Investment costs more than double for WindForce’s Mannar project

Amid rising raw material prices and the steep devaluation of the rupee, the estimated cost of WindForce PLC’s 15MW wind power project has more than doubled to a staggering Rs.6.65 billion, forcing the renewable energy developer to draw funds allocated for future projects in the pipeline.

“The company wishes to state that due to sudden increases in raw material prices in the global market and the devaluation of the Sri Lankan rupee, the estimated cost of the project has increased from Rs.3,090,000,000 to Rs. 6,653,000,000,” WindForce revealed in a filing to the Colombo Stock Exchange (CSE) yesterday.

In order to finance the estimated Rs.3.5 billion increase in project costs, the company is preparing to increase the equity infusion from IPO funds to Rs.1.66 billion from the initial Rs.927 million with an expected change in debt-equity ratio from 70:30 to 75:25.

In addition, WindForce plans to finance Rs.736 million through a funding mix using the company’s own reserves as well as the unutilised IPO funds allocated for two identified projects. 
Accordingly, the company plans to put on hold EOI Hambantota and Tororo Phase II projects.

“The funding mix would be as follows; Rs.119 million and Rs.617 million respectively. These two projects will be put on hold to prioritise the funding of the 10MW plus 5MW Mannar WPP,” WindForce said.

WindForce began the construction of 15MW Hiruras wind power plant located in Mannar in February 
this year. 

As of December 31 last year, the company had over Rs.2 billion in utilised IPO proceeds allocated for projects including Rs.931 million allocation for undisclosed on-going and future projects, Rs.257.34 million for EOI Hambantota and Rs.360 million for Tororo Phase II in Uganda.

On the upside, WindForce expects the equity internal rate of return (IRR), which measures net returns after settling the debt, to increase to 17.1 percent with a project IRR of 14 percent and weighted average cost of capital (WACC) of 13.1 percent due to the anticipated upward tariff rate revision adjusted to the US$.  

“...as the Power Purchase Agreement (PPA) is yet to be signed, an upward tariff rate revision adjusted to the US$ at the indicative LKR/USD rate published by the Central Bank of Sri Lanka (CBSL) is expected, seven (07) working days prior to the signing of the PPA,” it said.