Sri Lanka’s Vidullanka mini-hydro firm ratings confirmed: RAM

Oct 28, 2013 (LBO) – RAM Ratings has confirmed a ‘A-‘ rating of Vidullanka Plc, which owns mini-hydro plants and provides consultancy. However, we note that the revenue generated by each plant of the Group
highly depends on rainfall in the plant’s catchment area. This is reflected in the
positive correlation between revenue and plant factors, which vary based on
rainfall. Power plants recorded low generation levels between May and June
2012 compared to the corresponding period in 2013 due to poor rainfall. Given
that the Group depends solely on hydro resources for power generation, its
revenue is highly susceptible to fluctuations in rainfall.

The Group remains a small player in the IPP sector, with an effective
generation capacity of 7.5 MW. Its contribution to the country’s power
generation via non-conventional renewable energy sources (NCRES) remains
minuscule at less than 2.50%, based on total installed capacity.

Further, our concerns hinge on the non-renewal risk that the Group faces given
that its first PPA, which accounts for approximately 40% of its revenue from
power generation, will expire in fiscal 2016.