The LVL Energy Fund – A company at the forefront of Sri Lanka’s energy industry

A subsidiary of Lanka Ventures – a leading Sri Lankan venture capital company, the LVL Energy Fund is a limited liability company that invests in renewable and thermal power projects across Sri Lanka and beyond. With a diverse portfolio of energy projects spanning across Sri Lanka, Bangladesh and Nepal, the LVL Energy Fund will be the island’s only listed entity that possesses investments in thermal energy, as well as two key renewable energy sources; hydro and wind energy. In an effort to maintain and boost its growth trajectory, the company is currently preparing to launch an IPO, which will enable it to expand and strengthen its position at the forefront of Sri Lanka’s rapidly growing energy industry.

Hailing from solid roots and origins: The LVL Energy Fund was established in June 2006, as a result of its parent company, Lanka Ventures’ decision to venture more aggressively into the energy sector. Having handled power and energy projects since the year 2000, Lanka Ventures incorporated the LVL Energy Fund, with the primary objective of streamlining its investments in the power and energy industry into a single channel. The formation of the LVL Energy Fund enabled Lanka Ventures to further concentrate its efforts within the industry, whilst also putting the company in a stronger position to explore overseas markets with immense potential. With an initial capital of Rs. 300 million, followed by two successful private placements, the LVL Energy Fund kick-started with a solid foundation. Within a short span of time, the company attained significant success and stability, investing in wind and hydro power plants in several locations across Sri Lanka and later investing in thermal projects in Bangladesh.

A stronghold in thermal and renewable energy: The LVL Energy Fund currently invests in hydro, wind and thermal energy projects. Nearly 45% of the company’s investments are tied in thermal projects, whilst 30% and 25% of its investments are in wind and hydro projects respectively. LVL Energy Fund has investments in six operating local hydropower plants in Belihuloya, Aranayake, Ginigathhena, Galle, Norton Bridge and Bogawantalawa. The company also has investments in two operating wind power plants based in Kalpitiya peninsula in Puttalam district. More recently, LVL Energy Fund also invested in two thermal power projects in Rajshahi and Comilla, in Bangladesh.

A remarkable journey and track-record: Due to its wide variety of power plants situated across the country and key locations overseas, LVL Energy Fund will become the only listed establishment with stakes in hydro, wind and thermal energy projects –three key sources of energy for generating electricity. Having identified the seasonality and volatility of hydro and wind power operations, the company adopted a distinct strategy which involved the investment in a diverse range of power plants in various key locations. Whilst most players in the industry experience drastic peaks and troughs in their performance and profitability throughout the year, LVL Energy Fund’s prudent geographical and product diversification strategy has enabled it to sustain a consistent flow of income all year round. Moreover, over the past years, the same diversification strategy has been significantly instrumental in propelling the company towards a leading position in the local power and energy industry.

Ambitious vision and plans for the future: Commenting on the LVL Energy Fund’s outstanding journey thus far, as well as its ambitious vision for the future, Sumith Arangala – CEO, LVL Energy Fund Limited said: “Beginning from a small investment of Rs. 32 million in the sector at Lanka Ventures, LVL Energy Fund has come a long way since its inception. Over the past 11 years, we have gained immense stability and rooted ourselves in various strategic locations across Sri Lanka, and we have successfully tapped into two key overseas markets in Bangladesh and Nepal. The robust diversification strategy that we employ has remained our strong point over the years, and it is the same strategy that has elevated us to the summit of the local energy industry. Following several rounds of fund raising which culminated in a total fund base of nearly Rs. 2,700 million last year, we are now in a better position to explore more prospects and markets. As part of our ongoing efforts to further expand our operations, we will be launching an Initial Public Offering in the coming months. Part of the funds raised from the IPO will be channelled towards investment in three new hydro power projects in Sri Lanka and Nepal. We look forward to successfully growing and expanding LVL Energy Fund in the near future and contributing to the development of Sri Lanka’s power and energy industry as well as the country’s economic growth at large.”

An array of new projects and developments in the pipeline: As part of an ongoing effort to maintain its growth momentum as well as its significant lead in the market, LVL Energy Fund has several new developments and projects in the pipeline. As the potential in the local hydro power market is gradually diminishing, the company will look overseas for investment in hydro power as it has done in the case of the 10 megawatt hydropower project in Nepal that will be funded out of IPO proceeds. To further stabilize its operation, the company is looking to invest in a 100 megawatt thermal power plant in Bangladesh. Furthermore, the company is considering investing in two new wind power projects of 20 megawatts in Jaffna Peninsula. Lastly, as part of its next chapter of diversification, LVL Energy Fund will actively pursue opportunities to add solar power projects also to its portfolio in Sri Lanka.

Generating electricity and power from renewable energy sources instead of relying solely on fossil fuels, offers significant environmental and health benefits to the public and it also supports sustainable economic and industrial growth. Not only are renewable energy sources less taxing on the planet, they emit less pollution and are linked to less health risks. By embracing alternative energy production, industries can grow and thrive in a sustainable manner. Having recognized the potential of the alternative energy sector, the LVL Energy Fund made significant headway in establishing itself as a leading player in the local industry. Following its new development and expansion plans, the company is well poised to become a significant contributor to the regional and global energy industry as well.