2018/ 19 annual report...date of incorporation | 26 june 2006 name of company | lvlenergy fund plc...

LVL ENERGY FUND PLC

ANNUAL REPORT2018/ 19

Date of Incorporation | 26 June 2006

Name of Company | LVL Energy Fund PLC

Registration Number | PV1966PB/QB

Subsidiary Companies | LVS Energy (Private) Limited

Lanka Energy International (Private) Limited

Unit Energy Lanka (Private) Limited

Sapthakanya Hydro Electric Company (Private) Limited

Campion Hydro (Private) Limited

Pupulaketiya Hydro Power (Private) Limited

Associate Companies

Registered O�ce

| Hayleys Hydro Energy (Private) Limited

Neluwa Cascade Hydro Power (Private) Limited

Pawan Danavi (Private) Limited

Nala Dhanavi (Private) Limited

Raj-Lanka Power Company Limited

Lakdhanavi Bangla Power Limited

Nividhu (Private) LimitedNividhu Assupiniella (Private) LimitedBambarapana Hydro Power (Private) LimitedLTL Energy (Private) LimitedParambe Hydro (Private) Limited

| "Sayuru Sevana", 2nd Floor, No. 46/12, Navam Mawatha, Colombo 02Telephone : +94 11 2 439201 Facsimile : +94 11 2 439203E-Mail : [email protected]

Directors | Mr. L.H.A.L.Silva (Chairman)

Mr. A.J.Alles

Mr. T.W.De Silva

Mr. A.R.Munasinghe

Mr. M.R.Abeywardena

Mr. M.A.Wijetunge

Mr. D.S.Arangala (resigned with effect from 20 February 2019)

Mr. M.M.Wijetunge

Mr. J.D.N.Kekulawala

Mr. K.C.S.Dharmawardana

Ms. A.C.De Silva Gallage (appointed with effect from 27 February 2019)

Secretaries | Corporate Services (Private) Limited

No. 216, de Saram Place, Colombo 10

Auditors | KPMG

No. 32A, Sir Mohamed Macan Markar Mawatha, Colombo 03

Bankers | Hatton National Bank PLCNo. 10, Sri Uttarananda Mawatha, Colombo 03

DFCC Bank PLCCity Office, No. 73/5, Galle Road, Colombo 03

Lawyers | F J & G De Saram

Corporate Law Office, No. 216, de Saram Place, Colombo 10

Corporate InformationCONTENTS

01 Page |Financial Highlights

02 Page |Board of Directors

05 Page |Chairman’s Message

07 Page |Management Discussion and Analysis

14 Page |Annual Report of the Board of Directors

18 Page |Corporate Governance

22 Page |Audit Committee Report

23 Page |Related Party Transactions Review Committee Report

25 Page |Financial Reports

26 Page |Statement of Director’s Responsibilities

27 Page |Independent Auditor’s Report

30 Page |Statement of Pro�t or Loss and Other Comprehensive Income

31 Page |Statement of Financial Position

32 Page |Statement of Changes in Equity

34 Page |Statement of Cash Flows

35 Page |Notes of the Financial Statement

82 Page |Ten Year Summary

83 Page |Information to Shareholders

87 Page |Notice of Meeting

Enclosed- Form of Proxy

Back Inner Cover – Corporate Information

LVL Energy Fund PLC Annual Report 2018/19 1

FINANCIAL HIGHLIGHTSFor the year ended 31 March

2019 2018

Interest Income (LKR million) 73 22

Subsidiary Company Income (LKR million) 355 326

Total Income (LKR million) 430 349

Share of Profit from Associates (LKR million) 508 468

Profit / (Loss) before Tax (LKR million) 648 498

Profit / (Loss) after Tax (LKR million) 560 439

Shareholders' Funds (LKR million) 3,979 3,451

(Stated Capital and Reserves)

Redeemable Preference Shares (LKR million) 325 490

Interest Bearing Borrowings (LKR million) 763 562

Total Assets (LKR million) 5,320 4,951

Earnings per Share (LKR) 0.89 0.81

Dividend per Share (LKR) 0.65 0.64

Net Assets per Share (LKR) 6.83 5.93

Ratios

Return on Equity 13.96% 13.96%

LVL Energy Fund PLC Annual Report 2018/192

1. Mr. Lakshman Silva

Mr. Lakshman Silva is Director/Chief Executive Officer

of DFCC Bank PLC who has held the position since 16

August 2017. He functioned as Director/Deputy Chief

Executive Officer of DFCC Bank between the period 01

October 2015 and 15 August 2017.

Mr. Silva started his professional career with the

Department of Inland Revenue of Sri Lanka and

joined the DFCC Banking Group in 1987. He was

seconded to the services of DFCC Vardhana Bank in

2003 and functioned as the Chief Operating Officer

of DFCC Vardhana Bank from the year 2003 until his

appointment as the Chief Executive Officer in January

2010.

Mr. Silva is the Chairman of Synapsys Limited, Lanka

Industrial Estates Limited, DFCC Consulting (Private)

Limited, Lanka Financial Services Bureau Limited and

Lanka Ventures PLC. He also serves as a Director of

Acuity Partners (Private) Limited. Furthermore, he is a

member of the Board of Directors of the Association

of Development Financing Institutions in Asia and

the Pacific (ADFIAP). He is also a Past President of the

Association of Professional Bankers of Sri Lanka.

Mr. Silva holds a B.Com (Special) Degree from

the University of Kelaniya and an MBA from the

Postgraduate Institute of Management of the

University of Sri Jayewardenepura.

2. Mr. Jonathan Alles

Mr Jonathan Alles is the Managing Director/Chief

Executive Officer of Hatton National Bank PLC. He

counts over 33 years of banking experience, having

served several international banks including the HSBC-

Dubai, Saudi British Bank-Riyadh, HSBC – Colombo

and National Bank of Abu Dhabi.

Mr. Alles is the Chairman of Acuity Partners (Pvt)

Limited and HNB Finance Limited. He also serves as

a Director of Lanka Financial Services Bureau Limited

and Lanka Ventures PLC.

Mr. Alles holds an MBA in Finance from the University of

Stirling, UK and is an Associate Member of the Institute

of Bankers of Sri Lanka. He is the Vice Chairman of the

Banking, Financial & Insurance Services Group of the

Employers’ Federation of Ceylon and a Member of the

Sri Lanka Institute of Directors.

3. Mr. M. Ajitha Wijetunge

Mr. M. Ajitha Wijetunge is a Marine Engineer and also a

Ballistic Engineer by profession and an entrepreneur.

He is the inventor and licensed to be the sole

manufacturer of bullet proof jackets, body armours,

ballistic helmets, de-mining kits and vehicle armours

using highly specialized anti-ballistic composite

materials with indigenous technology.

Mr. Wijetunge is the Chairman of Dinima High

Performance Materials (Private) Limited and he serves

as a Director on the Boards of Sawam Holdings (Pte)

Ltd BVI, Tilara Hydro (Private) Limited, S & N Power

Kithulgala Mini Hydro (Private) Limited, Rivolka Energy

(Private) Limited, Diyatha Pharmaceutical & Health

Care (Private) Limited and Lakdhanavi Bangla Power

Limited.

4. Mr. Tyrone De Silva

Mr. Tyrone De Silva is the Executive Vice President

responsible for Strategic Planning & Subsidiaries at

DFCC Bank. He also oversees the Investment Banking

business of the Bank which is carried out through

Acuity Partners (Private) Limited an equally owned

joint venture between DFCC Bank PLC and Hatton

National Bank PLC. Mr. De Silva joined DFCC in 1989

and has been involved in the Bank’s Corporate Finance

and Capital Markets businesses throughout his career.

He has participated in DFCC’s corporate structuring

transactions including the set up or acquisition of

subsidiaries and associates of the DFCC Group. Besides

his planning function at DFCC, he is also involved in the

strategic planning and performance monitoring of the

member companies in the DFCC Group. In the latter

part of his career, Mr. De Silva was placed in charge

BOARD OF DIRECTORS


of Corporate Banking at DFCC and was subsequently

appointed as the Head of the Bank’s Lending Business

in the capacity of Executive Vice President. In October

2015, he took on his present responsibilities.

Mr. De Silva is a member of DFCC’s management

committees dealing with Credit, Investments,

Special Loans and Information Technology. He also

participates in various Board Sub-Committees. He

serves as Director on the Boards of DFCC Group

companies and on those in which the Bank has a

significant interest. He is also a Director of Lanka

Ventures PLC.

Prior to his career at DFCC, Mr. De Silva was employed

as a foreign exchange and money broker for a period

of seven years. Here he gained in-depth exposure to

foreign exchange and fixed income trading, structuring

of swap deals and other hybrid transactions.

Mr. De Silva holds a Master of Business Administration

degree from the University of Warwick (UK). He is also

a Graduate Member of the Institute of Mechanical

Engineers (UK). He has extensive international training

in various aspects of management, banking and

finance.

5. Mr. Ananda Munasinghe

Mr. Ananda Munasinghe has had over three-decades

of experience in the manufacturing industry in Sri

Lanka. He was the former Director/General Manager

of Acme Printing and Packaging Limited. He has

also functioned as Works Manager at State Fertilizer

Manufacturing Corporation and the Senior Instrument

Engineer at Ceylon Petroleum Corporation’s Refinery.

He has held the position of President, Sri Lanka Energy

Managers Association and the Sri Lanka Institute of

Packaging in the past. He serves as a Director of Lanka

Ventures PLC.

Mr. Munasinghe is an Engineering Graduate of the

University of Ceylon, Peradeniya and holds a Master’s

Degree in Business Administration from the University

of Sri Jayawardenepura. He also holds Post Graduate

Diplomas in Production Engineering and Engineering

Design from Colchester College of Technology,

England and Enfield College of Technology, England

respectively.

6. Mr. Ray Abeywardena

Mr. Ray Abeywardena is the Managing Director/Group

Chief Executive Officer of Acuity Partners (Private)

Limited. He has been associated with Sri Lanka’s capital

markets for over 32 years, primarily as a Stockbroker

and since 2009 as an Investment Banker.

Mr. Abeywardena is the Chairman of Acuity

Stockbrokers (Private) Limited, Acuity Securities

Limited and Guardian Acuity Asset Management

Limited and he is a Director of Lanka Ventures PLC.

He also serves as an independent non-Executive

Director on the Boards of Softlogic Life Insurance PLC

and The Associated Newspapers of Ceylon Limited.

Mr. Abeywardena is the Chairman of the Colombo

Stock Exchange and the Central Depository Systems

(Private) Limited. He is a past Chairman of the Colombo

Stockbrokers Association.

Mr. Abeywardena is a member of the Chartered

Institute of Marketing, (UK) and holds a Master’s

Degree in Business Administration from the University

of Wales.

7. Mr. Mahal Wijetunge

Mr. Mahal Wijetunge is a director of Harsha

International (Private) Limited, PR Communications

Fantasy Events (Private) Limited, Tilara Hydro (Private)

Limited, S & N Power Kithulgala Mini Hydro (Private)

Limited and Sawam Holdings (Pte) Ltd BVI.

He holds a Diploma in Law from University College

London and LLB (Hons) degree from the University of

Hertfordshire.

8. Mr. Nihal Kekulawala

Mr. Nihal Kekulawala is a director of Pan Asia Banking

Corporation PLC, Lanka Walltiles PLC, AMW Capital

BOARD OF DIRECTORS

BOARD OF DIRECTORS


Leasing and Finance PLC, Continental Insurance

Lanka Limited, Lanka Ceramic PLC, Softlogic Holdings

PLC and Lanka Ventures PLC. He was responsible for

setting up Pan Oceanic Bank in Solomon Island and

functioned as its Director/Chief Executive Officer

between June 2014 and June 2016. Prior to that he

held senior management positions at Hatton National

Bank PLC over a period of 20 years and at the time

of retirement in December 2012 held the position

of Senior Deputy General Manager – Strategy and

Compliance.

Mr. Kekulawala is a Fellow of the Institute of Chartered

Accountants, England & Wales and Fellow of the

Institute of Chartered Accountants, Sri Lanka. He is

also a Fellow of the Chartered Institute of Bankers,

England. He holds a Master of Business Administration

degree from the University of Manchester, England.

9. Mr. Chandana Dharmawardana

Mr. Chandana Dharmawardana functions as a

consultant to Maliban Biscuit Manufactories Limited

since January 2014. Prior to that he was attached to

DFCC Bank PLC for a period of 27 years from 1986 to

2013 and at the time of retirement held the position

of Vice President, Corporate Banking. Between the

period 1980 - 1986 he was employed at Sri Lanka Ports

Authority as a Mechanical Engineer.

Mr. Dharmawardana is a BSc Eng of the University

of Moratuwa. He is a member of the Institute of

Engineers, Sri Lanka and a Chartered Engineer. He

is also an Associate in Development Banking of the

Association of Development Financing Institutions in

Asia and the Pacific (ADFIAP).

10. Ms. Anusha Gallage

Ms. Anusha Gallage is the Chief Financial Officer

of Hatton National Bank PLC. She counts over

two decades of experience in the banking sector

locally and internationally. Currently Ms. Gallage is

overlooking HNB’s financial function and regulatory

compliance. She leads the overall financial sphere

of HNB encompassing the preparation of Group

BOARD OF DIRECTORS

Financials for HNB’s subsidiaries which includes HNB

Assurance PLC, Sithma Development (Private) Limited,

HNB Finance (Private) Limited and Acuity Partners

(Private) Limited.

As a member of HNB’s Corporate Management team,

Ms. Gallage is responsible for the strategic direction of

the Bank and Group financial reporting. Her additional

responsibilities include Secretary to the Bank’s Assets

and Liabilities Committee (ALCO), Chief Coordinating

Officer and an active member of the Bank’s Cost

Optimization & Productivity Improvement Committee,

member of the Bank’s EPF Fund and Trustee of the

Bank’s Pension fund entrusted with the responsibility

of managing the funds and was also a member of the

Board of Directors of Sithma Development (Private)

Limited. She serves as a Director of Lanka Ventures

PLC.

Ms. Gallage holds a number of senior positions at

HNB; she is a Management representative to the

Board Integrated Risk Management Committee, Board

Audit Committee and Secretary to the Board Related

Party Transaction Review Committee - contributing

immensely to strategic decision making in the Bank.

She is also the Treasurer of the Bank’s Sustainability

Foundation - which funds and drives the diverse social

responsibility agenda of the Bank and a member of

the Bank’s internal training resource team.

She has 3 years of overseas experience in banking &

finance in Australia.

Ms. Gallage holds a Master’s in Business Administration

from the University of Sri Jayawardenepura and a

Bachelor of Business Administration (Special) Degree

from the University of Colombo. She also holds a

Diploma in Commerce from the University of Papua

New Guinea and has also completed Licentiate Level

examinations of the Institute of Chartered Accountant.

She is an Associate Member of the Chartered Institute

of Management Accountants, UK and is a member

of Chartered Global Management Accountant and

Certified Practicing Accountants of Australia.


I welcome you to the eighth Annual General Meeting

of the Company and on behalf of the Board of Directors

take pleasure in presenting to you the Annual Report

and audited accounts of the Company for the year

ended 31st March 2019.

Financial Performance

The Group recorded a post-tax profit of LKR 560

million compared to LKR 439 million in the previous

year reflecting an increase of 27%. This is the first

time in the history of the Company that Group profit

exceeded LKR 500 million.

Pre-tax profit of the Group for the year increased by

30% to LKR 648 million from LKR 498 million in the

previous year. Tax charge of the Group for the year

increased to LKR 88 million from LKR 58 million in the

previous year mainly due to increase in withholding

tax attributable to dividend income received by the

Company.

Group finance cost decreased to LKR 140 million from

LKR 191 million in the previous year largely due to the

settlement of LKR 480 million of debt out of proceeds

of the Initial Public Offering (IPO) of the Company in

December 2017.

Group income from subsidiary companies rose to LKR

355 million from LKR 326 million in the previous year

while share of profit from equity accounted investees

also increased to LKR 508 million from LKR 468 million.

The contribution from hydro power plants showed

an improvement whilst the thermal power plants

in Bangladesh contributed a significantly higher

profit compared to last year. The share of profit from

Bambabarapana hydro power plant that commenced

commercial operation in the last quarter of the

previous financial year also contributed towards a

higher Group profit for the year. Power generation of

wind power plants during the year was less than in the

previous year and accordingly their contribution to

Group profit was lower.

Post-tax profit attributable to equity holders of the

Company was LKR 518 million compared to LKR 399

million in the previous year reflecting an increase in

earnings per share to LKR 0.89 from LKR 0.81.

Total comprehensive income for the year increased to

LKR 773 million from LKR 413 million in the previous

due to an exchange gain of LKR 213 million resulting

from foreign currency translation of investments in

Bangladesh.

Outlook

In January 2019, we started investing in the 10 MW

hydro power plant being constructed in Nepal out

of the proceeds of the IPO in FY2017/18. The project

is expected to commence commercial operation in

FY2020/21.

In May 2019, we invested USD 8.0 million in a 114 MW

thermal power plant being constructed in Bangladesh

that is expected to commence commercial operation

in the second half of FY2019/20.

We are also investing in six ground solar power

projects of a total capacity of 6 MW that are expected

to commence commercial operation in FY2020/21.

Since market conditions were not conducive for equity

raising, it was decided to fund the new investments

out of long-term debt secured on competitive terms.

The Company will be in a position to replace part of

the debt with equity at a future date after market

conditions improve.

The above investments are aimed at further

strengthening the financial prospects of the Company

although in the short term the bottom line could be

impacted by higher finance cost.

Dividend

In November 2018, we paid an interim dividend of LKR

0.34 per share amounting to LKR 198 million utilizing

dividend income. In June 2019, we paid a further

interim dividend of LKR 0.31 per share amounting

to LKR 180.5 million also utilizing dividend income.

CHAIRMAN’S MESSAGE


Altogether LKR 378.5 million has been paid out as

dividend from dividend income of LKR 380 million

received by the Company. Accordingly, no further

dividend can be recommended for the year. This year’s

total dividend paid per share was LKR 0.65 compared

to LKR 0.64 last year.

Acknowledgements

Mr. Sumith Arangala, the Chief Executive Officer of

the Company stepped down from the Board on 20

February 2019 to make way for the appointment of

Ms. Anusha Gallage, Chief Financial Officer of Hatton

National Bank PLC with effect from 27 February 2019.

Whilst welcoming Ms. Gallage to the Board, I wish to

place on record our deep appreciation of the valuable

contribution made by Mr. Arangala as a Director since

December 2015.

I would like to take this opportunity to thank all my

colleagues on the Board for their valuable guidance

and co-operation extended to me in fulfilling my duties

as Chairman. I also wish to thank the shareholders

who have placed confidence in our ability to direct

the affairs of the Company. While thanking our

project promoters who have placed confidence in

our management and valued relationships we have

forged together, I record our appreciation of the co-

operation extended to us by financial institutions that

co-financed our projects.

I would like to conclude by thanking the Chief

Executive and his team for their commitment and

hard work that led to the exceptional performance of

the Company during the year.

Lakshman Silva

Chairman

01 August 2019

CHAIRMAN’S MESSAGE


MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

The following discussion and analysis should be read

in conjunction with the audited consolidated financial

statements of the Group and the Company for the year

ended 31 March 2019.

Revenue

Total revenue of the Group for the year under review

was LKR 430 million compared to LKR 349 million

in the previous year, an increase of 23%. The major

contributors to revenue were subsidiary company

income and interest income.

0

100

200

300

400

500

2016/17 2017/18 2018/19

Revenue (LKR Mn)

0

50

100

150

200

250

300

2016/17 2017/18 2018/19

Operating Profit (LKR Mn)

0

100

200

300

400

500

600

2016/17 2017/18 2018/19

Share of Profit (LKR Mn)

Interest income for the period was LKR 73 million

compared to LKR 22 million for the same period

last year. The increase in interest income was mainly

due to the LKR 580 million raised at the Initial Public

Offering (IPO) of the Company in December 2017

remaining invested in fixed income securities awaiting

disbursement in respect of two hydro power projects.

LKR 117 million of this amount was disbursed in

January 2019. Further LKR 292.5 million was disbursed

in June & July 2019.

Subsidiary company income increased to LKR 355

million from LKR 326 million in the previous year due

to increase in power generation at Campion hydro

power plant and increase in avoided-cost based tariff

attributable to Kadawala hydro power plant operated

by Unit Energy Lanka (Private) Limited.

Subsidiary CompanyRevenue (LKR Mn)

FY 2018/19

FY 2017/18

Unit Energy Lanka (Pvt) Ltd 202.5 193.4

Sapthakanya Hydro Electric Company (Pvt) Ltd

72.0 77.2

Campion Hydro (Pvt) Ltd 80.8 55.6

355.3 326.2

Operating Profit

Direct expenses of Kadawala and Campion hydro

power plants increased in line with power generation

income mainly because the lease rental attributable to

land sub-leased from regional plantation companies is

linked to power generation income. Accordingly direct

expenses of subsidiaries increased to LKR 124 million

from LKR 111 million while total operating expenses of

the Group increased to LKR 150 million from LKR 129

million. Operating profit for the year under review was

recorded at LKR 280 million against LKR 220 million in

the previous year.

0

100

200

300

400

500

2016/17 2017/18 2018/19

Revenue (LKR Mn)

0

50

100

150

200

250

300

2016/17 2017/18 2018/19


0

100

200

300

400

500

600

2016/17 2017/18 2018/19

Share of Profit (LKR Mn) Share of Profit from Equity Accounted

Investees (Associate Companies)

The share of profit from associate companies increased

to LKR 508 million from LKR 468 million in the previous

year. A detailed breakdown of revenue and share

of profit attributable to each associate company

engaged in hydro and wind power generation is given

below:

Hydro Power

Associate Company

Revenue (LKR Mn)


FY

2018/19

FY

2017/18

FY

2018/19

FY

2017/18

Hayleys Hydro Energy (Pvt) Ltd

96.5 68.8 23.1 6.5

Nividu (Pvt) Ltd 52.9 41.2 2.7 11.9

Nividu Assupiniella (Pvt) Ltd

224.5 193.0 36.6 31.5

Bambarapana Hydro Power (Pvt) Ltd

207.4 24.1 24.8 1.9

581.3 327.1 87.2 51.8


Wind Power

Associate Company

Revenue (LKR Mn)


FY

2018/19

FY

2017/18

FY

2018/19

FY

2017/18Pawan Danavi (Pvt) Ltd

596.1 689.0 105.4 143.8

Nala Dhanavi (Pvt) Ltd

260.6 321.5 40.5 64.3

856.7 1,010.5 145.9 208.1

A breakdown of the share of profit attributable to

companies engaged in thermal power generation is

given below (profitability of these entities is linked to

capacity charge):

Thermal Power - Bangladesh

Associate Company


FY

2018/19

FY

2017/18Raj Lanka Power Company Ltd 68.1 43.5

Lakdhanavi Bangla Power Ltd 207.1 165.1

275.2 208.6

0

100

200

300

400

500

2016/17 2017/18 2018/19

Revenue (LKR Mn)

0

50

100

150

200

250

300

2016/17 2017/18 2018/19


0

100

200

300

400

500

600

2016/17 2017/18 2018/19


Finance Cost and Tax Charge

Group finance cost decreased to LKR 140 million

from LKR 191 million in the previous year following

the settlement of LKR 480 million of debt out of the

proceeds of the IPO. Company's finance cost reduced

to LKR 65 million form LKR 115 million in the previous

year.

Group tax charge increased to LKR 88 million from LKR

58 million in the previous year mainly due to increased

withholding tax attributable to dividend.

Profit after Tax

Profit after tax for the year amounted to LKR 560 million compared to LKR 439 million in the previous year signifying an increase of 27% which can be considered as a major achievement. This was the first time in the history of the Company, Group profit exceeded LKR 500 million.

0

100

200

300

400

500

600

2016/17 2017/18 2018/19

Profit After Tax (LKR Mn)

0.7

0.75

0.8

0.85

0.9

0.95

1

2016/17 2017/18 2018/19

Earnings per share (LKR)

0%

20%

40%

60%

80%

100%

2016/17 2017/18 2018/19

Total Assets

Cash & Cash Equivalents

Loans and Receivables

Intangible Assets

Investment in EquityAccounted Investee

Property Plant and Equipment

Profit attributable to equity holders of the Company increased to LKR 518 million compared to LKR 399 million in the previous year an increase of 30%. As a result Earnings Per Share (EPS) improved to LKR 0.89 from LKR 0.81 in the previous year.

0

100

200

300

400

500

600

2016/17 2017/18 2018/19

Profit After Tax (LKR Mn)

0.7

0.75

0.8

0.85

0.9

0.95

1

2016/17 2017/18 2018/19

Earnings per share (LKR)

0%

20%

40%

60%

80%

100%

2016/17 2017/18 2018/19

Total Assets

Cash & Cash Equivalents


Intangible Assets

Investment in EquityAccounted Investee


Total Comprehensive Income

Total comprehensive income for the year was LKR 773

million compared to LKR 413 million in the previous

year due to the recognition of LKR 213 million as

exchange gain on foreign currency translation of

investments in Bangladesh.

Total Assets

Total assets of the Group as at 31 March 2019

amounted to LKR 5,320 million compared to LKR 4,951

million, a year ago. The Group assets as at 31 March

2019 comprised the following:




ClassificationAmount(LKR Mn)

%

Property Plant & Equipment 975 18.32

Right to use Land 4 0.07

Investment in Equity Accounted Investees

3,349 62.95

Intangible Assets 56 1.05

Loans and Receivables 148 2.80

Cash & Cash Equivalents 787 14.79

5,320 100.0

0%

20%

40%

60%

80%

100%

2016/17 2017/18 2018/19

Total Assets (LKR Mn)Cash & Cash Equivalents


Intangible Assets

Investment in Equity AccountedInvestee

Right to use the land


Debt Capital

Total interest bearing borrowings of the Group as

at 31 March 2019 amounted to LKR 1,088 million

of which LKR 370 million is repayable during the

financial year 2019/20. The aforesaid interest bearing

borrowings included LKR 325 million cumulative

redeemable preference shares of which LKR 75 million

is redeemable during the financial year 2019/20.

Total liabilities of the Group as at 31 March 2019

including the aforesaid interest bearing borrowings

amounted to LKR 1,164 million representing 22% of

the total assets.

The total interest bearing borrowings of the Company

as at 31 March 2019 amounted to LKR 569 million of

which LKR 285 million is repayable during the financial

year 2019/20. This included LKR 75 million cumulative

redeemable preference shares which are redeemable

in full by 31 March 2020.

Equity Capital

Total asset base of LKR 5,320 million as at 31 March

2019 was funded by Group equity of LKR 4,156 million

including non-controlling interest representing 78%

of the total assets.

Amount(LKR Mn)

%

Stated Capital 2,906 69.9

Revaluation Reserve 9 0.2

Foreign Currency Translation Reserve

269 6.5

Retained Earnings 794 19.1

Non-controlling Interest 177 4.3

4,156 100.0

0%

20%

40%

60%

80%

100%

2016/17 2017/18 2018/19

Capital Structure (LKR Mn)

Total Equity

Total Debt

14%

11%

75%

Capacity (MW)

Hydro Wind Thermal

PORTFOLIO HIGHLIGHTS

With the investment of LKR 15 million by way of a

rights issue in Bambarapana hydro power project and,

LKR 117 million in Makari Gad hydro power project

under construction in Nepal, our investment portfolio

in terms of cost expanded to LKR 2,598 million from

LKR 2,466 million at the end of the previous financial

year.

The total investment in operational projects as

at 31 March 2019 was LKR 2,437 million. Portfolio

diversification in terms of energy source, capacity and

investment in operational projects is given below:

Energy Source

Capacity (MW)

% Investment (LKR Mn)

%

Hydro 19.4 14 730.8 30

Wind 15.3 11 666.5 27

Thermal 104.4 75 1,039.5 43

139.1 100 2,436.8 100

0%

20%

40%

60%

80%

100%

2016/17 2017/18 2018/19

Capital Structure (LKR Mn)

Total Equity

Total Debt

14%

11%

75%

Capacity (MW)

Hydro Wind Thermal

30%

27%

43%

Investment (LKR Mn)

Hydro Wind Thermal


We have a well-diversified investment portfolio not

only in terms of energy source but also in terms of

geographic location. In Sri Lanka, the hydro power

plants are scattered over several districts such as

Ratnapura, Nuwara Eliya, Kegalle, Galle and Badulla

thereby benefitting from rainfall patterns attributable

to each area. The new hydro power plant under

construction in Nepal would further strengthen the

diversification of the portfolio in terms of geographic

location. By extending our footprint beyond the

shores of Sri Lanka we have ensured that we will not

be dependent entirely on one buyer for our sales.

A summary of energy generation during financial

years 2018/19 and 2017/18 in each renewable energy

project is given below:

Hydro Power

Project NameInstalled Capacity

(MW)

Generation (MWh)

FY 2018/19 FY 2017/18

Kadawala 6.0 12,706 14,306

Theberton 1.3 4,077 4,395

Campion 1.2 4,628 3,196

Lower Neluwa 2.2 5,873 4,993

Belihuloya 2.2 9,892 6,958

Assupiniella 4.0 14,008 14,249

Bambarapana* 2.5 11,526 1,387

19.4 62,710 49,484

* commenced commercial operation on 09 Feb 2018

Wind Power

Project NameInstalled Capacity

(MW)

Generation (MWh)

FY 2018/19 FY 2017/18

Pawan Danavi 10.2 22,579 26,382

Nala Dhanavi 5.1 11,976 14,991

15.3 34,555 41,373

NEW INVESTMENTS & FUNDING ARRANGEMENTS

New Investments

In January 2019 we made the first equity disbursement

of LKR 117 million in respect of the 10 MW Makari Gad

hydro power project under construction in Nepal.

Our investment in this project is channeled through

a locally incorporated company named LTL Energy

(Private) Limited in which our Company and LTL

Holdings (Private) Limited will have a shareholding

of 45% and 55% respectively. The project is being

constructed by a special purpose vehicle named

Makari Gad Hydropower Pvt Ltd incorporated in

Nepal.

We made further disbursements aggregating to LKR

292.5 million in June and July 2019. LKR 465 million

of the proceeds of the IPO in December 2017 was

reserved for investment in the project. The balance LKR

55.5 million currently remains invested in fixed income

securities. The project is expected to commence

commercial operation in the latter part of financial

year 2020/21. The project company has entered into

a 30-year power purchase agreement with Nepal

Electricity Authority.

In May 2019 we made an investment of USD 8.0 million

in Feni Lanka Power Limited, a company incorporated

in Bangladesh that is constructing a 114 MW thermal

power plant in Feni, Bangladesh. The plant is expected

to commence commercial operation in October 2019.

The promoter and majority shareholder of the project

is Lakdhanavi (Private) Limited.

We were successful in securing six ground solar

power projects of 1 MW each under a tender floated

by the CEB in April 2018. Three of these projects will

be connected to the Maho grid substation while two

projects will be connected to Pallekele grid substation.

The sixth one will be connected to Matugama grid

substation. We have already received the Letters

of Intent from the CEB in respect of the projects in

Pallekele and Matugama. The Letters of Intent in

relation to the projects in Maho are expected to be

received shortly. We are currently engaged in securing

approvals for the projects. We expect the projects to

be commissioned within six months of receiving all

approvals. Accordingly we expect all six projects to

begin commercial operation in financial year 2020/21.



Funding Arrangements

The Board considered the possibility of raising part

of the funds required for investment in the thermal

power project in Feni, Bangladesh by way of a rights

issue but decided against it in view of the depressed

conditions in the stock market that led to the under-

subscription of several rights issues and depression

of the market price of those shares. Therefore it was

decided to postpone the rights issue until market

conditions improve. The USD 8.0 million invested in

the aforesaid project was accordingly funded out of

long-term debt secured on competitive terms. The

Company will have the option of replacing part of the

debt with equity in the future.

Of the LKR 1,200 million raised at the IPO, LKR 115

million was set aside for investment in the 1.4 MW

Pupulaketiya hydro power project to be undertaken

by Pupulaketiya Hydro Power (Private) Limited. At the

time of the IPO, the said company was awaiting the

extension of the approval of Central Environmental

Authority (CEA) which had lapsed in October 2016.

Although it was expected that the extension would

be granted speedily that was not to be the case. The

LKR 115 million identified for investment in the project

remained invested in fixed income securities.

The investment of LKR 465 million in Makari Gad hydro

power project was decided based on the exchange

rate that prevailed at the time of the IPO. Due to the

escalation of the exchange rate since then, the rupee

value of our investment had increased creating a

shortfall of approximately LKR 70 million. In view of

the inordinate delay in receiving CEA extension for

Pupulaketiya hydro power project, the Board proposes

to utilize the said LKR 115 million for meeting the

aforesaid shortfall and the balance towards the

redemption of preference shares. The Board plans to

obtain shareholder approval for the proposal at the

Annual General Meeting.

OPERATING ENVIRONMENT

Macro-economic Factors

The main macro-economic factors that have an impact

on our business are the interest rates, exchange rates

and taxation.

(a) Interest Rates

The interest rate of all borrowings of the Company and

project companies operating in Sri Lanka are linked

to weekly AWPLR that fluctuated between a low of

11.12% and a high of 12.82% during the financial year

2018/19 impacting the interest attributable to such

loans.

The US Dollar (USD) borrowings of project companies

in Bangladesh are linked to 3-month LIBOR which

had fluctuated between a low of 2.30% and a high of

2.82% during the financial year 2018/19 impacting the

interest attributable to such debt.

(b) Exchange Rates

In relation to the investments in Bangladesh,

where borrowings had been in USD, the exchange

rate between BDT and USD had an impact on

financial results of those entities. However, the USD

denominated feed-in tariff of those projects helped

to cushion the adverse effects of depreciation of

BDT against the USD. At our end the exchange rate

between BDT and LKR had an impact on translation of

the carrying value of the investments from BDT to LKR.

During the financial year 2018/19, the BDT depreciated

by 1.55% against the USD while LKR depreciated

by 12.85% against the BDT. The depreciation of LKR

against the BDT led to the exchange gain of LKR 213

million shown under Other Comprehensive Income

(OCI) in financial statements for the year ended

31 March 2019.

(c) Taxation

The Company was subject to a concessionary rate of

taxation of 12% as per Part A of the Second Schedule

of the Inland Revenue Act No 10 of 2006 in the

previous financial year. However under the new Inland



Revenue Act of No 24 of 2017 (Act), the Company is

subject to tax at 28% with effect from 01 April 2018 as

per the First Schedule of the Act.

Withholding Tax (WHT) rate applicable to dividend

increased to 14% from 10% with effect from 01 April

2018 in terms of the new Act. This had an impact

on dividend income of the Company while causing

an increase in the tax charge as reflected in financial

statements for the year ended 31 March 2019.

The WHT rate applicable to dividend distributed by

companies in Bangladesh is 20%. However in terms

of the Double Taxation Agreement dated 24 July 1986

entered into between the governments of Sri Lanka

and Bangladesh, WHT is deducted at 15%. Under

the Inland Revenue Act No 10 of 2006, the dividend

received by a resident company from a non-resident

company was exempt from tax in the hands of the

resident company and the re-distribution of such

dividend was not subject to any further WHT so long

as it was re-distributed within 3 months of receipt.

In terms of the new Act, foreign dividend received

by a resident company is exempt from tax in the

hands of the resident company subject to substantial

participation as defined in the Third Schedule of the

Act. Under such provision the dividend from our

investee companies in Bangladesh would continue to

be exempt from tax. However in terms of the new Act,

the re-distribution of such dividend is subject to WHT

at 14%. Accordingly dividend paid by our investee

companies in Bangladesh would be subject to a total

dividend tax of 29% upon re-distribution in Sri Lanka.

This second tier of WHT does not apply to distribution

of dividend received by a resident company from

another resident company. We have appealed to

the Ministry of Finance to provide the same relief in

relation to distribution of foreign dividend as well.

Until the new Act is amended suitably, dividend

from our Bangladeshi companies will continue to

be subject to WHT at both ends on distribution. The

loss to Company’s shareholders as a result of such

additional WHT on foreign dividend distributed in

respect of financial year 2018/19 amounted to LKR

4.72 cents per share.

Feed-in Tariff

The feed-in tariff attributable to three of our hydro

power projects (Kadawala, Lower Neluwa and

Assupiniella) are subject to avoided cost based tariff

announced by the CEB on a yearly basis which has an

impact on their revenue.

In February 2019, the Ceylon Electricity Board (CEB)

announced the revision of avoided cost based tariff

with effect from 01 January 2018 as follows:

Dry Season - LKR 17.58/kWh (LKR 15.43 in 2017)

(01st February to 30th April)

Wet Season - LKR 15.70/kWh (LKR 13.47 in 2017)

(01st to 31st January, 01st May to 31st December)

Weather Conditions

Changing weather patterns have an impact on the

performance of renewable energy projects as can

be seen from energy generation at our hydro and

wind power plants given under Portfolio Highlights.

The latest climate reports seem to indicate that

extreme and unpredictable weather patterns have

come to stay creating natural disasters and conflicts

over scarce resources. The changing rainfall patterns

and increased incidence of extreme weather events

such as droughts and floods have a direct bearing on

renewable energy generation. Natural calamities like

flash floods and earth slips can cause plant stoppages

and damage to infrastructure in hydro power projects

and in instances of such damage to infrastructure the

cost of repair can be insignificant compared to loss of

revenue. Due to adverse weather conditions, power

generation in our hydro power plants during the

period January to June 2019 has been less than half

the average.

In order to mitigate this risk, in 2012, the Company

took the decision to diversify into thermal energy by

investing in its first thermal power plant of 52.2 MW

in Bangladesh. Since then the Company had invested

in two more thermal power plants in Bangladesh

one of which is currently under construction. The

total installed capacity of thermal power plants in

Bangladesh will accordingly increase to 218.4 MW and



our total investment in them is USD 16.0 million. By

diversifying into thermal energy sector in Bangladesh

we have also achieved the objective of reducing our

reliance on CEB as the sole energy purchaser.

Plant & Equipment

Subject to financial viability, our commitment to rely

on leading and well established suppliers of plant and

equipment with the view to ensuring their reliability,

availability and efficiency is evident from the following

list of machinery suppliers to our projects:

Hydro Power

Project Name Source

Belihuloya Wasserkraft, Germany

Assupiniella VA Tech, Germany

Kadawala Voith Siemens, Germany

Lower Neluwa Gugler Hydro Energy, Austria

Theberton Fuchun Industry Development Co, China Hongya Power Generating Equipment, China

Campion Hongya Power Generating Equipment, China

Bambarapana Global Hydro Energy, Austria

Wind power

Project Name Source

Pawan Danavi Gamesa, Spain

Nala Dhanavi Gamesa, Spain

Thermal Power

Company Name Source

Raj Lanka Power Co. Ltd Wartsila, Finland

Lakdhanavi Bangla Power Ltd Wartsila, Finland

Future Outlook

The increased borrowings to fund new investments

partly due to the postponement of the rights issue

can have a bearing on Company’s earnings in the

financial year 2019/20 but we expect the new thermal

power plant in Bangladesh to commence commercial

operation as scheduled in October 2019 enabling us

to account for the share of profit from the investment

from October 2019 onwards thereby mitigating to

some extent the impact on earnings.

We were able to minimize the impact of new

borrowings on Company’s cash-flows in financial

years 2019/20 and 2020/21 by securing a 2-year grace

period on capital repayment. We expect that the

cash-flows to be realized from new investments will

go a long way in meeting Company’s debt service

commitments from financial year 2021/22 onwards.

Our objective is to maintain the current practice of

distributing to maximum possible extent the dividend

income of the Company which dividend is tax free in

the hands of shareholders as WHT which is the final

tax on dividend is paid at source (in respect of financial

year 2018/19, we distributed in the form of dividend

LKR 378.5 million out of LKR 380 million received as

dividend).

The new investments in thermal power sector in

Bangladesh and ground solar power projects in Sri

Lanka will provide a considerable boost to the bottom

line from financial year 2020/21 onwards whilst the

new investment in hydro power sector in Nepal will

further strengthen the profitability of the Company

from financial year 2021/22 onwards.



ANNUAL REPORT OF THE BOARD OF DIRECTORS The Directors of LVL Energy Fund PLC have pleasure in

presenting to the members their report together with

the Audited Financial Statements of the Company for

the year ended 31 March 2019.

Principal Activities

The principal activity of the Company is investing in

projects in the energy sector in Sri Lanka and abroad.

Performance Review

A review of the Group’s business and its performance

during the year is contained in the Chairman’s Message

and Management Discussion and Analysis on pages

5 to 13 of the Annual Report. This review together

with Financial Statements reflect the state of affairs of

the Company and the Group. These reports form an

integral part of the Annual Report of the Directors.

Financial Statements

The Financial Statements of the Company and the

Group together with the Notes are given on pages 30

to 81.

Auditors’ Report

The Auditors’ Report on the Financial Statements is

given on pages 27 to 29.

Accounting Policies

The accounting policies including any changes to

accounting policies adopted in the preparation of

Financial Statements are given on pages 35 to 52.

Directorate

The following Directors held office during the year

under review:

Mr. A.J. Alles

Mr. M.A. Wijetunge

Mr. T.W. De Silva

Mr. A.R. Munasinghe*

Mr. M.R. Abeywardena

Mr. D.S. Arangala - (resigned w.e.f. 20 February 2019)

Mr. L.H.A.L. Silva

Mr. M.M. Wijetunge

Mr. J.D.N. Kekulawala*

Mr. K.C.S. Dharmawardana*

Ms. A.C. De Silva Gallage - (appointed w.e.f. 27

February 2019)

*Independent Director

As required by Listing Rule 7.10.3 of the Colombo Stock Exchange, the Board has determined that Messrs. A.R. Munasinghe, J.D.N. Kekulawala and K.C.S. Dharmawardana to be independent non-executive Directors. Further details are given on page 21 under Corporate Governance.

Mr. A.R. Munasinghe has passed the age limit referred to in Section 210 of the Companies Act No. 07 of 2007 (the Act). His appointment as a Director of the Company requires the approval of a resolution of the Company in a general meeting. A notice is duly given by the Company in terms of Section 211 of the Act, and a resolution will be proposed that the age limit referred to in Section 210 will not apply to Mr. A.R. Munasinghe.

In terms of Article 27(12) of the Articles of Association of the Company Mr. M.A. Wijetunge and Mr. L.H.A.L. Silva retire by rotation, and being eligible, offer themselves for re-election with the unanimous approval of the Board.

Directors’ Shareholding

The relevant interest of Directors in the shares of the Company as at 31 March 2019 and 31 March 2018 is as follows:

Director 31 March 2019

31 March 2018

Mr. L.H.A.L. Silva 10,000 10,000

Mr. A.J. Alles Nil Nil

Mr. M.A. Wijetunge 67,911,668 67,911,668

Mr. T.W. De Silva Nil Nil

Mr. A.R. Munasinghe 160,300 221,800

Mr. M.R. Abeywardene Nil Nil

Mr. M.M. Wijetunge 1,866,100 1,866,100

Mr. J.D.N. Kekulawala 1,375,000 1,375,000

Mr. K.C.S. Dharmawardana Nil Nil

Ms. A.C. De Silva Gallage Nil Nil


Mr. D.S. Arangala, who functioned as the Chief

Executive Officer of the Company during the course

of the year, held 4,455,000 ordinary shares in the

Company as at 31 March 2019 and as at 31 March

2018.

Interest Register

The Interest Register is maintained by the Company as

per the Act. All Directors have disclosed their interests

pursuant to Section 192(2) of the Act.

Directors’ interests in contracts and proposed contracts with the Company

Directors’ interests in contracts, both direct and indirect

are referred to in Note 33 of the Financial Statements.

These interests have been declared at the meetings

of the Board of Directors. The Directors have no direct

or indirect interest in any other contract or proposed

contract with the Company.

Directors’ Remuneration

Directors’ remuneration in respect of the Company

and the Group for the financial year 2018/19 is given

under staff salaries, defined contribution plan cost,

bonus and directors’ fees in Note 10 of the Financial

Statements.

Donations

No donations have been made by the Company during the financial year 2018/19.

Auditors

The Auditors Messrs. KPMG were paid LKR 400,000

inclusive of taxes (2017/18 – LKR 414,270) as audit

fees and LKR 227,428 inclusive of taxes (2017/18 –

LKR 145,394) for audit related other services by the

Company.

As far as the Directors are aware the Auditors do not

have any relationship (other than that of an auditor)

with the Company or any subsidiary other than those

disclosed above. The Auditors also do not have any

interest in the Company or in any subsidiary.

ANNUAL REPORT OF THE BOARD OF DIRECTORS

Audit Committee

The Audit Committee of the parent namely Lanka

Ventures PLC which is also a listed entity, functions as

the Audit Committee of the Company and comprises

the following members:

Mr. J.D.N. Kekulawala – Chairman Mr. A.R. Munasinghe Mr. A.G.R. Dissanayake (resigned w.e.f. 12 February 2019) Ms. A.C. De Silva Gallage (appointed w.e.f. 15 February 2019)

Remuneration Committee

The Remuneration Committee of the parent namely

Lanka Ventures PLC which is also a listed entity,

functions as the Remuneration Committee of the

Company and comprises the following members:

Mr. J.D.N. Kekulawala – Chairman Mr. T.W. De Silva Mr. A.R. Munasinghe

Related Party Transactions Review committee

The Related Party Transactions Review Committee

of the parent namely Lanka Ventures PLC which is

also a listed entity, functions as the Related Party

Transactions Review Committee of the Company and

comprises the following members:

Mr. A.R. Munasinghe – Chairman

Mr. J.D.N. Kekulawala

The Company is in compliance with Section 9 of

the Listing Rules of the Colombo Stock Exchange

pertaining to related party transactions.

There were no non-recurrent related party transactions

during the year that required to be disclosed in

compliance with Section 9.3.2.(a) of the Listing Rules

of the Colombo Stock Exchange and there were no

recurrent related party transactions during the year

that required to be disclosed in compliance with

Section 9.3.2.(b) of the Listing Rules of the Colombo

Stock Exchange.



Group Financial Results

For the year ended 31 March 2019 2018

LKR ‘000 LKR ‘000 Total Income 429,509 349,050

Profit before Interest and Tax 787,921 688,438

Interest (140,098) (190,814)

Tax Expense (88,240) (58,266)

Profit for the Year 559,583 439,358

Other Comprehensive Income 213,324 (26,029)

Retained profit brought forward 480,450 472,030

Retained profit carried forward 794,271 480,450

Dividend

The Directors do not propose the payment of a final

dividend. Accordingly the Directors recommend that

the interim dividend of LKR 0.65 per share already paid

(LKR 0.34 per share in November 2018 and LKR 0.31

per share in June 2019) be treated as the final dividend

for the financial year 2018/19 (2017/18 LKR 0.64 per

share).

Property, Plant & Equipment

The movement in property, plant and equipment

during the year under review is set out in Note 16 of

the Financial Statements.

The Directors are of the opinion that the carrying

amount of properties stated in Note 16 to the financial

statements reasonably reflects their fair values.

Stated Capital & Reserves

The stated capital of the Company as at 31

March 2019 comprised ordinary share capital of

LKR 2,906,472,020/- (2017/18 – LKR 2,906,472,020/-)

and redeemable preference share capital of

LKR 75,000,000/- (2017/18 LKR 150,000,000/-).

The number of ordinary shares and redeemable

preference shares in issue as at 31 March 2019

was 582,278,117 (2017/18 – 582,278,117) and

7,500,000 (2017/18 – 15,000,000) respectively.

Total reserves of the Company as at 31 March 2019

amounted to LKR 1,103.9 million (2017/18 – LKR

575.9 million) which was the carried forward reserves

of the Company. The Group reserves as at 31 March

2019 amounted to LKR 1,072.4 million (2017/18 –

LKR 544.5 million). The composition of reserves is

shown in the Statement of Changes in Equity in the

Financial Statements.

Taxation

As per the First Schedule of the Inland Revenue Act

No. 24 of 2017 the Company was liable to income tax

at the rate of 28% for the year ended 31 March 2019.

Shareholder Information

The distribution of shareholders is indicated on page

83 of the Annual Report. There were 945 registered

shareholders as at 31 March 2019 (31 March 2018

– 834). The public holding of the Company as at 31

March 2019 was 29.95% comprising 938 shareholders

and float adjusted market capitalization was

LKR 1,413,119,117.

In terms of Rule 7.13.1.(a) of the Listing Rules of the

Colombo Stock Exchange relating to Main Board

listing, the Company complies with minimum public

holding requirement pertaining to Option 5.

Information on share trading is given on page 84 of

the Annual Report.

The status of the utilization of funds raised at the Initial

Public Offering in December 2017 is given on page 85

of the Annual report.

Circular to Shareholders – Utilization of the proceeds of the IPO

In conformity with Article 14(2) of the Articles of

Association of the Company notice is duly given by

the Company that a resolution will be proposed for the

purpose of addressing the utilization of the proceeds

of the IPO referred to in the Circular to Shareholders

dated 01 August 2019 circulated together with this

Annual Report.


Events after the Reporting Date

No circumstances have arisen and no material events

have occurred since the Balance Sheet date which

would require adjustments to, or disclosure in the

accounts other than those disclosed in the Financial

Statements and this report.

Going Concern

The Board is satisfied that the Company has adequate

resources to continue its operations in the foreseeable

future and the Directors have adopted the going

concern basis in preparing the accounts.

Annual General Meeting

The Eighth Annual General Meeting of the Company

will be held at the Auditorium of the Ceylon Chamber

of Commerce, No. 50, Navam Mawatha, Colombo 02,

on the Twenty Seventh (27th) day of September 2019

at 10.00 a.m. The Notice of the Eighth Annual General

Meeting is on page 87 of the Annual Report.

For and on behalf of the Board

A.R. Munasinghe J.D.N. Kekulawala Corporate Services

Director Director (Private) Limited

Secretary

01 August 2019

Colombo



CORPORATE GOVERNANCE

Ms. A.C. De Silva Gallage - (appointed w.e.f.

27 February 2019)

* Independent Director

The role of Chairman and Chief Executive Officer are

separate with responsibilities divided between them.

Audit Committee Meetings

During the year the Audit Committee held two

meetings and on three other occasions decisions

of the Committee were made by circular resolution

following discussion and consultation via email or

telephone with members of the Committee and

relevant officials. The attendance of each member

who participated at meetings and in passing circular

resolutions is given below.

Meetings Circular

Resolutions

Mr. J.D.N. Kekulawala 2/2 3/3

Mr. A.R. Munasinghe 2/2 3/3

Mr. A.G.R. Dissanayake* 1/2 3/3

Ms. A.C. De Silva Gallage** ---- ----

* resigned w.e.f. 12 February 2019

** appointed w.e.f. 15 February 2019

Remuneration Committee Meetings

During the year the Remuneration Committee held

two meetings and the attendance of each member is

given below.

Mr. J.D.N. Kekulawala 1/2

Mr. T.W. De Silva 1/2

Mr. A.R. Munasinghe 2/2

Related Party Transactions Review Committee Meetings

During the year the Related Party Transactions Review

Committee held four meetings and the attendance of

each member is given below.

Mr. A.R. Munasinghe 4/4

Mr. J.D.N. Kekulawala 4/4

The Board of Directors is responsible for the

governance of the Company whilst the shareholders’

role in governance is to appoint Directors and to

satisfy themselves that an appropriate governance

structure is in place.

The Board of Directors of LVL Energy Fund PLC is

committed to business integrity and professionalism

in all its activities. As part of this commitment, the

Board supports the highest standards of corporate

governance and the development of best practices.

Board of Directors

The Board consists of ten non-executive Directors

including three independent Directors with wide

financial and commercial knowledge and experience.

A brief background of each Director is given on pages

2 to 4 of the Annual Report.

Board Meetings

The Board meets once in two months and special

Board meetings are also held whenever required to

review the results of the Company with reference

to monthly Financial Statements, status of portfolio,

pipeline of projects, investment and divestment

proposals and position papers on portfolio companies.

The Board comprising 10 non-executive members is

able to bring independent judgment to bear on the

decision making process of the Company.

Over the past year the Board held six meetings and the

attendance of each Director is given below.

Mr. L.H.A.L. Silva (Chairman) - 6/6

Mr. A.J. Alles - 3/6

Mr. T.W. De Silva - 4/6

Mr. A.R. Munasinghe * - 5/6

Mr. M.R. Abeywardena - 4/6

Mr. M.A. Wijetunge - 4/6

Mr. D.S. Arangala - 6/6 (resigned w.e.f. 20

February 2019)

Mr. M.M. Wijetunge - 5/6

Mr. J.D.N. Kekulawala* - 5/6

Mr. K.C.S. Dharmawardana* - 5/6


Appraisal of the Chief Executive Officer

The performance of the Chief Executive Officer

(CEO) is reviewed every year by the Board. The CEO

is accountable to the Board and is responsible for

the day-to-day operations of the Company while

ensuring that corporate goals are achieved making

the optimum use of resources available.

Time Commitment

The Board dedicates adequate time to discharge their

duties effectively. In addition to Board meetings, they

attend sub-committee meetings and make decisions

via circular resolutions.

Appointments to the Board

New appointments to the Board are based on

collective decisions of the Board. In making new

appointments, the Board considers the composition

of the Board in order to assess whether they have the

right mix of skills and experience to be better prepared

for managing the Company.

Re-election of Directors

As per the Articles of Association of the Company

two Directors retire from office at each Annual

General Meeting and offer themselves for re-

election.

Access to Independent Professional Advice

All Directors have access to advice of the Company

Secretary and independent professional advice is

available to Directors in appropriate circumstances at

Company’s expense.

Remuneration of Directors

The remuneration of Directors is determined by the

Board and disclosed under staff salaries, defined

contribution plan cost, bonus and directors’ fees in

Note 10 of the Financial Statements.

Remuneration Policy

The Company’s remuneration policy is based on the

following principles:

To deliver improved shareholder value by

ensuring that individual performance and reward

reflect and reinforce the business objectives of

the Group.

To support the recruitment, motivation and

retention of high quality senior executives.

To ensure that performance is the key factor in

determining individual reward.

Company Secretary

Corporate Services (Private) Limited are the Secretaries

to the Company. The Company Secretaries attend

Board meetings, minute all Board decisions and liaise

with Directors on matters connected with the Board.

The Company Secretaries ensure proper procedures

are followed and applicable rules and regulations are

adhered to by the Board.

Investment Committee

The Investment Committee comprising four members

of the Board is responsible for considering investment

and divestment proposals prior to placing them

before the Board for approval.

Responsibilities

The Board and its committees are supplied with full

and timely information to enable them to discharge

their responsibilities. The responsibilities of the Board

include the following:

• Exercise leadership, enterprise, integrity and judgment in directing the Company so as to achieve continuing prosperity in a manner based on transparency, accountability and responsibility.

• Ensure a managed and effective process of Board appointments.



• Determine the Company’s purpose and values, strategy and ensure that appropriate procedures and practices are in place.

• Monitor and evaluate the implementation of strategies and policies for better management performance.

• Ensure compliance with the relevant laws, regulations and codes of best practice.

• Communicate with shareholders effectively and serve the legitimate interests of the shareholders.

• Periodic and timely reporting to shareholders of the progress and performance of the Company.

• Review processes and procedures regularly to ensure that internal controls are effective.

• Identify key risk areas and ensure that these risks are addressed and managed effectively.

• Appointing and evaluating the performance of the Chief Executive Officer.

• Approving the Annual Budget.

• Ensure the continuation of the Company as a going concern.

Investor Relations

The Annual General Meeting, Annual Report of the

Company, Quarterly Reports and the Company’s

website are the principal means of communication

with the shareholders.

Foreseeable risk factors

• Credit Risk

Is the risk of loss due to uncertainty in

counterparty’s ability to meet its financial

obligations in full and in a timely manner. Investee

companies in the energy sector are dependent

on a single customer for sale of electricity.

• Interest Rate Risk

Is the risk of financial loss due to adverse

movement in interest rates.

• Liquidity Risk

Is the risk arising out of the lack of marketability

of an investment. The Group’s investments are in

unlisted companies whose shares may not be

readily marketable.

• Business Risk

Is the risk that can have a negative impact on

the operation or earnings of the company due to

internal or external factors such as changes in the

cost structure, loss of market share and changes

in industry or macro economic conditions.

• Operational Risk

Is the risk of direct or indirect loss arising from

a wide variety of causes associated with the

Company’s processes, personnel, technology

and infrastructure, and from external factors

other than credit, market and liquidity risks

such as those arising from legal and regulatory

requirements and generally accepted standards

of corporate behaviour. Operational risks arise

from all of the company’s operations. Venture

capital investments are well known as high risk

investments since venture capital companies

invest in ventures with a high growth but also

high risk potential.

The overall responsibility for the governance of

operational risk lies with the Board of Directors.

The Board identifies major risk areas and provide

adequate resources and people to mitigate and

minimize risks. Performance of the ventures and

potential new investments are evaluated by the

Board in order to make strategic decisions.

• Environment Risk

Is the risk which arises due to actual or potential

threat of adverse effects from environment. An

environment study is carried out in respect of

each power sector project. Changing weather

patterns can have an impact on projects in the

renewable energy sector.

Material issues pertaining to employees and industrial relations

There are no material issues pertaining to employees

and industrial relations of the Company.



Compliance with Corporate Governance Rules of the Colombo Stock Exchange

The following disclosures are made in conformity with Section 7 of the Rules of the Colombo Stock Exchange:

Rule Status

7.10.1 Non-executive

Directors

Complied with.

All ten Directors are non-executive.

7.10.2 Independent

Directors

Complied with.

Each non-executive Director has submitted a signed and dated declaration as specified in

the Rule.

The Board has decided that 03 Directors are independent (see cage below)

7.10.3 Disclosures

relating to Directors

7.10.4 Criteria

for determining

independence

Mr. J.D.N. Kekulawala and Mr. K.C.S. Dharmawardana meet all the criteria set out in Rule 7.10.4 for determining the independence of Directors. Mr. A.R. Munasinghe does not meet the criterion relating to tenure of office as he has completed 9 years as a Director of the Parent Company on 01 October 2017.

However, considering the following factors the Board has determined that Mr. A.R. Munasinghe could nevertheless be considered independent;

a) The Directors do not participate when considering transactions in which they have an interest. On other matters they act in accordance with their beliefs in the best interest of the Company.

b) No Director exercises undue influence over the deliberations of the Board or uses his seniority or position to prevent any other Director expressing his views on any matter.

7.10.5 Remuneration

Committee

Complied with.

The Remuneration Committee of the parent namely Lanka Ventures PLC which is also a listed entity, functions as the Remuneration Committee of the Company and comprises three non-executive directors including two independent directors of the parent. The names of the members of the committee are given in the Annual Report of the Board of Directors. The remuneration of the CEO is recommended by the committee. The total remuneration paid to Directors is given under staff salaries, defined contribution plan cost, bonus and directors’ fees in Note 10 of the Financial Statements on page 53. A statement regarding the remuneration policy of the Group is given on page 19.

7.10.6 Audit Committee Complied with.

The Audit Committee of the parent namely Lanka Ventures PLC which is also a listed entity functions as the Audit Committee of the Company and comprises three non-executive Directors including two independent Directors of the parent. The names of the members of the committee are given in the Annual Report of the Board of Directors. The report of the committee is given on page 22.



AUDIT COMMITTEE REPORT

policies and material judgmental matters and

recommended the financial statements to the Board

for its deliberations and issuance. The Committee

also discussed with the management the matters

communicated to the Committee by the External

Auditors during the audit for the year.

The effectiveness of the Company’s internal controls

and risk management processes are evaluated by

the Committee and provided reasonable assurance

to the Directors that assets are safeguarded and that

the financial reporting system can be relied upon in

preparation and presentation of financial statements.

The Committee is satisfied that the Company’s

compliance framework provided reasonable

assurance that all relevant laws, rules and regulations

and accounting standards have been complied with.

The Committee is satisfied that the independence of

the External Auditors has not been impaired by any

event or service that gives rise to a conflict of interest.

Due consideration has been given to the nature of

the services provided by the Auditors and the level

of audit and non-audit fees received by the Auditors

from the Company. The Committee has proposed

that the Messrs. KPMG be re-appointed as auditors

for the financial year ending 31 March 2020 subject

to approval by the shareholders at the Annual General

Meeting.

J.D.N. Kekulawala

Chairman

01 August 2019

The role of the Audit Committee is to assist the Board

in fulfilling its oversight responsibilities with regard to

ensuring the integrity of the financial statements of the

Company and that a sound financial reporting system

is in place and is well managed in order to provide

accurate, appropriate and timely information to the

management, regulatory authorities and shareholders

in compliance with Sri Lanka Accounting Standards.

The Audit Committee reviews the effectiveness of

internal control system and implement changes

where required ensuring that the risk management

processes are effective and sufficient to identify and

mitigate risks. The Audit Committee ensures that

the conduct of the business is in compliance with

legal and regulatory requirements and assesses the

Company’s ability to continue as a going concern in

the foreseeable future.

The Audit Committee comprises of three non-

executive Directors including two independent

Directors in conformity with the Listing Rules of the

Colombo Stock Exchange and the names of the

members of the Committee are given on page 15 in

the Annual Report of the Board of Directors.

In addition to two meetings, decisions of the

Committee were made by way of circular resolution

following discussion and consultation with members

of the Committee and relevant officers. The attendance

of members who participated at meetings and in

passing circular resolutions is given on page 18 under

Corporate Governance.

The Audit Committee has reviewed and discussed the

Company’s quarterly and annual financial statements,

prior to publication with the management, including

the extent of compliance with Sri Lanka Accounting

Standards, the appropriateness of accounting


RELATED PARTY TRANSACTIONS REVIEW COMMITTEE REPORT

The Committee met on four occasions during the

financial year and the attendance of the members is

given on page 18 under Corporate Governance. The

Chief Executive Officer and Finance Manager of Lanka

Ventures PLC attended the meetings as invitees.

The Committee reviewed the related party

transactions and communicated its views to the

Board. The Committee was satisfied with the quality

and adequacy of the information pertaining to related

party transactions presented to it by the management

in compliance with Section 9 of the Listing Rules of

the Colombo Stock Exchange.

A.R. Munasinghe

Chairman

01 August 2019

The Committee comprises two independent directors

and their names are given on page 15 in the Annual

Report of the Board of Directors.

The main responsibilities of the Committee are as

follows:

(1) Establish definitions and set out threshold values

for each related party transaction that requires

discussion and disclosure.

(2) Identify related party transactions that require

prior approval of the Board, immediate market

disclosure, shareholder approval and disclosure

in the annual report.

(3) Formulate a standard format for documentation

of related party transactions to be presented to

the Committee.

(4) Establish guidelines to identify recurrent and

non-recurrent related party transactions.

(5) Obtain knowledge and expertise to assess

proposed related party transactions where

necessary including obtaining of appropriate

professional and expert advice from suitably

qualified persons.

(6) Communicate to the Board its views on related

party transactions reviewed by the Committee.

RESPONSIBILITIES

INCOM

E

FINANCIA

L POSITION

EQUITY

CASH FLOW

S

AUDITORS’ REPORT

Page 26 | Statement of Directors' Responsibilities

| Independent Auditors’ Report

Page 30 | Statement of Profit or Loss and Other Comprehensive Income

Page 31 |Statement of Financial Position

Page 32 | Statement of Changes in Equity

Page 34 | Statement of Cash Flows

Page 35 | Notes to the Financial Statements

FINACIAL REPORTS


STATEMENT OF DIRECTORS’ RESPONSIBILITIES

They are also responsible for safeguarding the assets of

the Company and the Group and for taking reasonable

steps for the prevention and detection of fraud and

other irregularities. In this regard the Directors have

instituted an effective and comprehensive system of

internal control.

The Directors are required to prepare Financial

Statements and to provide the External Auditors

with every opportunity to take whatever steps and

undertake whatever inspections they may consider

to be appropriate to enable them to give their

independent audit opinion.

The Directors are of the view that they have discharged

their responsibilities as set out in this statement.

Compliance Report

The Directors confirm that to the best of their

knowledge, all taxes, duties and levies payable by the

Company, all contributions, levies and taxes payable

on behalf of and in respect of the employees of the

Company and other known statutory dues as were

due and payable by the Company as at the Balance

Sheet date have been paid or, where relevant provided

for.

By Order of the Board,

Corporate Services (Private) Limited

Secretaries

01 August 2019

Colombo

The responsibility of the Directors, in relation to the

Financial Statements of the Company differs from the

responsibilities of the Auditors, which are set out in the

independent Auditors’ Report on pages 27 to 29.

The Directors are responsible for preparing the

Annual Report and the Financial Statements to the

shareholders of the Company. The Directors confirm

that the Financial Statements give a true and fair view

of the state of affairs of the Company and of the Group

at the end of the financial year, and of the profit or loss

of the Company and the Group for the financial year.

In preparing the Financial Statements set out on pages

30 to 34, the Directors are required to:

• Select appropriate accounting policies and then

consistently make judgments and estimates that

are reasonable and prudent.

• State whether applicable accounting standards

have been followed.

The Directors confirm that they have complied

with the above requirements in preparing both the

Company Financial Statements and the consolidated

Financial Statements. The Directors also confirm that

the Company and the Group have adequate resources

to continue in business for the foreseeable future and

have applied going concern basis in preparing the


The Directors are responsible for keeping proper

accounting records which disclose with reasonable

accuracy, at any time, the financial position of the

Company and the Group and to enable them to

ensure the Financial Statements comply with the

Companies Act No. 7 of 2007.


INDEPENDENT AUDITORS’ REPORT

INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS OF LVL ENERGY FUND PLC

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of LVL Energy Fund PLC (“the Company”) and the consolidated financial statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at March 31, 2019, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information set out on pages 30 to 81 of the Annual Report.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company and the Group as at 31 March 2019, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Basis for Opinion

We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Company financial statements and consolidated financial statements of the current period. These matters were addressed in the context of our audit of the Company financial statements and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Equity accounting of subsidiaries and associates in the Company’s separate financial statements and consolidation of investments in subsidiaries and associates in the Group financial statements.

As described in Note 3.2 (Accounting policies), Note 17 (Investment in Subsidiaries) and Note 18 (Investment in equity accounted investees), the carrying value of the subsidiaries and associates in the separate financial statements amounted to Rs. 2,404 Mn and Rs. 1,543 Mn respectively and the carrying value of associates recorded in Consolidated financial statements amounted to Rs. 3,349 Mn as at 31 March 2019.

Risk Description

Investments within the Company and Group are accounted for by equity accounting or by consolidation respectively. The determination of the appropriate accounting depends upon the ability of the Company and Group to exercise control or significant influence.

The Company measures its components using the equity method of accounting in its separate financial statements in accordance with LKAS 27 and consolidation of group financial statements in accordance with SLFRS 10 and LKAS 28.

: +94 - 11 542 6426 : +94 - 11 244 5872 : +94 - 11 244 6058 : www.kpmg.com/lk

KPMG (Chartered Accountants) 32A, Sir Mohamed Macan Markar Mawatha, P. O. Box 186, Colombo 00300. Sri Lanka.

TelFax

Internet

KPMG, a Sri Lankan partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG Intemational"), a Swiss entity.

M.R. Mihular FCA T.J.S. Rajakarier FCA Ms. S.M.B. Jayasekara ACA G.A.U. Karunaratne FCA R.H. Rajan ACA

P.Y.S. Perera FCA W.W.J.C. Perera FCA W.K.D.C. Abeyrathne FCA R.M.D.B. Rajapakse FCAM.N.M. Shameel ACA

C.P. Jayatilake FCA Ms. S. Joseph FCA S.T.D.L. Perera FCA Ms. B.K.D.T.N. Rodrigo FCA Ms. C.T.K.N. Perera ACA

Principals - S.R.I. Perera FCMA (UK), LLB, Attorney-at-Law, H.S. Goonewardene ACA



Due to the significant judgement involved and as the potential financial impact is significant to the presentation of the financial statements, this was considered to be a key audit matter.

Our audit procedures included,

• Testing the design and implementation of key controls around the application of SLFRS 10 and we challenged the significant judgment that management have exercised in determining whether the Group controls its components.

• Reviewing documents to support any key judgements management have made in determining whether they control or have significant influence over an investee.

• Discussion held with management of the company concerning the basis of these entities accounted for as subsidiaries and associates in the financial statements.

• Obtaining and reviewing those relevant terms in the shareholders’ agreements and articles of association of subsidiaries and associates.

• Verifying the net assets used for equity accounting with the individual entity’s financial statements to ensure accuracy.

• Performing or reviewing the work carried out by component auditors where necessary and for the non-significant investees performing analytical reviews limited to the financial statements.

• Assessing the adequacy of the disclosures in the financial statements.

Other Information

Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the

financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:



• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial

statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

As required by section 163 (2) of the Companies Act

No. 07 of 2007, we have obtained all the information

and explanations that were required for the audit

and, as far as appears from our examination, proper

accounting records have been kept by the Company.

CA Sri Lanka membership number of the engagement

partner responsible for signing this independent

auditor’s report is 1798.

CHARTERED ACCOUNTANTS Colombo, Sri Lanka 01 August 2019


Group CompanyFor the year ended 31 March Notes 2019 2018 2019 2018RevenueInvestment income 6 1,430 538 - -

Interest income 7 72,756 22,274 66,210 19,385

Other income 8 - - 4,524 5,952

Subsidiary company income 9 355,323 326,238 - -

429,509 349,050 70,734 25,337

Operating expenses 10Administrative expenses (7,634) (7,204) (7,634) (7,204)

Sales and establishment expenses (271) (155) (141) -

Other operating expenses (17,848) (10,394) (6,664) (2,431)

Direct expenses - subsidiaries 9 (124,016) (111,327) - -

Results from operating activities 279,740 219,970 56,295 15,702

Finance cost 11 (140,098) (190,814) (64,687) (114,515)

Share of profit of equity accounted investees, net of tax 12 508,181 468,468 546,794 520,552

Profit before income tax 647,823 497,624 538,402 421,739

Tax expense 13 (88,240) (58,266) (19,981) (22,506)

Profit for the year 559,583 439,358 518,421 399,233

Other comprehensive income, net of income taxItems that are or may be re-classified subsequently to profit or lossForeign operations - foreign currency translation difference 213,349 (26,029) 213,349 (26,029)

Share of other comprehensive income from Equity Accounted Investees (25) - (25) -

Total other comprehensive income that are or may be re-classified to profit or loss in subsequent period 213,324 (26,029) 213,324 (26,029)

Items that will not be re-classified subsequently to profit or loss - - - -

Total other comprehensive income for the year, net of income tax 213,324 (26,029) 213,324 (26,029)

Total comprehensive income for the year 772,907 413,329 731,745 373,204

Profit attributable to:Equity holders of the company 518,420 399,147 518,421 399,233

Non-controlling interest 41,163 40,211 - -


Total comprehensive income attributable to:Equity holders of the company 731,744 373,118 731,745 373,204

Non-controlling interest 41,163 40,211 - -


Earnings per share on profitBasic earnings per share 14 0.89 0.81 0.89 0.81

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME(All amounts in Sri Lanka Rupees thousands)

The notes to the Financial Statements form an integral part of these Financial Statements.


STATEMENT OF FINANCIAL POSITION

(All amounts in Sri Lanka Rupees thousands)

I certify that these Financial Statements have been prepared in compliance with the requirements of the Companies Act No 07 of 2007.

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.

Signed for and on behalf of the Board.

Group CompanyAs at 31 March Notes 2019 2018 2019 2018AssetsNon current assetsProperty, plant and equipment 16 975,309 1,017,251 - - Right-to-use land 16.1 3,554 3,742 - -Investment in subsidiaries 17 - - 2,404,314 1,951,385 Investment in equity accounted investees 18 3,349,239 2,843,605 1,542,623 1,298,453 Intangible assets 19 56,413 59,286 - - Total non current assets 4,384,515 3,923,884 3,946,937 3,249,838

Current assetsLoans and receivables 20 57,963 51,608 5,404 88 Amounts due from related parties 21 - 489 40,887 52,675 Income tax receivables 30.1 5,425 2,380 4,790 1,590 Other receivables 22 84,581 27,877 63,782 28,470 Cash & cash equivalents 23 787,370 944,342 521,659 868,032 Total current assets 935,339 1,026,696 636,522 950,855

Total assets 5,319,854 4,950,580 4,583,459 4,200,693

EquityStated capital 25 2,906,472 2,906,472 2,906,472 2,906,472Revaluation reserve 9,112 8,301 9,112 8,301 Translation reserve 269,076 55,727 275,502 62,153Retained earnings 794,271 480,450 819,276 505,454Total equity attributable to equity holders of the company 3,978,931 3,450,950 4,010,362 3,482,380Non controlling interest 176,849 158,688 - -Total equity 4,155,780 3,609,638 4,010,362 3,482,380

LiabilitiesNon current liabilitiesInterest bearing borrowings 26 467,687 362,241 284,000 219,000 Cumulative redeemable preference shares 27 250,000 415,000 - 75,000 Deferred tax liability 28 47,591 42,050 - - Total non current liabilities 765,278 819,291 284,000 294,000

Current liabilitiesInterest bearing borrowings 26 295,302 199,463 210,477 112,824 Cumulative redeemable preference shares 27 75,000 75,000 75,000 75,000 Other payables 29 16,301 242,709 3,620 236,489 Income tax payable 30.2 12,193 4,479 - - Total current liabilities 398,796 521,651 289,097 424,313 Total liabilities 1,164,074 1,340,942 573,097 718,313

Total equity and liabilities 5,319,854 4,950,580 4,583,459 4,200,693


D.L. WijesekaraFinance Manager J.D.N. Kekulawala

DirectorA.R. Munasinghe

Director Signed in Colombo on 01 August 2019


STATEMENT OF CHANGES IN EQUITY


Group Attributable to equity holders of the group

Stat

ed c

apita

l

Reva

luat

ion

rese

rve

Tran

slat

ion

rese

rve

Reta

ined

ea

rnin

gs

Tota

l

Non

con

trol

ling

inte

rest

Tota

l

Balance as at 01 April 2017 1,706,472 8,301 81,756 472,030 2,268,559 166,969 2,435,528

Profit for the year - - - 399,147 399,147 40,211 439,358

Foreign operations - foreign currency translation difference - - (26,029) - (26,029) - (26,029)

Total comprehensive income - - (26,029) 399,147 373,118 40,211 413,329

Transactions with equity holders recognized directly in equity contributions by & distribution to equity holders

Issue of shares during the period 1,200,000 - - (46,869) 1,153,131 - 1,153,131

Dividend paid - - - (110,947) (110,947) (48,492) (159,439)

Dividend payable - - - (232,911) (232,911) - (232,911)

1,200,000 - - (390,727) 809,273 (48,492) 760,781

Balance as at 31 March 2018 2,906,472 8,301 55,727 480,450 3,450,950 158,688 3,609,638

Profit for the year - - - 518,420 518,420 41,163 559,583

Foreign operations - foreign currency translation difference

- - 213,349 - 213,349 - 213,349

Share of OCI Income-Equity Accounted Investees - 811 - (836) (25) - (25)

Total comprehensive income - 811 213,349 517,584 731,744 41,163 772,907 Transactions with equity holders recognized directly in equity contributions by & distribution to equity holdersPreference dividend - equity accounted investees - - - (3,798) (3,798) - (3,798)

Share issue expenses - - - (1,990) (1,990) - (1,990)

Dividend paid - - - (197,975) (197,975) (23,002) (220,977)

- - - (203,763) (203,763) (23,002) (226,765)

Balance as at 31 March 2019 2,906,472 9,112 269,076 794,271 3,978,931 176,849 4,155,780



Company

Stat

ed c

apita

l

Reva

luat

ion

rese

rve

Tran

slat

ion

rese

rve

Reta

ined

ear

ning

s

Tota

l

Balance as at 01 April 2017 1,706,472 8,301 88,182 496,948 2,299,903

Profit for the year - - - 399,233 399,233

Foreign currency translation difference - - (26,029) - (26,029)

Total comprehensive income for the year - - (26,029) 399,233 373,204

Transactions with equity holders recognized directly in equitycontributions by & distribution to equity holders

Issue of shares during the period 1,200,000 - - - 1,200,000

Share issue expenses - - - (46,869) (46,869)

Dividend paid - - - (110,947) (110,947)

Dividend payable - - - (232,911) (232,911)

1,200,000 - - (390,727) 809,273

Balance as at 31 March 2018 2,906,472 8,301 62,153 505,454 3,482,380

Profit for the year - - - 518,421 518,421

Foreign currency translation difference - - 213,349 - 213,349

Share of OCI income-equity accounted investees - 811 - (836) (25)

Total comprehensive income for the year - 811 213,349 517,585 731,745

Transactions with equity holders recognized directly in equitycontributions by & distribution to equity holders

Preference dividend - equity accounted investees - - - (3,798) (3,798)

Share issue expenses - - - (1,990) (1,990)

Dividend paid - - - (197,975) (197,975)

- - - (203,763) (203,763)

Balance as at 31 March 2019 2,906,472 9,112 275,502 819,276 4,010,362

STATEMENT OF CHANGES IN EQUITY




STATEMENT OF CASH FLOWS



Group CompanyFor the year ended 31 March 2019 2018 2019 2018

Cash flows from operating activitiesProfit before tax 647,823 497,624 538,402 421,739

Adjustments for:Interest income (72,756) (22,274) (66,210) (19,385)

Other income - - (4,524) (5,952)

Interest expense 71,131 102,795 45,839 76,547

Preference dividend 68,400 86,469 18,525 37,225

Depreciation 41,943 41,997 - -

Amortization 333 2,153 - -

Intangible assets write off 2,846 - - -

Share of profit of equity accounted investees (net of income tax) (508,181) (468,468) (546,794) (520,552)

251,539 240,296 (14,762) (10,378)Changes inLoans & receivables (6,355) 1,934 (5,316) -

Amounts due from related parties 489 (47) 16,086 24,596

Other receivables (81,179) 122,551 (35,312) 121,991

Other payables (226,408) 3,507 (232,869) 578

Cash generated / (used) from operating activities (61,915) 368,241 (272,173) 136,787

Interest paid (74,656) (104,678) (45,962) (77,131)

Taxes paid (16,694) (9,402) (3,199) (160)

Net cash from operating activities (153,264) 254,161 (321,334) 59,496

Cash flows from investing activitiesInterest received 72,756 22,274 66,210 19,385 Dividend received 307,802 255,170 171,880 344,786

Investment in equity accounted investees (132,639) (140,000) (132,639) (140,000)

Cost incurred to obtain approval for power projects - (1,050) - -

Disposal / acquisition of property plant and equipment - (10,262) - -

Net cash generated / (used) from investing activities 247,919 126,132 105,451 224,171

Cash flows from financing activities

Dividend paid (197,975) (110,947) (197,975) (110,947)

Dividend paid to minority share holders by subsidiary (23,002) (48,492) - -

Issue of ordinary shares - 1,200,000 - 1,200,000

Cash proceeds of interest bearing borrowings 444,000 577,871 310,000 500,000

Cash repayments of interest bearing borrowings (239,260) (731,050) (147,000) (695,000)

Share issue expenses (1,990) (46,869) (1,990) (46,869)

Cash repayments of cumulative redeemable preference shares (165,000) (255,000) (75,000) (255,000)

Preference dividend paid (68,400) (104,780) (18,525) (55,536)

Net cash generated/ (used) from financing activities (251,626) 480,733 (130,490) 536,648

Net increase/(decrease) in cash & cash equivalents (156,972) 861,026 (346,373) 820,315

Cash & cash equivalents at 01 April 944,342 83,316 868,032 47,717

Cash & cash equivalents at 31 March (Note 23) 787,370 944,342 521,659 868,032


NOTES TO THEFINANCIAL STATEMENTS

1. Reporting entity

LVL Energy Fund PLC is a Public Quoted Company with limited liability incorporated and domiciled in Sri Lanka. The address of the Company’s registered office is No. 46/12, Navam Mawatha, Colombo 02. The Company was listed on the Colombo Stock exchange on 9 January 2018.

The Consolidated Financial Statements of the Company as at and for the year ended 31 March 2019 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interest in its equity accounted investees. The Financial Statements of all Companies within the Group are prepared for a common financial year which ends 31 March 2019.

Lanka Ventures PLC is the parent company for LVL Energy Fund PLC, which has 57.00% controlling interest and the ultimate parent is Acuity Partners (Private) Limited. Hatton National Bank PLC and DFCC Bank PLC jointly control Acuity Partners (Private) Limited.

LVL Energy Fund PLC (‘the Company’) and its subsidiaries (together ‘the Group’) invest in the equity and equity related financial instruments of new and existing companies of Sri Lanka which undertake projects with potential for high growth.

There were no significant changes in the nature of the principal activities of the Company and the Group during the financial year under review.

The number of employees as at the end of the year was 01 (2018 – 01).

2. Basis of preparation

2.1 Statement of compliance

The Consolidated Financial Statements of the Group and the Financial Statements of the Company which comprise the Statement of financial position, Statement of profit or loss and other comprehensive income, Statement of changes in equity, Statement of cash flows and notes thereto have been prepared in accordance with Sri Lanka Accounting Standards (SLFRSs and LKASs) as laid down by the Institute of

Chartered Accountants of Sri Lanka, and comply

with the requirements of Companies Act No. 7 of

2007 and provide appropriate disclosures required

by the Listing Rules of the Colombo Stock Exchange.

2.2 Approval of Financial Statements by Directors

The Consolidated and Company’s Financial

Statements were authorised for issue by the Board

of Directors in accordance with the resolution of the

directors on 01 August 2019.

2.3 Responsibility for Financial Statements

The Board of Directors is responsible for the

preparation and presentation of the Financial

Statements of the Consolidated Financial

Statements of the Group and the Financial

Statements of the Company as per the provisions of

the Companies Act No 07 of 2007.

The Board of Directors acknowledges this

responsibility and such responsibilities include the

following components:

• Information on the financial performance of

the group for the year under review.

• Information on the financial position of the

group as at the year end.

• Showing all changes in shareholders’ equity

during the year under review.

• Information to the users on the movement of

the cash and cash equivalents.

• Notes to the financial statements including

the Accounting Policies and other explanatory

notes.

2.4 Basis of measurement

The Financial Statements have been prepared on

the historical cost basis and applied consistently

with no adjustments being made for inflationary

factors affecting the Financial Statements except for

the following;

• Investment in equity accounted investees

• Investment in subsidiaries


This is the first set of the Consolidated Financial Statements of the Group in which SLFRS 9 – “Financial Instruments” and SLFRS 15 – “Revenue from Contracts with Customers” have been applied. Changes to significant accounting policies are described in Note 03.

2.5 Functional and presentation currency

The Financial Statements are presented in Sri Lankan Rupees, which is the Group’s functional currency. Financial information presented in Sri Lankan Rupees has been rounded to the nearest thousand unless indicated otherwise.

2.6 Presentation of financial statements

The assets and liabilities of the Group is presented in its Statement of Financial Position are grouped by nature and listed in an order that reflects their relative liquidity and maturity pattern.

2.7. Materiality and aggregation

Each material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard - LKAS 01 - “Presentation of Financial Statements”.

2.8. Going concern basis for accounting

The Management has made an assessment of its ability to continue as a going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, the Management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the Financial Statements of Consolidated Financial Statements of the Group and the Company continue to be prepared on a going concern basis.

2.9. Offsetting

Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial Position, only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or to realise the assets and settle the liabilities

simultaneously. Income and expenses are not offset in the Income Statement, unless required or permitted by an Accounting Standard or Interpretation (issued by the International Financial Reporting Interpretations Committee and Standard Interpretation Committee) and as specifically disclosed in the Accounting Policies of the Group.

2.10. Use of estimates and judgments

The preparation of the Financial Statements in conformity with Sri Lanka Accounting Standards requires (LKAS/SLFRS) management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

In particular, Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the Financial Statements are described in the following notes:

i. Note 3.4 - Recognition and measurement of financial instruments

ii. Note 3.12.2 - Recognition of deferred tax liabilities

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these Financial Statements.

3.1 Changes in accounting policies

The Group have initially adopted SLFRS 9 and SLFRS 15 from 1st April 2018. Due to the transition method chosen by the Group in applying SLFRS 9, comparative information throughout these Financial Statements have not been restated to reflect its requirements. The adoption of SLFRS 15

NOTES TO THE FINANCIAL STATEMENTS


did not impact the timing or amount of fee and income from contracts with customers and the related assets and liabilities recognized by the Group. Accordingly the impact on the comparative information throughout these financial statements have not been restated to reflect the requirements of the new standards.

SLFRS 15 Revenue from Contracts with

Customers

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced LKAS 18 Revenue, LKAS 11 Construction Contracts and related interpretations. Under SLFRS 15, revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the transfer of control – at a point in time or over time – requires judgement.

The Group have adopted SLFRS 15 using the cumulative effect method (without practical expedients), with the effect of initially applying this standard recognised at the date of initial application (i.e. 01 April 2018). Accordingly, the information presented for 2018 has not been restated – i.e. it is presented, as previously reported, under LKAS 18, LKAS 11 and related interpretations. Additionally, the disclosure requirements in SLFRS 15 have not generally been applied to comparative information.

There was no impact on the comparative figures presented in the statement of financial position, statement of changes in equity and statement of cash flows. Further, the change in accounting policy has no impact on the reported amount of accumulated profits as at 01 April 2018.

SLFRS 9 Financial Instruments

SLFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces LKAS 39 Financial Instruments: Recognition and Measurement.


Classification and measurement of financial

assets and financial liabilities

SLFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, FVOCI and FVTPL. The classification of financial assets under SLFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. SLFRS 9 eliminates the previous LKAS 39 categories of held to maturity, loans and receivables and available for sale. SLFRS 9 largely retains the existing requirements in LKAS 39 for the classification and measurement of financial liabilities. The adoption of SLFRS 9 has not had a significant effect on the Group’s accounting policies.

The following table and the accompanying notes below explain the original measurement categories under LKAS 39 and the new measurement categories under SLFRS 9 for each class of the Group’s financial assets and financial liabilities as at 01 April 2018.


Note LKAS 39 SLFRS 9Carrying amount under LKAS 39

Carrying amount under SLFRS 9

Group

Financial assets

Loans and receivables Loans and Receivables

Amortised cost 51,608 51,608

Amounts due from related party Loans and Receivables

Amortised cost 489 489

Other receivables Loans and Receivables


Cash and cash equivalents Loans and Receivables


Company

Financial assets

Loans and receivables Loans and Receivables

Amortised cost 88 88

Amounts due from related party Loans and Receivables


Other receivables Loans and Receivables


Cash and cash equivalents Loans and Receivables


Group

Financial liabilities

Interest bearing borrowings Other financial liabilities

Other financial liabilities

561,704 561,704

Cumulative redeemable preference shares



490,000 490,000

Other payables Other financial liabilities


242,709 242,709

Company


Interest bearing borrowings Other financial liabilities


331,824 331,824




75,000 75,000

Other payables Other financial liabilities


236,489 236,489





Impairment of financial assets

SLFRS 9 replaces the ‘incurred loss’ model in LKAS 39 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under SLFRS 9, credit losses are recognised earlier than under LKAS 39.

For assets in the scope of the SLFRS 9 impairment model, impairment losses are generally expected to increase and become more volatile.

Transition

Changes in accounting policies resulting from the adoption of SLFRS 9 have not been applied retrospectively, except as described below.

The Group have used an exemption not to restate comparative information for prior periods with respect to classification and measurement (including impairment) requirements. Therefore, comparative periods have not been restated. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of SLFRS 9 are recognised in retained earnings and reserves as at 01 April 2018. Accordingly, the information presented for 2018 does not generally reflect the requirements of SLFRS 9, but rather those of LKAS 39. However, the impact of adopting this standard has not been recognized as a revision of opening reserves as it is considered immaterial (Refer Note 24.4).

3.2 Basis of consolidation

3.2.1 Business combinations

The Group accounts for business combinations using the acquisition method when control is transferred to the group. The consideration transferred in acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on bargain purchase is

recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in statement of profit or loss and other comprehensive income.

3.2.2 Subsidiaries

Subsidiaries are entities controlled by the group. The group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Financial Statements of subsidiaries are included in the consolidated financial statement from the date on which control commences until the date on which control ceases.

The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Total comprehensive income of subsidiary is attached to the owners of the Company and to the non- controlling interest, even this result in the non- controlling interest having a deficit balance.

3.2.2.1 Critical judgments in applying the entity’s accounting policies

The directors have concluded that the group has control and voting rights over its subsidiaries as depicted in Note 3.2.2.2.


Name of the entityPlace of business/

Country of incorporationPercentage of ownership

held by the group Principal Services


Colombo – Sri Lanka 100.00% Investing in new and existing companies outside Sri Lanka which undertake projects with potential for high growth

Sapthakanya Hydro Electric Company (Private) Ltd

Norton Bridge - Sri Lanka 85.00% Building and operating of mini hydropower stations and supply of electricity to the National Grid.

Pupulaketiya Mini Hydro Power (Private) Limited

Ratnapura - Sri Lanka 100.00% Building and operating of mini hydropower stations and supply of electricity to the National Grid.


Ginigathena – Sri Lanka 54.86% Building and operating of mini hydropower stations and supply of electricity to the National Grid.

LVS Energy (Private) Limited

Kolannawa – Sri Lanka 57.75% Investment in power generation companies


Bogawantalawa – Sri Lanka 84.29% Building and operating of mini hydropower stations and supply of electricity to the National Grid.


3.2.3 Non-controlling interest (NCI)

NCI are measured at their proportionate share of acquirer's identifiable net assets at the date of acquisition. Changes in the group interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

3.2.4 Loss of control

When the group loses control over a subsidiary, it derecognizes the asset and liabilities of the subsidiary, and any related NCI (if applicable) and other components of equity. Any resulting gain or loss is recognized in the statement of profit or loss and other comprehensive income. Any interest in the former subsidiary is measured at fair value when control is lost.

3.2.5 Equity accounted investees

The Group’s interests in equity accounted investees comprise interests in associates. Associates are those entities in which the Group has significant influence, but not control or joint control, over

the financial and operating policies. Significant influence is presumed to exist when the Group holds 20% or more of the voting power of the investee, unless this can be clearly demonstrated that this is not the case.

Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. The considerations made in determining significant influence or joint control is similar to those necessary to determine control over subsidiaries.

Investments in associates are accounted for under the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.


3.2.6 Transactions eliminated on consolidation

Intra-group balances, and income and expenses arising from intra-group transactions are eliminated in preparing the Consolidated Financial Statements. Unrealised gains arising from transactions with equity accounted investees are eliminated to the extent of the Group’s interest in the investee against the investment in the investee. Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.

3.2.7 Equity accounting in the separate financial statements

The Company measures its subsidiaries and associates using the equity method of accounting in accordance with LKAS 27. Subsequent to initial recognition, the separate Financial Statements include the Company’s share of the profit or loss and other comprehensive income of subsidiaries and equity accounted investees, until the date on which control or significant influence ceases. The dividends are recognized as a reduction of the carrying amount of the investments.

3.3 Foreign currency translation

Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the date of transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are generally recognised in profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency are not translated.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into rupees at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into rupees at the exchange rates at

the dates of the transactions. Foreign currency differences are recognised in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to NCI.

When a foreign operation is disposed of in its entirety or partially as such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

3.4 Financial instruments

3.4.1. Financial instruments (policy applicable from 01 April 2018)

(i) Recognition and initial measurement

Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the group becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(ii) Classification and subsequent measurement

Financial assets (policy applicable from 01 April 2018)

(a) Classification

On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI – debt investment; FVOCI – equity investment; or FVTPL.



Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions:

- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Group's financial assets classified under amortised cost includes loans and receivables, other receivables and cash and cash equivalents.

A debt investment is measured at FVOCI if it meets both of the following conditions:

- it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets – Business model assessment: Policy applicable from 01 April 2018

The Group makes an assessment of the objective

of the business model in which a financial asset is

held at a portfolio levels because this best reflects

the way the business is managed and information

is provided to management. The information

considered includes:

- the stated policies and objectives for the

portfolio and the operation of those policies in

practice. These include whether management’s

strategy focuses on earning contractual interest

income, maintaining a particular interest rate

profile, matching the duration of the financial

assets to the duration of any related liabilities or

expected cash outflows or realising cash flows

through the sale of the assets;

- how the performance of the portfolio is evaluated

and reported to the Group’s management;

- the risks that affect the performance of the

business model (and the financial assets held

within that business model) and how those risks

are managed;

- how managers of the business are compensated

– e.g. whether compensation is based on the fair

value of the assets managed or the contractual

cash flows collected; and the frequency,

volume and timing of sales of financial assets

in prior periods, the reasons for such sales and

expectations about future sales activity.

Transfers of financial assets to third parties in

transactions that do not qualify for derecognition

are not considered sales for this purpose, consistent

with the Group’s continuing recognition of the

assets. Financial assets that are held for trading or

are managed and whose performance is evaluated

on a fair value basis are measured at FVTPL.



Financial assets – Assessment whether contractual cash flows are solely payments of principal and interest: Policy applicable from 01 April 2018

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:

- contingent events that would change the amount or timing of cash flows;

- terms that may adjust the contractual coupon rate, including variable-rate features;

- prepayment and extension features; and

- terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.


(b) Subsequent measurement and gains and losses - policy applicable from 01 April 2018

Financial assets at FVTPL

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.

Financial assets at amortised cost

These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

Debt investments at FVOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

Equity investments at FVOCI

These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.


Financial assets – Policy applicable prior 01 April 2018

(a-ii) Non-derivative financial assets – measurement

Loans and receivable

These assets are initially recognized at fair value

plus any directly attributable transaction costs.

Subsequent to initial recognition, they are

measured at amortized cost using the effective

interest method. Loans and receivables comprise

cash and cash equivalents and other receivables,

including related party receivables.

Available-for-sale financial assets

These assets are initially recognized at fair value

plus any directly attributable transaction costs.

Subsequent to initial recognition, they are measured

at fair value and changes therein, are recognized in

other comprehensive income and accumulated in

the available for sale reserve. When these assets

are derecognized, the gain or loss accumulated in

equity is reclassified to statement of profit or loss

and other comprehensive income.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances

and call deposits with original maturities of three

months or less. Bank overdrafts that are repayable

on demand form an integral part of the groups

cash management, are included as a component

of cash and cash equivalents for the purpose of the

statement of cash flow.

(a-ii) Non-derivative financial liabilities–measurement

Non-derivative financial liabilities are initially

recognized at fair value less any directly attributable

transaction costs. Subsequent to initial recognition,

these liabilities are measured at amortized cost

using the effective interest method.

Financial liabilities – Classification, subsequent

measurement and gains and losses

Financial liabilities are classified as measured at

amortised cost or FVTPL. A financial liability is

classified as at FVTPL if it is classified as held-for-

trading, it is a derivative or it is designated as such

on initial recognition. Financial liabilities at FVTPL

are measured at fair value and net gains and losses,

including any interest expense, are recognised

in profit or loss. Other financial liabilities are

subsequently measured at amortised cost using

the effective interest method. Interest expense and

foreign exchange gains and losses are recognised

in profit or loss. Any gain or loss on derecognition is

also recognised in profit or loss.

Financial liabilities measured at amortised cost

include trade and other payables.

3.4.2 Derecognition

Financial assets

The Group derecognises a financial asset when

the contractual rights to the cash flows from the

financial asset expire, or it transfers the rights to

receive the contractual cash flows in a transaction

in which substantially all of the risks and rewards

of ownership of the financial asset are transferred

or in which the Group neither transfers nor

retains substantially all of the risks and rewards of

ownership and it does not retain control of the

financial asset.

The Group enters into transactions whereby

it transfers assets recognised in its statement

of financial position, but retains either all or

substantially all of the risks and rewards of the

transferred assets. In these cases, the transferred

assets are not derecognised.


The Group derecognises a financial liability when its

contractual obligations are discharged or cancelled,

or expire. The Group also derecognises a financial

liability when its terms are modified and the cash

flows of the modified liability are substantially

different, in which case a new financial liability

based on the modified terms is recognised at fair

value.



On derecognition of a financial liability, the difference

between the carrying amount extinguished and the

consideration paid (including any non-cash assets

transferred or liabilities assumed) is recognised in

profit or loss.

3.4.3 Offsetting

Financial assets and financial liabilities are offset

and the net amount presented in the statement of

financial position when, and only when, the Group

currently has a legally enforceable right to set off

the amounts and it intends either to settle them

on a net basis or to realise the asset and settle the

liability simultaneously.

3.4.4 Impairment

Policy applicable from 01 April 2018

The Group recognises loss allowances for expected

credit losses (ECLs) on financial assets measured

at amortised cost, debt investments measured at

FVOCI and contract assets (as defined in IFRS 15).

The Group measures loss allowances at an amount

equal to lifetime ECL, except for other debt securities

and bank balances for which credit risk (i.e. the risk

of default occurring over the expected life of the

financial instrument) has not increased significantly

since initial recognition which are measured as

12-month ECL.

Loss allowances for trade receivables and contract

assets are always measured at an amount equal

to lifetime ECL as per the simplified approach.

When determining whether the credit risk of a

financial asset has increased significantly since

initial recognition and when estimating ECL, the

group considers reasonable and supportable

information that is relevant and available without

undue cost or effort. This includes both quantitative

and qualitative information and analysis, based

on the group’s historical experience and informed

credit assessment and including forward-looking

information.

The group considers a financial asset to be in default

when: the borrower is unlikely to pay its credit

obligations to the group in full, without recourse by

the group to actions such as realising security (if any

is held).

Lifetime ECLs are the ECLs that result from all

possible default events over the expected life of a

financial instrument. 12-month ECLs are the portion

of ECLs that result from default events that are

possible within the 12 months after the reporting

date (or a shorter period if the expected life of the

instrument is less than 12 months).

The maximum period considered when estimating

ECLs is the maximum contractual period over which

the group is exposed to credit risk.

Credit-impaired financial assets

At each reporting date, the Group assesses whether

financial assets carried at amortised cost and debt

securities at FVOCI are credit-impaired. A financial

asset is ‘credit-impaired’ when one or more events

that have a detrimental impact on the estimated

future cash flows of the financial asset have

occurred.

Evidence that a financial asset is credit-impaired

includes the following observable data:

- Significant financial difficulty of the borrower or

issuer;

- The restructuring of a loan or advance by the

Group on terms that the Group would not

consider otherwise;

- It is probable that the borrower will enter

bankruptcy or other financial reorganisation.

Presentation of allowance for ECL in the statement

of financial position

Loss allowances for financial assets measured

at amortised cost are deducted from the gross

carrying amount of the assets.



Write-offs

The gross carrying amount of a financial asset is

written off (either partially or in full) to the extent

that there is no realistic prospect of recovery.

3.4.5 Policy applicable before 01 April 2018

The Group had assessed at the end of each

reporting period whether there was objective

evidence that a financial asset or group of financial

assets was impaired. A financial asset or a group of

financial assets was impaired and impairment losses

were incurred only if there was objective evidence

of impairment as a result of one or more events that

occurred after the initial recognition of the asset (a

‘loss event’) and that loss event (or events) had an

impact on the estimated future cash flows of the

financial asset or group of financial assets that can

be reliably estimated.

For loans and receivables category, the amount of

the loss was measured as the difference between

the asset’s carrying amount and the present

value of estimated future cash flows (excluding

future credit losses that have not been incurred)

discounted at the financial asset’s original effective

interest rate. The carrying amount of the asset was

reduced and the amount of the loss was recognised

in the statement of profit or loss.

If, in a subsequent period, the amount of the

impairment loss decreases and the decrease

can be related objectively to an event occurring

after the impairment was recognised (such as an

improvement in the debtor’s credit rating), the

reversal of the previously recognised impairment

loss is recognised in the statement of profit or loss.

3.5 Determination of fair values

The determination of fair value for financial assets

and liabilities for which there is no observable

market price requires the use of valuation

techniques. For financial instruments that trade

infrequently and have little price transparency, fair

value is less objective, and requires varying degrees

of judgment depending on liquidity, concentration,

uncertainty of market factors, pricing assumption

and other risks affecting the specific instrument.

- Level 1 - Fair value measurements using quoted

prices (unadjusted) in active markets

for identical assets or liabilities;

- Level 2 - Fair value measurements using inputs

other than quoted prices included

within Level 1 that are observable for

the asset or liability, either directly (i.e. as

prices) or indirectly (i.e. derived from

prices); and

- Level 3 - Fair value measurements using inputs

for the asset or liability that are

not based on observable market data

(i.e. unobservable inputs).

3.6 Property, plant and equipment

3.6.1 Recognition and measurement

Items of property, plant and equipment are

measured at cost less accumulated depreciation

and accumulated impairment losses.

Cost includes expenditure that is directly

attributable to the acquisition of the asset. The

cost of self-constructed assets includes the cost of

materials and direct labour, any other costs directly

attributable to bringing the assets to a working

condition for their intended use. Purchased

software that is integral to the functionality of the

related equipment is capitalised as part of that

asset.

When parts of an item of property, plant and

equipment have different useful lives, they

are accounted for as separate items (major

components) of property, plant and equipment.

3.6.2 Subsequent costs

The subsequent cost of replacing a component

of an item of property, plant and equipment is

recognised in the carrying amount of the item if

it is probable that the future economic benefits

embodied within that part will flow to the Group

and its cost can be reliably measured. The costs



of day to day servicing of property, plant and

equipment are charged to the profit or loss as

incurred. Costs incurred in using or redeploying

items are not included under carrying amount of an

item.

3.6.3 Depreciation

Depreciation is calculated over the depreciable

amount, which is the cost of an asset, or other

amount substituted for cost, less its residual value.

Depreciation is recognized in profit or loss on a

straight-line basis over the estimated useful lives

of each part of an item of property, plant and

equipment. In the year of acquisition depreciation is

computed on proportionate basis from the month

the asset is put in to use and no depreciation will

be charged to the month in which the particular

asset was disposed. Leased assets are depreciated

over the shorter of the lease term and their useful

lives unless it is reasonably certain that the Group

will obtain ownership by the end of the lease term.

Land is not depreciated.

Depreciation method, useful lives and residual

values are reviewed at each reporting date and

adjusted if appropriate.

Plant and machinery 30 Years

Building 30 Years

Computer systems 04 Years

Motor vehicle 05 Years

Office equipment 05 Years

Furniture and fittings 08 Years

3.6.4 Capital work-in-progress

Capital work-in-progress is stated at cost. These

are expenses of a capital nature directly incurred

in the construction of buildings, major plant and

machinery and system development, awaiting

capitalization.

3.6.5 Derecognition

The carrying amount of an item of property, plant

& equipment is derecognized on disposal. Gains

and losses on disposal of an item of property, plant

and equipment are determined by comparing the

proceeds from disposal with the carrying amount of

property, plant and equipment, and are recognized

net within “other income” in profit or loss.

When replacement costs are recognized in the

carrying amount of an item of property, plant and

equipment, the remaining carrying amount of the

replaced part is derecognized. Major inspection

costs are capitalized. At each such capitalization,

the remaining carrying amount of the previous cost

of inspections is derecognized.

3.6.6 Borrowing costs

Borrowing costs directly attributable to the

acquisition, construction or production of an asset

that necessarily takes a substantial period of time to

get ready for its intended use or sale are capitalised

as part of the cost of the respective assets. All other

borrowing costs are expensed in the period they

occur. Borrowing costs consist of interest and other

costs that an entity incurs in connection with the

borrowing of funds.

3.7 Intangible assets

Intangible assets that are acquired by the Group

include right to use land and cost incurred to obtain

approval for power projects, which have finite

useful lives, are measured at cost less accumulated

amortisation and accumulated impairment losses.

3.7.1 Subsequent expenditure

Subsequent expenditure is capitalized only when it

increases the future economic benefits embodied

in the specific asset to which it relates. All other

expenditure, including expenditure on internally

generated goodwill is recognized in the statement

of profit or loss and other comprehensive income

as incurred.



3.7.2 Amortisation

Amortisation is recognized in the statement of

profit or loss and other comprehensive income on

a straight-line basis over the estimated useful lives

of intangible assets, other than goodwill, from the

date that they are available for use. The estimated

useful lives for the current periods are as follows:

Right to use lands 27 Years

Approval cost 30 Years

3.8 Stated capital

Ordinary share capital

Ordinary shares are classified as equity. Incremental

costs directly attributable to the issue of ordinary

shares and share options are recognised as a

deduction from equity, net of any tax effects.

3.9 Provisions

A provision is recognised if, as a result of a past

event, the Group has a present legal or constructive

obligation that can be estimated reliably, and it is

probable that an outflow of economic benefits will

be required to settle the obligation.

A provision for onerous contracts is recognised

when the expected benefits to be derived by

the Group from a contract are lower than the

unavoidable cost of meeting its obligations under

the contract.

3.10 Commitments and contingencies

All discernible risks are accounted for in determining

the amount of all known liabilities. The Group’s share

of any contingencies and capital commitments of

a Subsidiary, Associate for which the Group is also

liable severally or otherwise are also included with

appropriate disclosures.

Contingent liabilities are possible obligations whose

existence will be confirmed only by uncertain future

events or present obligations where the transfer

of economic benefit is not probable or cannot be

reliably measured. Contingent liabilities are not


recognised in the Statement of Financial Position

but are disclosed unless they are remote.

3.11 Income and expenses and basis of measurement

3.11.1 Interest income and expenses

Policy applicable before and after 01 April 2018

Effective interest rate

Interest income and expense are recognised in

profit or loss using the effective interest method.

The ‘effective interest rate’ is the rate that exactly

discounts estimated future cash payments or

receipts through the expected life of the financial

instrument to:

- the gross carrying amount of the financial asset; or

- the amortised cost of the financial liability.

Amortised cost and gross carrying amount

The ‘amortised cost’ of a financial asset or financial

liability is the amount at which the financial asset or

financial liability is measured on initial recognition

minus the principal repayments, plus or minus

the cumulative amortisation using the effective

interest method of any difference between that

initial amount and the maturity amount and, for

financial assets, adjusted for any expected credit

loss allowance (or impairment allowance before 01

April 2018). The ‘gross carrying amount of a financial

asset’ is the amortised cost of a financial asset before

adjusting for any expected credit loss allowance.

Presentation

Interest income calculated using the effective

interest method presented in the statement of

profit or loss and OCI includes–

• Interest on financial assets and financial liabilities measured at amortised cost;

• Other interest income presented in the statement of profit or loss and OCI includes interest income from loans given to related parties.



Interest expense presented in the statement of

profit or loss and OCI includes:

• Financial liabilities measured at amortised cost; and

3.11.2 Dividend income

Dividend income is recognised in profit or loss on

an accrual basis when the Group’s right to receive

the dividend is established.

This is usually on the ex-dividend date for equity

securities. Dividends are presented in net trading

income or net income from other financial

instruments at fair value through profit or loss

based on the underlying classification of the equity

investment. Dividends on available-for-sale equity

securities are presented in dividend income.

When equity method of accounting is used for

Subsidiaries and associates, the dividends are

recognized as a reduction of the carrying amount

of the investments.

3.11.3 Other income

Other Income is recognized on an accrual basis.

3.11.4 Expenditure

The expenses are recognised on an accrual basis. All

expenses incurred in the ordinary course of business

and in maintaining property, plant & equipment in

a state of efficiency is charged against income in

arriving at the profit for the year.

3.11.5 Profit / loss from sale of property, plant and equipment

Profit / loss from sale of property, plant and

equipment are recognised in the period in which

the sale occurs and is classified as other operating

income.

3.12 Income tax

Income tax expense comprises current and

deferred tax. Income tax expense is recognized in

profit or loss except to the extent that it relates to

items recognized directly in equity, in which case

it is recognized in equity or other comprehensive

income.

3.12.1 Current tax

Current tax is the expected tax payable on the

taxable income for the year, using tax rates enacted

or substantively enacted on the reporting date,

and any adjustment to tax payable in respect of

previous years.

Provision for taxation is based on the profit for the

year adjusted for taxation purposes in accordance

with the provisions of the Inland Revenue Act No.

24 of 2017 and the amendments thereto at the

rates specified in Note 13.

Provision for taxation on overseas subsidiaries/

equity accounted investees are made on the basis

of the profit for the year as adjusted for taxation

purposes in accordance with the provisions of the

relevant statutes in those countries.

3.12.2 Deferred tax

Deferred tax is recognised in respect of temporary

differences between the carrying amounts of assets

and liabilities for financial reporting purposes and

the amounts used for taxation purposes.

Deferred tax is not recognised for:

• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

• temporary differences related to investments in subsidiaries, associates and jointly controlled entities to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

• taxable temporary differences arising on the initial recognition of goodwill.


The measurement of deferred tax reflects the tax

consequences that would follow the manner in

which the Group expects, at the end of the reporting

period, to recover or settle the carrying amount of

its assets and liabilities. Deferred tax is measured

at the tax rates that are expected to be applied to

temporary differences when they reverse, using

tax rates enacted or substantively enacted at the

reporting date. Deferred tax assets and liabilities are

offset if there is a legally enforceable right to offset

current tax liabilities and assets, and they relate to

taxes levied by the same tax authority on the same

taxable entity, or on different tax entities, but they

intend to settle current tax liabilities and assets on

a net basis or their tax assets and liabilities will be

realized simultaneously.

A deferred tax asset is recognised for unused

tax losses, tax credits and deductible temporary

differences to the extent that it is probable that

future taxable profits will be available against which

they can be utilised. Deferred tax is not recognized

for the undistributed profits of subsidiaries as the

parent group has control over the dividend policy

of its subsidiaries and distribution of those profits.

Deferred tax assets are reviewed at each reporting

date and are reduced to the extent that it is no

longer probable that the related tax benefit will be

realized.

3.12.3 Withholding tax on dividends

Dividend distributed out of taxable profit of the

local Subsidiaries attracts a 14% deduction at source

and is not available for set off against the tax liability

of the Group. Thus, the withholding tax deducted

at source is added to the Subsidiaries investment

account in the Consolidated Financial Statements

as a consolidation adjustment.

Withholding tax that arise from the distribution of

dividends by the Group are recognised at the same

time as the liability to pay the related dividend is

recognised.

3.13 Earnings per share

The Group presents basic earnings per share (EPS)

for its ordinary shares. Basic EPS is calculated by

dividing the profit or loss attributable to ordinary

shareholders of the Group by the weighted average

number of ordinary shares outstanding during the

period.

3.14 Comparatives

Except when a standard permits or requires

otherwise, comparative information is disclosed

in respect of the previous period. Where the

presentation or classification of items in the

Financial Statements are amended, comparative

amounts are reclassified unless it is impracticable.

3.15 Cash flow statement

The Cash Flow Statement has been prepared

using the indirect method of preparing Cash

Flows in accordance with the Sri Lanka Accounting

Standard (LKAS 7) - Statement of Cash Flows. Cash

and cash equivalents comprise short term, highly

liquid investments that are readily convertible

to known amounts of cash and are subject to an

insignificant risk of changes in value. The cash and

cash equivalent include cash in hand, balances with

banks and repurchase agreements.

3.16 Events occurring after the reporting period

All material events the reporting date have been

considered and where appropriate, adjustments or

disclosures have been made in respective notes to

the Financial Statements.

4. Financial risk management

4.1 Introduction and overview

The Group has exposure to the following risks from

financial instruments:

• credit risk

• liquidity risk

• market risks

• operational risks



This note presents information about the Group’s

exposure to each of the above risks, the Group’s

objectives, policies and processes for measuring

and managing risk, and the Group’s management

of capital.

4.2 Risk management framework

The board of directors has overall responsibility for

the establishment and oversight of the Group’s risk

management framework. The Board consists of

three Directors with wide financial and commercial

knowledge and experience.

The Group’s risk management policies are

established to identify and analyse the risks faced

by the Group, to set appropriate risk limits and

controls, and to monitor risks and adherence to

limits. Risk management policies and systems are

reviewed regularly to reflect changes in market

conditions, products and services offered. The

Group, through its training and management

standards and procedures, aims to develop a

disciplined and constructive control environment,

in which all employees understand their roles and

obligations.

4.3 Credit risk

Credit risk is the risk of financial loss to the Group if a

customer or counterparty to a financial instrument

fails to meet its contractual obligations, and arises

principally from the Group’s investment in debt

securities and amounts due from related parties.

4.4 Liquidity risk

Liquidity risk is the risk that the Group will encounter

difficulty in meeting the obligations associated with

its financial liabilities that are settled by delivering

cash or another financial asset. The Group’s

approach to managing liquidity is to ensure, as

far as possible, that it will always have sufficient

liquidity to meet its liabilities when due, under both

normal and stressed conditions, without incurring

unacceptable losses or risking damage to the

Group’s reputation.

The group ensures its liquidity is maintained by

investing in short, medium and long-term financial

instruments to support operational and other

funding requirements. The group determines its

liquidity requirements by the use of both short

and long-term cash forecasts. These forecasts are

supplemented by a financial headroom analysis

which is used to assess funding adequacy for at

least a 12-month period and the same is reviewed

on an annual basis.

4.5 Market risk

Market risk is the risk that changes in market prices,

such as foreign exchange rates, interest rates and

equity prices will affect the Group’s income or the

value of its holdings of financial instruments. The

objective of market risk management is to manage

and control market risk exposures within acceptable

parameters, while optimising the return.

4.6 Operational risk

Operational risk is the risk of direct or indirect loss

arising from a wide variety of causes associated

with the Group’s processes, personnel, technology

and infrastructure, and from external factors other

than credit, market and liquidity risks such as those

arising from legal and regulatory requirements

and generally accepted standards of corporate

behavior. Operational risks arise from all of the

Group’s operations.

The Group’s objective is to manage operational risk

so as to balance the avoidance of financial losses

and damage to the Group’s reputation with overall

cost effectiveness and to avoid control procedures

that restrict initiative and creativity.

The primary responsibility for the development and

implementation of controls to address operational

risk is assigned to management within the Group.

This responsibility is supported by the development

of overall Group standards for the management of

operational risk in the following areas:




• Requirements for appropriate segregation of duties, including the independent authorization of transactions

• Requirements for the reconciliation and monitoring of transactions

• Compliance with regulatory and other legal requirements

• Documentation of controls and procedures

• Training and professional development

• Ethical and business standards

4.7 Capital management

The Board’s policy is to maintain a strong capital

base so as to maintain investor market confidence

and to sustain future development of the business.

The Board of Directors monitors the return on

capital, which the Group defines as result from

operating activities divided by total shareholders’

equity. The Board of Directors also monitors the

level of dividends to ordinary shareholders.

There were no changes in the Group’s approach

to capital management during the year. Group

wishes to raise additional capital to invest in more

diversified investments to mitigate the future

operational risk.

5 New accounting standards issued but not effective as at reporting date

The Institute of Chartered Accountants of Sri Lanka

has issued the following new Sri Lanka Accounting

Standards which will become applicable for the

financial periods beginning after 1 April 2019.

Accordingly, these standards have not been applied

in preparing these financial statements.

New or Amended

Standards

Summary of

requirements

SLFRS 16 Leases SLFRS 16 introduces a

single, on-balance sheet

lease accounting model for

lessees. A lessee recognises

a right-of-use asset

representing its right to use

the underlying asset and a

lease liability representing

its obligation to make

lease payments. There are

recognition exemptions

for short-term leases and

leases of low-value items.

Lessor accounting remains

similar to the current

standard – i.e. lessors

continue to classify leases

as finance or operating

leases

The directors do not expect a significant impact

on its financial statements resulting from the

application of the above standard.


(All amounts in Sri Lanka Rupees thousands)Group Company

For the year ended 31 March 2019 2018 2019 2018

6 Investment incomeManagement fee 1,430 538 - -

1,430 538 - - 7 Interest income

Interest on savings 5,381 2,349 - - Interest on fixed deposits 61,833 3,528 61,258 3,528 Interest on security purchased under resale agreement 5,542 16,397 4,952 15,857

72,756 22,274 66,210 19,385

8 Other incomeInterest income on advances given to related parties - - 4,524 5,952

- - 4,524 5,952

9 Subsidiary company Income / Direct expenses

Power generation income 355,323 326,238 - - Direct expenses (124,016) (111,327) - -

231,307 214,911 - -

Subsidiary company income constitutes power generation income of Unit Energy Lanka (Private) Limited, Sapthakanya Hydro Electric Company (Private) Limited and Campion Hydro (Private) Limited. Subsidiary company expenses constitute direct expenses relating to power generation. Income from other sources in these companies are shown under the relevant line item under Revenue.

10 The result from operating activities is after charging all expenses including the following;

Staff salaries 4,804 4,261 4,804 4,261 Defined contribution plan cost (EPF,ETF) 721 639 721 639 Bonus 1,732 1,750 1,732 1,750 Directors' fees 1,138 746 1,138 746 Management fees 1,000 1,000 1,000 1,000 Auditors' remuneration - Audit fees 994 803 400 414 - Audit related other services 278 181 227 145 Depreciation 41,943 41,997 - - Amortization 333 2,153 - -

11 Finance costBorrowing & other charges 71,698 104,345 46,162 77,290 Dividend on cumulative redeemable preference shares 68,400 86,469 18,525 37,225

140,098 190,814 64,687 114,515 12 Share of profit of equity accounted investees The Group's share of profit from its equity accounted investees for the year was Rs. 508,180,789/- (2018 - Rs 468,468,427/-).

Lanka Energy International (Private) Limited received a dividend (net of WHT) of Rs. 172,422,341/- (2018 - 50,661,937/-) from Lakdhanavi Bangla Power Limited and (net of WHT) of Rs. 24,023,500/- (2018 - NIL) from Raj Lanka Power Company Limited during the financial year.

None of the Group's equity accounted investees are publicly listed entities and consequentially do not have published price

quotations.

Summary of financial information for equity accounted investees are as follows.



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40

128

,757

-

(556

) (5

56)

(272

)

Nal

a D

hana

vi (P

rivat

e) L

imite

dSr

i Lan

ka49

.00%

67,

338

1,0

43,7

33

1,1

11,0

71

239

,209

1

75,8

96

415

,105

6

95,9

66

262

,924

(1

80,3

10)

82,

614

40,

481

Nel

uwa

Casc

ade

Hyd

ro P

ower

(P

rivat

e) L

imite

dSr

i Lan

ka49

.00%

42,

613

259

,657

3

02,2

70

38,

436

1,7

21

40,

157

262

,113

9

6,58

4 (4

8,85

8) 4

7,72

6 2

3,38

6

Raj L

anka

Pow

er C

ompa

ny

Lim

ited

Bang

lade

sh20

.25%

3,2

42,3

54

6,8

10,5

33

10,0

52,8

88

4,1

46,6

18

2,3

73,2

27

6,5

19,8

46

3,5

33,0

42

5,8

88,3

16

(5,5

52,2

10)

336

,106

6

8,06

1

Lakd

hana

vi B

angl

a Po

wer

Li

mite

dBa

ngla

desh

33.1

6% 1

,418

,642

6

,470

,064

7

,888

,707

1

,666

,303

2

,941

,995

4

,608

,298

3

,280

,409

2

,403

,850

(1

,779

,328

) 6

24,5

22

207

,091

Para

mbe

Hyd

ro (P

rivat

e) L

imite

d Sr

i Lan

ka43

.88%

3,9

71

76,

986

80,

957

223

-

223

8

0,73

4 -

(43)

(43)

(19)

Bam

bara

pana

Hyd

ro P

ower

(P

vt) L

td.

Sri L

anka

40.0

0% 1

15,2

87

837

,564

9

52,8

51

74,

605

437

,504

5

12,1

09

440

,742

2

07,4

15

(145

,449

) 6

1,96

6 2

4,78

7

Niv

idhu

(Priv

ate)

Lim

ited

Sri L

anka

25.0

0% 7

2,85

8 1

81,4

26

254

,284

2

6,99

5 -

26,

995

227

,289

1

16,6

78

(45,

355)

10,

896

2,7

24

Niv

idhu

Ass

upin

iella

(Priv

ate)

Li

mite

dSr

i Lan

ka25

.00%

224

,941

4

6,77

6 2

71,7

17

39,

351

444

3

9,79

5 2

31,9

22

233

,318

(8

7,04

0) 1

46,2

78

36,

570

5,3

39,9

53

17,7

67,5

21

23,1

07,4

74

6,5

41,9

44

6,3

59,7

70

12,9

01,7

14

10,2

05,7

60

9,8

13,0

22

(8,1

79,6

47)

1,5

72,9

45

508

,181

Gro

up



2018

Coun

try

of

corp

orat

ion

Ow

ners

hip

Curr

ent

asse

ts

Non

cu

rren

t as

sets

Tota

l as

sets

Curr

ent

liabi

litie

s

Non

cu

rren

t lia

bilit

ies

Tota

l lia

bilit

ies

Net

ass

ets

Inco

me

Exp

ense

s Pr

ofit /

(lo

ss)

Gro

up’s

shar

e of

pr

ofit /

(loss

)A

ssoc

iate

s

Paw

an D

anav

i (Pr

ivat

e) L

imite

dSr

i Lan

ka40

.00%

128

,571

2

,052

,393

2

,180

,964

7

58,1

16

146

,495

9

04,6

11

1,2

76,3

53

693

,993

(3

34,4

51)

359

,542

1

43,8

17

Hay

leys

Hyd

ro E

nerg

y (P

rivat

e)

Lim

ited

Sri L

anka

49.0

0% 1

0,51

4 1

19,1

00

129

,614

3

01

- 3

01

129

,313

-

(433

) (4

33)

(212

)

Nal

a D

hana

vi (P

rivat

e) L

imite

dSr

i Lan

ka49

.00%

64,

958

1,1

14,8

44

1,1

79,8

02

- 3

31,6

85

331

,685

8

48,1

17

322

,525

(1

91,3

04)

131

,221

6

4,29

8

Nel

uwa

Casc

ade

Hyd

ro P

ower

(P

rivat

e) L

imite

dSr

i Lan

ka49

.00%

26,

053

279

,681

3

05,7

34

56,

362

28,

269

84,

631

221

,103

6

8,84

5 (5

5,15

9) 1

3,68

6 6

,706

Para

mbe

Hyd

ro (P

rivat

e) L

imite

d Sr

i Lan

ka43

.88%

3,9

71

76,

986

80,

957

180

-

180

8

0,77

7 -

(93)

(93)

(41)

Bam

bara

pana

Hyd

ro P

ower

(P

vt) L

td.

Sri L

anka

40.0

0% 2

9,43

0 8

82,4

59

911

,889

3

1,97

7 4

84,0

00

515

,977

3

95,9

12

24,

123

(19,

277)

4,8

46

1,9

38

Niv

idhu

(Priv

ate)

Lim

ited

Sri L

anka

25.0

0% 6

9,64

5 1

89,8

02

259

,447

3

1,97

7 -

31,

977

227

,471

1

83,1

63

(3,0

08)

47,

422

11,

855

Niv

idhu

Ass

upin

iella

(Priv

ate)

Li

mite

dSr

i Lan

ka25

.00%

114

,323

7

2,86

4 1

87,1

87

40,

355

761

4

1,11

7 1

46,0

71

199

,746

(7

3,64

6) 1

26,1

00

31,

525

447

,465

4

,788

,129

5

,235

,594

9

19,2

68

991

,210

1

,910

,478

3

,325

,117

1

,492

,395

(6

77,3

71)

682

,291

2

59,8

86

Subs

idia

ries

LVS

Ener

gy (P

rivat

e) L

imite

dSr

i Lan

ka57

.75%

45,

622

Sapt

haka

nya

Hyd

ro E

lect

ric

Com

pany

(Priv

ate)

Lim

ited

Sri L

anka

85.0

0% 2

1,24

7

Pupu

laka

tiya

Min

i Hyd

ro P

ower

(P

rivat

e) L

imite

dSr

i Lan

ka10

0.00

% (6

9)

Lank

a En

ergy

Inte

rnat

iona

l (P

rivat

e) L

imite

dSr

i Lan

ka10

0.00

% 1

99,6

19

Cam

pion

Hyd

ro P

ower

(Priv

ate)

Li

mite

dSr

i Lan

ka84

.29%

(5,7

53)

260

,666

Tota

l sha

re o

f pro

fits

from

equ

ity

acco

unte

d in

vest

ees

520

,552

Com

pany

Dur

ing

the

year

Com

pany

rec

eive

d di

vide

nd (n

et o

f WH

T) o

f Rs

. 17,1

92,2

03/-

, Rs

. 73,

959,

979/

-, Rs

. 9,8

00,0

00/-

, Rs.

4,00

0,00

0/-

and

Nil

from

N

ivid

hu (P

rivat

e) L

imite

d, P

awan

Dan

avi (

Priv

ate)

Lim

ited,

Nal

a D

hana

vi (P

rivat

e) L

imite

d, B

amba

rapa

na H

ydro

Pow

er (P

rivat

e) L

imite

d an

d H

ayle

s H

ydro

(Priv

ate)

Lim

ited

resp

ectiv

ely

from

its

equi

ty a

ccou

nted

inve

stee

s. (2

018

- Rs.

44,5

60,5

03/-

,

Rs.18

3,16

8,00

0/-,

Rs. 2

4,50

0,00

0/-,

Nil

and

2,94

0,00

0/- r

esp

ectiv

ely.

)

The

Com

pany

's sh

are

of p

rofit

from

its

equi

ty a

ccou

nted

inve

stee

s fo

r the

yea

r was

Rs.

546,

794,

201/

- (2

018

- Rs

520,

552,

223/

-).

Dur

ing

the

year

Com

pany

rece

ived

div

iden

d (n

et o

f WH

T) o

f Rs.

22,9

33,6

04/-

, Rs.

20,6

60,2

10/-

and

Rs.

23,3

33,5

20/-

from

LVS

Ene

rgy

(Priv

ate)

Lim

ited,

Lan

ka E

nerg

y In

tern

atio

nal (

Priv

ate)

Lim

ited

and

Sapt

haka

nya

Hyd

ro E

lect

ric C

ompa

ny (P

rivat

e) L

imite

d re

spec

tivel

y fro

m it

s su

bsid

iarie

s. (2

018

- Rs.

57,2

78,5

05/-

, Rs.

51,1

80,5

00/-

and

Rs.

7,14

0,00

0/-)

NOTES TO THE FINANCIAL STATEMENTS(A

ll am

ount

s in

Sri L

anka

Rup

ees t

hous

ands

)


2019

Coun

try

of

corp

orat

ion

Ow

ners

hip

Curr

ent

asse

ts

Non

cu

rren

t as

sets

Tota

l as

sets

Curr

ent

liabi

litie

s

Non

cu

rren

t lia

bilit

ies

Tota

l lia

bilit

ies

Net

ass

ets

Inco

me

Exp

ense

s Pr

ofit /

(lo

ss)

Gro

up’s

shar

e of

pr

ofit /

(loss

)

Ass

ocia

tes

Paw

an D

anav

i (Pr

ivat

e) L

imite

dSr

i Lan

ka40

.00%

142

,051

1

,921

,682

2

,063

,733

3

09,9

63

428

,982

7

38,9

45

1,3

24,7

89

603

,937

(3

40,5

01)

263

,436

1

05,3

74

Hay

leys

Hyd

ro E

nerg

y (P

rivat

e)

Lim

ited

Sri L

anka

49.0

0% 9

,897

1

19,1

00

128

,997

2

40

- 2

40

128

,757

-

(556

) (5

56)

(272

)

Nal

a D

hana

vi (P

rivat

e) L

imite

dSr

i Lan

ka49

.00%

67,

338

1,0

43,7

33

1,1

11,0

71

239

,209

1

75,8

96

415

,105

6

95,9

66

262

,924

(1

80,3

10)

82,

614

40,

481

Nel

uwa

Casc

ade

Hyd

ro P

ower

(P

rivat

e) L

imite

dSr

i Lan

ka49

.00%

42,

613

259

,657

3

02,2

70

38,

436

1,7

21

40,

157

262

,113

9

6,58

4 (4

8,85

8) 4

7,72

6 2

3,38

6

Para

mbe

Hyd

ro (P

rivat

e) L

imite

d Sr

i Lan

ka43

.88%

3,9

71

76,

986

80,

957

223

-

223

8

0,73

4 -

(43)

(43)

(19)

Bam

bara

pana

Hyd

ro P

ower

(P

vt) L

td.

Sri L

anka

40.0

0% 1

15,2

87

837

,564

9

52,8

51

74,

605

437

,504

5

12,1

09

440

,742

2

07,4

15

(145

,449

) 6

1,96

6 2

4,78

7

Niv

idhu

(Priv

ate)

Lim

ited

Sri L

anka

25.0

0% 7

2,85

8 1

81,4

26

254

,284

2

6,99

5 -

26,

995

227

,289

1

16,6

78

(45,

355)

10,

896

2,7

24

Niv

idhu

Ass

upin

iella

(Priv

ate)

Li

mite

dSr

i Lan

ka25

.00%

224

,941

4

6,77

6 2

71,7

17

39,

351

444

3

9,79

5 2

31,9

22

233

,319

(8

7,04

0) 1

46,2

79

36,

570

678

,956

4,

486,

923

5,1

65,8

80

729

,022

1,

044,

547

1,7

73,5

68

3,3

92,3

11

1,5

20,8

57

(848

,112

) 6

12,3

18

233

,029

Subs

idia

ries

LVS

Ener

gy (P

rivat

e) L

imite

dSr

i Lan

ka57

.75%

44,

199

Sapt

haka

nya

Hyd

ro E

lect

ric

Com

pany

(Priv

ate)

Lim

ited

Sri L

anka

85.0

0% 1

6,96

4

Pupu

laka

tiya

Min

i Hyd

ro P

ower

(P

rivat

e) L

imite

dSr

i Lan

ka10

0.00

% (2

,935

)

Lank

a En

ergy

Inte

rnat

iona

l (P

rivat

e) L

imite

dSr

i Lan

ka10

0.00

% 2

42,2

63

Cam

pion

Hyd

ro P

ower

(Priv

ate)

Li

mite

dSr

i Lan

ka84

.29%

13,

274

313

,765

Tota

l sha

re o

f pro

fits

from

equ

ity

acco

unte

d in

vest

ees

546

,794


(All

amou

nts i

n Sr

i Lan

ka R

upee

s tho

usan

ds)



Group Company2019 2018 2019 2018

13 Tax expenseIncome tax (note 13.1) 82,699 54,385 19,981 22,506 Deferred tax (note 28) 5,541 3,881 - -

88,240 58,266 19,981 22,506

13.1 Income tax expense

Liability to income tax of the Company and its subsidiaries has been computed in accordance with the provisions of Inland Revenue Act No. 24 of 2017 and subsequent amendments thereto.

Current tax charge 82,699 54,385 19,981 22,506 Under/(over) provision of previous years - - - -

82,699 54,385 19,981 22,506

13.1.1 Reconciliation between accounting profit and taxable income

Profit / (loss) before income tax 647,823 497,624 538,402 421,739 Disallowable expenses 45,926 130,773 195 38,986 Allowable expenses (32,082) (1,168) - - Income from other sources and exempt income (519,472) (488,351) (551,318) (526,504)Taxable business profit/(loss) for the year 142,195 138,878 (12,721) (65,779)

Other income liable for tax 11,291 8,900 4,524 5,952 Total statutory income 153,486 147,778 4,524 5,952

Tax loss utilized (5,350) (51,403) (4,524) (2,083)Assessable / taxable income 148,136 96,375 - 3,869

Income tax charged at the rate of 14% 20,116 11,524 - 464 Income tax charged at the rate of 28% 1,246 95 - - With holding tax on dividend 61,337 42,766 19,981 22,042 Tax expense for the year 82,699 54,385 19,981 22,506

The Company tax rate is 28% (2018- 12%) and the other companies in the Group are taxed at following rates;

Name of the company Applicable tax rate

2019 2018

Unit Energy Lanka (Private) Limited 14% 12%

Sapthakanya Hydro Electric Company (Private) Limited 28% 28%

LVS Energy (Private) Limited 28% 28%

Lanka Energy International (Private) Limited 28% 28%

Campion Hydro Power (Private) Limited 28% 28%



13.1.2 Tax losses

Group Company

2019 2018 2019 2018

Unutilized tax losses at the beginning of the year 134,789 120,217 127,708 63,888

Tax losses recognized during the year 6,855 65,975 12,721 65,903

141,644 186,192 140,429 129,791

Tax losses utilized (5,350) (51,403) (4,524) (2,083)

Unutilized tax losses at the end of the year 136,294 134,789 135,905 127,708

14 Basic earnings per share

Basic earnings per share has been calculated by dividing the profit for the year attributable to equity holders of the

Company by the weighted average number of ordinary shares in issue during the year, as per the requirements of the Sri

Lanka Accounting Standards LKAS 33 - Earnings per share.

Group Company

2019 2018 2019 2018

Weighted average number of ordinary shares in issue

Present number of ordinary shares ('000) 582,278 582,278 582,278 582,278

Weighted average number of ordinary shares in issue ('000) 582,278 492,278 582,278 492,278

Profit attributable to equity holders of the company 518,420 399,147 518,421 399,233

Earnings per share 0.89 0.81 0.89 0.81

Diluted earnings per share is same as computed above.

15 Dividend per share

Dividend per share is based on the dividend relevant for the year.

Company Company

2019 2018

Dividend 378,481 343,858

Weighted average number of ordinary shares in issue ('000) 582,278 492,278

Dividend per share 0.65 0.64

Dividend payout ratio 73.03% 79.01%





16 Property, plant and equipment (Group)

LandPlant &

Machinery BuildingWork in

progress Total

Cost

Balance as at 01 April 2017 1,000 883,589 2,828 335,310 1,222,727

Transfers during the year - 335,310 - (335,310) -

Additions/(disposals) during the year - 7,572 2,690 - 10,262

Balance as at 31 March 2018 1,000 1,226,471 5,518 - 1,232,989

Accumulated depreciation

Balance as at 01 April 2017 - (173,399) (342) - (173,741)

Charge for the year - (41,809) (188) - (41,997)

Balance as at 31 March 2018 - (215,208) (530) - (215,738)

Carrying amounts 1,000 1,011,263 4,988 - 1,017,251

Cost

Balance as at 01 April 2018 1,000 1,226,471 5,518 - 1,232,989

Transfers during the year - - - - -

Additions/(disposals) during the year - - - - -

Balance as at 31 March 2019 1,000 1,226,471 5,518 - 1,232,989

Accumulated depreciation

Balance as at 01 April 2018 - (215,208) (530) - (215,738)

Charge for the year - (41,823) (119) - (41,942)

Balance as at 31 March 2019 - (257,031) (649) - (257,680)

Carrying amounts 1,000 969,440 4,869 - 975,309

(a) On reassessment of fair values of Group's assets, it had been identified that there is no permanent impairment of property, plant and equipment which requires a provision in the Financial Statements.

(b) Refer note no. 26 for information regarding property plant & equipment pledged as securities for liabilities obtained by subsidiaries.



16.1 Right-to-use land (Group)

Cost 2019 2018

As at the beginning of the year 5,105 5,105

(+) Additions/ (transfers) - -

(-) Intangible assets write off - -

As at the end of the year 5,105 5,105

Accumulated amortization (1,363) (1,175)

As at the beginning of the year (188) (188)

(+) Amortization for the period (1,551) (1,363)


Land rights relate to the land in Peragahamulla, Ginigathhena on which the power plant owned by Unit Energy Lanka (Private) Limited is located.

17 Investment in subsidiaries (Company)

As at 31 March 2019 2018% of

holding

Cost of

investment

Carrying

Value

% of

holding

Cost of

investment

Carrying

Value

LVS Energy (Private) Limited 57.75% 130,600 139,167 57.75% 130,600 117,997

Sapthakanya Hydro Electric Company

(Private) Limited

85.00% 142,800 136,983 85.00% 142,800 147,151

Pupulakatiya Mini Hydro Power (Private)

Limited

100.00% 9,000 4,615 100.00% 9,000 7,550

Lanka Energy International (Private) Limited 100.00% 1,044,500 2,001,087 100.00% 1,044,500 1,569,499

Campion Hydro Power (Private) Limited 84.29% 118,000 122,462 84.29% 118,000 109,188

1,444,900 2,404,314 1,444,900 1,951,385




17.1 Non controlling interest (NCI) The following table summarizes the information related to each of the Group's subsidiaries that has material NCI, before any

intra - group eliminations.

As at 31 March 2019 2018

LVS

Ener

gy (P

riva

te)

Lim

ited

Uni

t Ene

rgy

Lank

a

(Pri

vate

) Lim

ited

LVS

Ener

gy (P

riva

te)

Lim

ited

Uni

t Ene

rgy

Lank

a

(Pri

vate

) Lim

ited

NCI Percentage 42.25% 45.14% 42.25% 45.14%

Non current assets 250,484 343,510 194,553 361,910

Current assets 2,089 101,967 28,192 122,048

Non - current liabilities - 130,448 - 137,921

Current liabilities 282 64,520 26,006 134,555

Net assets 252,291 250,509 196,739 211,482

Carrying amount of NCI 106,593 58,880 83,122 95,456

Revenue 1,430 202,519 538 193,367


Other comprehensive income for the year, net of income tax - - - -


Profit allocated to NCI 32,353 38,992 33,381 42,775

OCI allocated to NCI - - - -

Cash flows from operating activities (26,958) 61,614 127,300 (15,227)

Cash flows from investment activities 40,491 - - -

Cash flows from financing activities (39,877) (14,688) (99,183) 7,889

Net cash increase (decrease) in cash equivalent (26,344) 46,926 28,117 (7,338)


Campion Hydro (Private) Limited (15.71%) and Sapthakanya Hydro Electric (Private) Limited (15%) are not considered as a

material NCI during the year.



18 Investment in equity accounted investees

Group

Effec

tive

hold

ing

As

at 0

1 A

pril

Acq

uisi

tions

Shar

e of

pr

ofits

Pref

eren

ce

divi

dend

Reva

luat

ion

ga

in /

loss

Shar

e of

OCI

Fore

ign

curr

ency

ad

just

men

t

Div

iden

d di

stri

butio

n

As

at 3

1 M

arch

2018 Hayleys Hydro Energy (Private) Limited

49.00% 55,490 - (212) - - - - (2,940) 52,338


49.00% 55,324 - 6,706 - - - - - 62,030

Pawan Danavi (Private) Limited 40.00% 570,245 - 143,817 - - - - (203,520) 510,542

Nala Dhanavi (Private) Limited 49.00% 270,542 - 64,298 - - - - (24,500) 310,340

Lakdhanavi Bangla Power Limited 33.16% 832,573 - 165,101 - - - (16,865) (30,343) 950,466

Raj Lanka Power Company Limited 20.25% 589,256 - 43,481 - - - (9,164) (28,887) 594,686

Nividhu (Private) Limited 25.00% 187,184 - 11,855 - - - - (46,192) 152,846

Nividhu Assupiniella (Private) Limited

25.00% 1,435 - 31,525 - - - - - 32,960

Parambe Hydro (Private) Limited 43.88% 35,500 - (41) - - - - - 35,459

Bambarapana Hydro Power (Private) Limited

40.00% - 140,000 1,938 - - - - - 141,938

2,597,549 140,000 468,468 - - - (26,029) (336,382) 2,843,605

2019

Hayleys Hydro Energy (Private) Limited

49.00% 52,338 - (272) - - - - - 52,065


49.00% 62,030 - 23,386 (3,797) 811 (836) - - 81,594



Lakdhanavi Bangla Power Limited 33.16% 950,466 - 207,091 - - - 133,076 (202,850) 1,087,784

Raj Lanka Power Company Limited 20.25% 594,686 - 68,061 - - - 80,273 (24,186) 718,834



25.00% 32,960 - 36,570 - - - - - 69,530



40.00% 141,938 15,639 24,787 - - - (4,000) 178,364

LTL Energy (Private) Limited 45.00% - 117,000 - - - - - - 117,000

2,843,605 132,639 508,182 (3,797) 811 (836) 213,349 (344,712) 3,349,239





Company

Effec

tive

hold

ing

As

at 0

1 A

pril

Acq

uisi

tions

Shar

e of

pr

ofits

Pref

eren

ce

divi

dend

Reva

luat

ion

ga

in /

loss

Shar

e of

OCI

Fore

ign

curr

ency

ad

just

men

t

Div

iden

d di

stri

butio

n

As

at 3

1 M

arch

2018


49.00% 55,490 - (212) - - - - (2,940) 52,338


49.00% 55,324 - 6,706 - - - - - 62,030





25.00% 1,435 - 31,525 - - - - - 32,960



40.00% - 140,000 1,938 - - - - - 141,938

1,175,720 140,000 259,886 - - - - (277,153) 1,298,453

2019


49.00% 52,338 - (272) - - - - - 52,065


49.00% 62,030 - 23,386 (3,797) 811 (836) - - 81,594





25.00% 32,960 - 36,570 - - - - - 69,530



40.00% 141,938 15,639 24,787 - - - - (4,000) 178,364

LTL Energy (Private) Limited 45.00% - 117,000 - - - - - 117,000

1,298,453 132,639 233,029 (3,797) 811 (836) - (117,676) 1,542,623




19 Intangible assets

Group 2019 2018

Cost

As at the beginning of the year 61,383 60,333

(+) Additions/ (transfers) 118 1,050

(-) Intangible assets write off (2,846) -


Accumulated amortization

As at the beginning of the year (2,097) (132)

(+) Amortization for the period (145) (1,965)

As at the end of the year (2,242) (2,097)

Carrying value 56,413 59,286

Approval cost consist of expenditure incurred in connection with approvals, Surveys and engineering designs in respect of Pupulaketiya Hydro Power (Private) Limited Rs. 26,673,346/- (in 2018 - Rs. 29,401,537/-) This cost is to be amortized with effect from commencement of commercial operations.

Approval cost of Rs. 1,981,602/- and Rs. 30,000,000/- of Sapthakanya Hydro Electric Company (Private) Limited and Campion Hydro (Private) Limited respectively are being amortized over the period.

There has been no impairment of intangible assets that requires a provision in the Financial Statements. Method used in estimating recoverable amount was based on value in use. Value in use was determined by discounting the future cash flows generated from the continuing use of the assets.

Approval cost of Pupulaketiya Hydro Power (Private) Limited amounting to Rs. 2,845,550/- was written off during the period due to lapse of certain approvals obtained.

20 Loans and receivables

Group Company

2019 2018 2019 2018

Receivable from Ceylon Electricity Board 46,060 34,372 - -

Advances 5,894 619 5,275 -

Prepayments 6,009 16,617 129 88

57,963 51,608 5,404 88



Group Company

2019 2018 2019 2018

21 Amounts due from related parties

Acuity Partners (Private) Limited - 489 - 489

Lanka Energy International (Private) Limited - - - 392

Campion Hydro (Private) Limited - - 18,800 29,885

Pupulaketiya Hydro Power (Private) Limited - - 22,087 21,909

- 489 40,887 52,675

22 Other receivables

Dividend receivable 20,558 24,554 - 25,982

Receivable Kankiriya-Thambiliya Mini Hydro Power (Private) Limited 106 56 106 56

Receivable Parambe Hydro Power (Private) Limited 135 91 135 91

Receivable from solar projects 63,540 2,341 63,541 2,341

Receivable from VS Hydro (Private) Limited 242 835 - -

84,581 27,877 63,782 28,470

23 Cash and cash equivalentsCash at bank and in hand 118,274 332,723 33,056 263,185

Short term investments 669,096 611,619 488,603 604,847

787,370 944,342 521,659 868,032




24 Financial risk management and financial instruments

24.1 Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the end of the

reporting period was as follows.

Carrying amounts

Group Company

Note 2019 2018 2019 2018

Loans and receivables 20 57,963 51,608 5,404 88

Amounts due from related parties 21 - 489 40,887 52,675

Other receivables 22 84,581 27,877 63,782 28,470

Cash & cash equivalents 23 787,370 944,342 521,659 868,032

929,914 1,024,316 631,732 949,265

Ageing

The aging of loans and receivables (Loans and receivables, amounts due from related parties and other receivables) at the

reporting date was as follows.

Carrying amounts

Group Company

2019 2018 2019 2018

Below 30 days 7,267 - - 25,981

30 - 45 days 7,043 - - -

46 - 60 days 52,550 58,926 - -

Over 61 days 75,684 21,048 110,073 55,252

142,544 79,974 110,073 81,233

There were no objective evidence of impairment as a result of one or more loss events that occurred subsequent to their

initial recognition. Hence no impairment provision made in the financial statements as at 31 March 2019.





24 Financial risk management and financial instruments (continued.)

24.2 Exposure to liquidity risk

The following are the contractual maturities of financial liabilities:

The maturity analysis of liabilities - 2019

Current Non current

Group Carrying value

Upto 1 year

1 to 2 years

2 to 5 years

Above 5 years

Cumulative redeemable preference shares 325,000 75,000 - 75,000 175,000

Interest bearing borrowings 762,989 295,303 307,151 160,535 -

Current Non current

Company Carrying value

Upto 1 year

1 to 2 years

2 to 5 years

Above 5 years

Cumulative redeemable preference shares 75,000 75,000 - - -

Interest bearing borrowings 494,477 210,477 188,000 96,000 -

The maturity analysis of liabilities - 2018

Current Non current

Group Carrying value

Upto 1 year

1 to 2 years

2 to 5 years

Above 5 years

Cumulative redeemable preference shares 490,000 75,000 115,000 115,000 185,000

Interest bearing borrowings 561,704 343,463 117,411 50,580 50,250

Current Non current

Company Carrying value

Upto 1 year

1 to 2 years

2 to 5 years

Above 5 years

Cumulative redeemable preference shares 150,000 75,000 75,000 - -

Interest bearing borrowings 331,824 256,824 75,000 - -





24.3 Exposure to market risk

24.3.1 Currency risk

The Group's exposure to foreign currency risk was as follows based on notional amounts.

31 March 2019 2018

BDT BDT

Investment in equity accounted investees

Raj Lanka Power Company Limited 234,920 234,920

Lakdhanavi Bangla Power Limited 386,800 386,800

Share of profit of equity accounted investees (net of income tax)

Raj Lanka Power Company Limited 32,483 23,187

Lakdhanavi Bangla Power Limited 98,836 88,916

The following exchange rates applied on 31 March

Spot rate as at 31 March 2019 2018

Bangladesh Taka (BDT) 2.0953 1.8567

Sensitivity analysis

A strengthening /(weakening) of the LKR and BDT against all other currencies at 31 March would have affected the

measurement of financial instruments denominated in a foreign currency and increased /(decreased) equity and profit

or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group

considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables,

in particular interest rates, remain constant. The analysis is performed on the same basis for 2019, albeit that the impact

of reasonably possible foreign exchange rate variances were nil, as indicated below.

Equity Profit or loss

Strengthening Weakening Strengthening Weakening

31 March 2019 27,515 (27,515) 27,515 (27,515)

BDT (10% movement)

31 March 2018

BDT (10% movement) 20,814 (20,814) 20,814 (20,814)





24.3.2 Interest rate risk

At the reporting date the interest rate profile of the Group’s and the Company's interest-bearing financial instruments were:

Carrying amounts

As at 31 March

Group Company

2019 2018 2019 2018

Fixed rate instruments

Financial assets 669,096 611,619 488,603 604,847

Financial liabilities - - - -

669,096 611,619 488,603 604,847

Variable rate instruments

Financial assets - - - -

Financial liabilities 1,087,989 1,051,704 569,477 481,824

1,087,989 1,051,704 569,477 481,824

24.4 Analysis of financial instruments by measurement basis

The fair values of financial assets and liabilities, together with carrying amounts shown in the Statement of Financial Position are as follows.

Group

Measured at

2019 NoteAmortized

cost

Fair value through profit

or loss

Fair value through other

Comprehensive income

Other financial liabilities Total

Financial assets

Loans and receivables 20 57,963 - - - 57,963

Amounts due from related parties 21 - - - - -

Other receivables 22 84,581 - - - 84,581

Cash & cash equivalents 23 787,370 - - - 787,370

929,914 - - - 929,914

Financial labilities

Interest bearing borrowings 26 - - - 762,989 762,989


27 - - - 325,000 325,000

Other payables 29 - - - 16,301 16,301

- - - 1,104,290 1,104,290





24.4 Analysis of financial instruments by measurement basis (continued.)

Group

2018 Note

Fair value through profit or

loss

Available for sale

financial assets

Loans and receivables

Held to maturity

investments


Financial assets

Loans and receivables 20 - - 51,608 - - 51,608

Amounts due from related parties 21 - - 489 - - 489

Other receivables 22 - - 27,877 - - 27,877

Cash & cash equivalents 23 - - 944,342 - - 944,342

- - 1,024,316 - - 1,024,316


Interest bearing borrowings 27 - - - - 561,704 561,704


28 - - - - 490,000 490,000

Other payables 29 - - - - 242,709 242,709

- - - - 1,294,413 1,294,413

Company

Measured at

2019 NoteAmortized

cost


loss

Fair value through other

comprehensive income


Financial assets

Loans and receivables 20 5,404 - - - 5,404

Amounts due from related parties 21 40,887 - - - 40,887

Other receivables 22 4,790 - - - 4,790

Cash & cash equivalents 23 521,659 - - - 521,659

572,740 - - - 572,740


Interest bearing borrowings 27 - - - 494,477 494,477

Cumulative redeemable preference shares 28 - - - 75,000 75,000

Other payables 29 - - - 3,620 3,620

- - - 573,097 573,097





24.4 Analysis of financial instruments by measurement basis (continued.)

Company

2018 Note


loss

Available for sale

financial assets

Loans and receivables

Held to maturity

investments


Financial assetsLoans and receivables 20 88 - 88 - - 176

Amounts due from related parties 21 - - 52,675 - - 52,675

Other receivables 22 - - 28,558 - - 28,558

Cash & cash equivalents 23 - - 868,032 - - 868,032

88 - 949,353 - - 949,441 Financial liabilities Interest bearing borrowings 27 - - - - 331,824 331,824

Cumulative redeemable preference shares 28 - - - - 75,000 75,000

Other payables 29 - - - - 236,489 236,489

- - - - 643,313 643,313

The Company does not anticipate the fair value of the above to be significantly different to their carrying values and

consider the impact as non material for disclosure.

25 Stated capital

Group Company

2019 2018 2019 2018

Balance as at 1 April 2,906,472 1,706,472 2,906,472 1,706,472

Issued during the year - 1,200,000 - 1,200,000

Balance as at 31 March 2,906,472 2,906,472 2,906,472 2,906,472

Number of shares

As at 1 April 582,278,117 462,278,117 582,278,117 462,278,117

Issued during the year - 120,000,000 - 120,000,000

As at 31 March 582,278,117 582,278,117 582,278,117 582,278,117

Par value per share was 10/- for the Company.

The holders of ordinary shares are entitled to recover dividends as declared from time to time, and are entitled to one

vote per individual at meetings of shareholders or one vote per share in case of poll.

Outstanding value of redeemable preference shares as at 31 March 2019 was Rs. 75 Mn which are classified as a financial

liability. According to the Companies Act No. 07 of 2007, redeemable preference shares form a part of the stated

capital.

Stated capital as per the requirements of the Companies Act No. 07 of 2007.




25 Stated capital (continued.)

Note Group Company

2019 2018 2019 2018

Ordinary share capital 25 2,906,472 2,906,472 2,906,472 2,906,472

Redeemable preference shares 27 325,000 490,000 75,000 150,000

Stated capital as per the Companies Act No. 07 of 2007 3,231,472 3,396,472 2,981,472 3,056,472

26 Interest bearing borrowingsAs at 01 April 561,704 716,766 331,824 527,408

Repayments during the year (239,260) (731,050) (147,000) (695,000)

Obtained during the period 444,000 577,871 310,000 500,000

Interest payable/ overpaid at the end of the year (3,455) (1,883) (347) (584)

As at 31 March 762,989 561,704 494,477 331,824

Repayments due within one year 295,302 199,463 210,477 112,824

Repayments due after one year 467,687 362,241 284,000 219,000

762,989 561,704 494,477 331,824



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27

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(All

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27 Cumulative redeemable preference shares (continued.)

Group Company

2019 2018 2019 2018

Balance as at 01 April 490,000 763,311 150,000 423,311

Preference shares issued during the year - - - -

Preference shares redeemed during the year (165,000) (255,000) (75,000) (255,000)

325,000 508,311 75,000 168,311

Preference dividend recognized during the year 68,400 86,469 18,525 37,225

Preference dividend paid during the year (68,400) (104,780) (18,525) (55,536)

325,000 490,000 75,000 150,000

Non current liabilities

Redeemable after one year to five years 250,000 415,000 - 75,000

Current liabilities

Redeemable within one year 75,000 75,000 75,000 75,000

325,000 490,000 75,000 150,000

28 Deferred tax liability - Group

Deferred tax (assets) and liabilities are calculated on all taxable and deductible temporary differences arising from

differences between accounting bases and tax bases of assets and liabilities.

The amount shown in the statement of financial position represents the following:

As at 31 March 2019 2018

Liabilities

Plant and equipment 47,591 42,822

Assets

Tax losses - (772)

Net deferred tax liability 47,591 42,050

The taxable and deductible temporary differences mainly arise from property, plant & equipment and tax losses.

Balance as at 31 March

2017

Recognised in profit or

loss


2018

Recognised in profit or

loss


2019

Plant and equipment 44,854 (2,032) 42,822 4,769 47,591

Tax losses (6,685) 5,913 (772) 772 -

38,169 3,881 42,050 5,541 47,591





28.1 Unrecognized deferred tax assets

As at 31 March 2019, a deferred tax asset of Rs. 38,053,471/- (2018- Rs. 15,325,011/-) was not recognized since it is not

probable that adequte taxable profits will be available in the foreseeable future to absorb these amounts.

Company

2019 2018

Taxable temporary differences - -

Deductible temporary differences

Tax losses 38,053 15,325

38,053 15,325

Group Company

2019 2018 2019 2018

29 Other payables

Dividend payable - 232,941 - 232,911

Other payables 16,301 9,768 3,620 3,578

16,301 242,709 3,620 236,489



30 Income tax (receivable)/ payable

Group Company

2019 2018 2019 201830.1 Income tax receivable

Balance as at 01 April 2,380 2,106 1,590 1,894

Provision for the year (20,990) (603) (19,981) (22,506)

WHT deduction 3,335 184 3,199 160

WHT on associate company dividend 19,981 - 19,982 22,042

Under/(over) provision in the previous years - - - -

Payments during the year 719 693 - -

Balance receivable as at 31 March 5,425 2,380 4,790 1,590

30.2 Income tax payable

Balance as at 01 April 4,479 1,987 - -

Provision for the year 61,710 53,783 - -

WHT deduction - (21) - -

WHT on associate company dividends (41,356) (42,766) - -

Under/(over) provision in the previous years - - - -

Payments during the year (12,640) (8,504) - -

Balance payable as at 31 March 12,193 4,479 - -

31 Capital commitments and contingencies

There were no commitments and contingencies as at the balances sheet date, which require adjustments to or disclosure

in the Financial Statements.

32 Events after the reporting date The Board of Directors have declared an interim dividend of Rs. 0.31 per share (on the 582,278,117 shares now in issue) on

31 May 2019 and paid on 21 June 2019 for the year ended 31 March 2019.

On 09 May 2019 through its fully owned subsidiary Lanka Energy International (Private) Limited, Company made an

investment of USD 8.0 Mn in Feni Lanka Power Limited, a company incorporated in Bangladesh which will undertake the

construction of a 114 MW thermal power plant.

There are no other events that occurred since the reporting date which would require adjustments to or disclosure in the





33 Related parties

Lanka Ventures PLC (LVL) is the parent company for LVL Energy Fund PLC, which has 57% controlling interest and the

ultimate parent is Acuity Partners (Private) Limited. Hatton National Bank PLC and DFCC Bank PLC jointly control Acuity

Partners (Private) Limited.

33.1 Transactions with key management personnel

Key management personnel include all the members of the Board of Directors of the Company and the CEO of the

Company having authority and responsibility for planning, directing and controlling the activities of the Company directly

or indirectly.

Board of Directors of the Company are as follows;

Mr. L.H.A.L. Silva

Mr. A.J. Alles

Mr. T.W. De Silva

Mr. A.R. Munasinghe

Mr. M.R. Abeywardena

Mr. M.A. Wijetunge

Mr. M.M. Wijetunge

Mr. J.D.N. Kekulawala

Mr. K.C. Dharmawardena

Ms. A.C. Gallage

Mr. L.H.A.L. Silva is the Director/Chief Executive Officer of DFCC Bank PLC. He is a director of Acuity Partners (Private) Limited

and Lanka Ventures PLC.

Mr. A. J. Alles is the Managing Director/Chief Executive Officer of Hatton National Bank PLC. He is the Chairman of Acuity

Partners (Private) Limited and a director of Lanka Ventures PLC.

Mr. T.W. De Silva is the Executive Vice President -Strategic Planning & Subsidiaries of DFCC Bank PLC. He is a director of Lanka

Ventures PLC, Acuity Partners (Private) Limited and Acuity Securities Limited.

Mr. A.R. Munasinghe is a director of Lanka Ventures PLC.

Mr. M.R. Abeywardena is the Managing Director/Group Chief Executive Officer of Acuity Partners (Private) Limited. He is the

chairman of Acuity Stockbrokers (Private) Limited and Acuity Securities Limited. He is a director of Lanka Ventures PLC.

Mr. J.D.N. Kekulawala is a director of Lanka Ventures PLC.

Mr. M.A. Wijetunge is a director of Lakdhanavi Bangla Power Limited.

Ms. A.C. De Silva Gallage is a director of Lanka Ventures PLC.




33 Related parties (Continued.)

33.1 Transactions with key management personnel (continued.)

Mr. D.S. Arangala who is the Chief Executive Officer of the Company is a director of Nividhu (Private) Limited, LVS Energy

(Private) Limited, Unit Energy Lanka (Private) Limited, Lanka Energy International (Private) Limited, Pawan Danavi (Private)

Limited, Hayleys Hydro Energy (Private) Limited, Nala Dhanavi (Private) Limited, Raj Lanka Power Company Limited,

Lakdhanavi Bangla Power Limited, Pupulaketiya Mini Hydro Power (Private) Limited, Sapthakanya Hydro Electric Company

(Private) Limited, Campion Hydro (Private) Limited and Bambarapana Hydropower (Private) Limited. He was appointed as

a director of Solar Energy Investments (Private) Limited with effect from 13 February 2018.

During the year directorship changes,

Ms. A.C. Gallage was appointed as a director of the Company with effect from 27 February 2019. Mr. D.S. Arangala who was

a director of the Company resigned with effect from 20 February 2019.

33.2 Transactions with key management personnel

(i) Key management personnel compensation

Compensation paid to / on behalf of key management personnel of the company are as follows.

Group Company

2019 2018 2019 2018

Director's remuneration 1,138 746 1,138 746

Employee benefits 6,931 6,214 6,931 6,214

Post employment benefits - - - -

(ii) Loans given to directors

Company has not given any loans for the directors of the company during the year ended 31 March 2019.




33 Related parties (Continued.)

33.3 Other related party transactions

Company enters into transactions with related parties in the ordinary course of business on an arm's length basis on terms similar to comparable transactions with unrelated parties.

Outstanding balances at year end are unsecured and settlement occurs in cash. No guarantees were given or received in respect of the outstanding balances. Company did not recognize any provision for doubtful debt related to the amount of outstanding balances and did not recognize any expenses during the year in respect of bad or doubtful debts from related parties.

2019 2018

Name of the related party RelationshipNature of

transaction

Amounts (paid)/

received Balance 31 March

Amounts (paid)/

received Balance 31 March

DFCC Bank PLC Joint holder of the ultimate parent company

Redeemable preference shares

(75,000) 75,000 (255,000) 150,000

Preference dividend (15,931) - (55,536) -

Term loan - obtained 310,000 - (120,000) 180,000

Term loan - repaid (147,000) 418,693 - -

Interest on term loan (30,434) - (52,679) 363

Fixed deposit - 115,000 - -

Fixed deposit - interest 61,218 808 - -

TB repo - interest 435 - - -

Bank charges (229) - (152) -

Hatton National Bank PLC Joint holder of the ultimate parent company

Term loan - repaid (75,000) 75,000 (75,000) 150,000

Interest on term loan (13,315) 784 (24,452) 1,461

Bank charges (13) - (7) -

Acuity Securities Limited Subsidiary of ultimate parent company

TB repurchase interest 4,518 1,834 8,567 10

TB repurchase - Investment - 370,961 - 15,767

Acuity Partners (Private) Limited

Subsidiary of ultimate parent company

Audit fees 488 - 52 489

Lanka Ventures PLC Parent company Management fees (1,000) - (1,000) -


Subsidiary company Current account 392 - 366 392


Subsidiary company Interest income - - 168 -


Subsidiary company Current account (198) 22,087 1,115 21,909


Subsidiary company Current account - - 47,323 -


Subsidiary company Current account 12,875 18,800 23,747 29,885




34 Prior year adjustment due to change in accounting policy (Group)

During the year, company decided to reclasify right to use land on lease seperately in the financial statements. The effect of

change in accounting policy has been recognize retrospectively in the financial statements. The following table summarize

the impact to the financial statements.

The change in accounting policy provides better representation of right of use land.

Statement of Financial Position

Impact of change in accounting policy

31 March 2018 As previously

reported

Adjustments As restated

Right-to-use land - 3,742 3,742

Intangible assets 63,028 (3,742) 59,486

Total assets 63,028 - 63,028

There is no impact on the Group's total operating, investing or financing cash flows for the year ended 31 March 2018.



TEN YEAR SUMMARY

2019 2018 2017 2016 2015 2014 2013 2012 2011 2010LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000

Operating Results

Investment income 1,430 538 279 23,820 40,703 34,979 30,352 34,207 - - Interest income 72,756 22,274 12,158 6,934 2,481 12,597 26,778 2,939 - - Subsidiary company income 355,323 326,238 224,457 248,351 239,090 46,270 - - - - Other income - - - - 11 - 2,103 - - - Total income 429,509 349,050 236,894 279,105 282,285 93,846 59,233 37,146 93,152 40,125 Operating profit 279,740 219,970 131,457 187,644 192,825 39,293 54,262 34,893 90,719 38,175 Share of profit net of tax of equity accounted investees

508,181 468,468 423,360 303,893 263,955 222,023 62,900 22,234 19,214 8,182

Gain on deriative financial instrument - - - - - - - - - - Gain on disposal of subsidiary - - 900 - - - - - - - Available for sale financial assets reclassified from OCI

- - 108,263 - - - - - - -

Finance cost (140,098) (190,814) (153,575) (94,088) (60,530) (71,622) (14,251) (30) - - Tax expense (88,240) (58,266) (45,472) (40,540) (44,082) (15,536) (3,730) (878) (3,588) (2,821)Profit for the year 559,583 439,358 464,933 356,909 352,168 174,158 99,181 56,219 106,345 43,536 Non controlling interest (41,163) (40,211) (34,019) (61,090) (91,336) 18,085 (140) (148) (9,039) (370)Profit attributable to equity holders of the company

518,420 399,147 430,914 295,819 260,832 192,243 99,041 56,071 97,306 43,166

Dividend 378,481 343,858 277,367 231,139 137,395 120,098 29,000 64,500 33,000 - Statement of Financial PositionAssetsProperty, plant and equipment 975,309 1,017,251 1,048,986 825,422 709,039 437,782 452,888 - - - Right-to-use land 3,554 3,742 3,931 4,119 4,306 4,494 4,682 - - -Investment in equity accounted investees 3,349,239 2,843,606 2,597,549 2,206,180 2,076,798 1,816,796 1,047,773 653,573 247,339 121,406 Intangible assets 56,413 59,286 60,200 84,504 54,001 - - - - - Long term investments - - - - - - - 141,549 149,788 108,105 Available for sale financial assets - - - 146,860 150,431 118,403 89,950 - - - Loans and receivables 57,963 51,608 9,962 11,056 52,880 65,690 70,190 - - - Amounts due from related parties - 489 438 437 310 2,282 9,733 - 4,110 18,860 Income Tax receivables 5,425 2,380 2,106 1,881 - 318 - - - -Other receivables 84,581 27,877 155,534 26,750 19,415 35,197 37,168 31,667 5,891 - Cash and cash equivalents 787,370 944,342 83,316 128,231 115,325 13,298 96,284 216,424 151,091 116,420 Total assets 5,319,854 4,950,580 3,962,022 3,435,440 3,182,505 2,494,260 1,808,668 1,043,213 558,219 364,791

Cumulative redeemable preference shares (325,000) (490,000) (763,311) (685,486) (657,519) (420,022) (310,186) - - - Interest bearing borrowings (762,989) (561,704) (716,766) (536,682) (487,891) (162,293) (183,830) - - - Other liabilities (76,085) (289,238) (46,417) (59,557) (53,700) (163,736) (147,318) (98,457) (891) (48,319)Total liabilities (1,164,074) (1,340,942) (1,526,494) (1,281,725) (1,199,110) (746,051) (641,334) (98,457) (891) (48,319)Net assets 4,155,780 3,609,638 2,435,528 2,153,715 1,983,395 1,748,208 1,167,334 944,757 557,328 316,472

Financed byStated capital 2,906,472 2,906,472 1,706,472 1,370,270 1,357,300 1,093,040 860,020 711,090 300,000 300,000 Revaluation reserve 9,112 8,301 8,301 - - - - - - - Available for sale reserve - - - 113,879 117,450 85,422 56,969 65,381 75,307 - Retained earnings 794,271 480,450 472,030 322,161 283,405 185,708 117,729 76,613 90,497 16,472 Translation reserve 269,076 55,727 81,756 75,400 10,930 - - - - -

Total equity attributable to equity holders of the company

3,978,931 3,450,950 2,268,559 1,881,710 1,769,085 1,364,170 1,034,718 853,084 465,804 270,839

Non controlling interest 176,849 158,688 166,969 272,005 214,310 384,038 132,616 91,672 91,524 45,633 Total equity 4,155,780 3,609,638 2,435,528 2,153,715 1,983,395 1,748,208 1,167,334 944,756 557,328 316,472

Performance IndicatorsReturn on equity ratio (%) 13.96 13.96 20.77 16.21 16.65 16.03 10.49 8.50 26.42 20.78 Return on total assets ratio (%) 10.90 9.86 12.57 10.79 12.41 8.09 6.96 7.02 23.04 12.30 Interest cover ratio 5.62 3.61 4.32 5.22 7.55 3.65 8.22 1,904.23 - - Total debt to equity ratio (%) 26.18 29.14 60.77 56.75 57.75 33.31 42.32 - - - P/E ratio 8.87 12.22 - - - - - - - - Price to book value ratio 1.16 1.67 - - - - - - - - Net assets per share (LKR) 6.83 5.93 4.91 4.48 4.29 21.59 17.84 14.71 15.53 9.03 Earnings per share (LKR) 0.89 0.81 0.95 0.71 0.67 0.53 1.76 1.35 3.24 1.77 Dividend per share (LKR) 0.65 0.64 0.60 0.55 0.35 1.95 0.50 0.50 1.10 - Dividend yield (%) 8.23 6.46 - - - - - - - - Market price per share (LKR) 7.90 9.90 - - - - - - - -

Portfolio size (LKR Mn) 2,598 2,466 2,326 2,123 2,011 1,842 1,189 713 301 313

For the year ended 31 March

Restated


1. Stock Exchange Listing

The issued ordinary shares of LVL Energy Fund PLC are listed on the Colombo Stock Exchange.

2. Shares held by the Public

The percentage of shares held by the public is 29.95% as at 31 March 2019.

3. Distribution of Shareholding as at 31 March 2019

No. of Shares Held

No of Shareholders

No of Shareholders %

TotalHoldings

TotalHoldings %

1 - 1,000 340 35.98 146,217 0.03

1,001 - 10,000 300 31.75 1,586,435 0.27

10,001 - 100,000 200 21.16 8,645,841 1.48

100,001 - 1,000,000 78 8.25 28,830,760 4.95

Over 1,000,000 27 2.86 543,068,864 93.27

Total 945 100.00 582,278,117 100.00

No of Shareholders

No of Shareholders %

Total Holdings

Total Holdings %

Individual 879 93.02 112,931,933 19.39

Institutional 66 6.98 469,346,184 80.61

Total 945 100.00 582,278,117 100.00

Resident 931 98.52 578,669,173 99.38

Non-Resident 14 1.48 3,608,944 0.62

Total 945 100.00 582,278,117 100.00

INFORMATION TO SHAREHOLDERS


No. of Shares

% of IssuedCapital

2019

INFORMATION TO SHAREHOLDERS

2018

4. Twenty Largest Shareholders as at 31 March 2019

Lanka Ventures PLC 331,885,609 57.00

Mr. Mohandas Ajitha Wijetunge 67,911,668 11.66

Sri Lanka Insurance Corporation Limited - General Fund 50,000,000 8.59

Pheonix Ventures (Private) Limited 24,001,460 4.12

Equity Investments Lanka Limited 14,831,634 2.55

Guardian Capital Partners PLC 10,312,500 1.77

National Savings Bank 4,606,600 0.79

Mr. Daya Sumith Arangala 4,455,000 0.77

J.B. Cocoshell (Private) Limited 3,155,257 0.54

Mr. Kanthimany Maheshwaran 3,000,000 0.52

Mrs. Mohamed Moujood Fathima Zareena 2,970,000 0.51

Mr. Colombapatadendige Ranjith Perera 2,537,800 0.44

Merchant Bank of Sri Lanka and Finance PLC 2,500,000 0.43

Mr. Kandiah Tharmalingam Konesh 2,425,000 0.42

People's Bank 2,305,979 0.40

Dinima High Performance Materials (Private) Limited 1,880,004 0.32

Mr. Mahal Mathisha Wijetunge 1,866,100 0.32

Softlogic Life Insurance PLC 1,561,600 0.27

Guardian Fund Management Limited / The Aitken Spence and

Associated Companies Executive Staff Provident Fund 1,378,900 0.24Hatton National Bank PLC 1,378,900 0.24

Mr. J.D.N.Kekulawala 1,375,000 0.24

Total 536,339,011 92.11

5. Share Trading Information

Year to 31 March

Number of Transactions 1,984 575

Number of Shares Traded 8,871,930 1,598,384

Value of Shares Traded (LKR) 72,305,769 15,670,125

Highest Price (LKR) 10.00 10.50

Lowest Price (LKR) 7.30 9.00

Last Traded Price (LKR) 7.90 9.90

Market Capitalisation (LKR) 4,599,997,124.30 5,764,553,358.30


INFORMATION TO SHAREHOLDES

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9


NOTICE IS HEREBY GIVEN that the Eighth Annual General

Meeting of LVL Energy Fund PLC will be held at the

Auditorium of the Ceylon Chamber of Commerce, No. 50,

Navam Mawatha, Colombo 02, on the 27th day of September

2019 at 10.00 a.m. for the following purposes:

1) To receive and consider the Annual Report of the

Board of Directors together with the Financial

Statements of the Company for the year ended 31

March 2019 together with the Report of the Auditors

thereon.

2) To re-elect Mr. L.H.A.L. Silva who retires by rotation in

terms of Article 27(12) of the Articles of Association of

the Company, and being eligible has offered himself

for re-election.

3) To re-elect Mr. M.A. Wijetunge who retires by rotation

in terms of Article 27(12) of the Articles of Association

of the Company, and being eligible has offered

himself for re-election.

4) To propose the following resolution as an ordinary

resolution for the re-appointment of Mr. A.R.

Munasinghe who has reached the age of 75

years.

IT IS HEREBY RESOLOVED that age limit referred to in

Section 210 of the Companies Act No. 07 of 2007 shall

not apply to Mr. A.R. Munasinghe who has reached

the age of 75 years prior to this Annual General

Meeting and that he be re-appointed as a Director of

the Company.

5) To propose the following resolution as an ordinary

resolution as per the circular to shareholders dated

01 August 2019.

IT IS HEREBY RESOLVED that the sum of Rupees

One Hundred and Fifteen Million (LKR 115,000,000)

which is allocated for investment in Pupulaketiya

Hydro Power (Private) Limited in terms of section

3.1 of the Prospectus dated 27 November 2017 in

connection with the Initial Public Offering of Rupees

One Hundred and Twenty Million (LKR 120,000,000)

ordinary shares of the Company be instead utilized

for the following purposes, as detailed in the Circular

to Shareholders dated 01 August 2019 circulated

together with the Annual Report.

(i) A sum of approximately Rupees Seventy Million

(LKR 70,000,000) to be utilized for the purpose of

financing the Makari Gad hydro power project

referred to in section 3.1 of the said Prospectus with

a view to meeting the shortfall of the investment

amounting approximately Rupees Seventy Million

(LKR 70,000,000) in LTL Energy (Private) Limited.

(ii) The balance of approximately Rupees Forty Five

Million (LKR 45,000,000) to be utilized for the

purpose of redeeming of the cumulative redeemable

preference shares amounting to Rupees Seventy

Five Million (LKR 75,000,000) remaining outstanding

as of today issued to the DFCC Bank PLC, in two

equal installments of Rupees Thirty Seven Million

Five Hundred Thousand (LKR 37,500,000) each on

30 September 2019 and 31 March 2020, out of the

total amount of Rupees Three Hundred Million (LKR

300,000,000) as disclosed in section 5.12 of the said

Prospectus.

6) To re-appoint Messrs. KPMG, Chartered Accountants,

as Auditors of the Company to hold office until the

conclusion of the next Annual General Meeting of

the Company at a remuneration to be agreed with

by the Board of Directors and to audit the Financial

Statements of the Company for the accounting

period ending 31 March 2020.

7) To authorize the Directors to determine contribution

to charities for the ensuing year.

By order of the Board

Director

Corporate Services (Private) Limited

Secretaries

LVL Energy Fund PLC

01 August 2019

Colombo

NOTICE OF MEETING


Note:

I. A shareholder entitled to attend and vote at the

Meeting is entitled to appoint a Proxy who need not

be a shareholder to attend instead of him/her.

II. The Form of Proxy is attached herewith.

III. The completed Form of Proxy should be deposited

at the office of the Company at “Sayuru Sevana”, 2nd

Floor, No.46/12, Navam Mawatha, Colombo 02 not

less than 48 hours before the meeting.

NOTICE OF MEETING


FORM OF PROXY

*I/We……………………………………………………………………………………………of…………………………………………………………..………………………………………… being * a shareholder /shareholders of LVL ENERGY FUND PLC, do hereby appoint ……………………………………………………...of…………………………………………………………………………….. (whom failing)

Mr. L.H.A.L. Silva of Colombo or failing him Mr. A.J. Alles of Colombo or failing himMr. M.A. Wijetunge of Colombo or failing himMr. T.W. De Silva of Colombo or failing himMr. A.R. Munasinghe of Colombo or failing himMr. M.R. Abeywardena of Colombo or failing himMr. M.M. Wijetunge of Colombo or failing himMr. J.D.N. Kekulawala of Colombo or failing himMr. K.C.S. Dharmawardana of Colombo or failing himMs. A.C. De Silva of Colombo

as *my/our Proxy to represent *me/us and to speak and vote for *me/us on *my/our behalf at the ANNUAL GENERAL MEETING OF THE COMPANY to be held at the Auditorium of Ceylon Chamber of Commerce, No. 50, Nawam Mawatha, Colombo 02 at 10.00 a.m. on the Twenty Seventh (27th) day of September 2019 and at any adjournment thereof, and at every poll which may be taken in consequence thereof.

1) To receive and consider the Annual Report of the Board of Directors together with the Financial Statements of the Company for the year ended 31 March 2019 together with the Report of the Auditors thereon.

2) To re-elect Mr. L.H.A.L. Silva who retires by rotation in terms of Article 27(12) of the Articles of Association of the Company, and being eligible has offered himself for re-election.

3) To re-elect Mr. M.A. Wijetunge who retires by rotation in terms of Article 27(12) of the Articles of Association of the Company, and being eligible has offered himself for re-election.

4) To pass an ordinary resolution for re-appointment of Mr. A.R. Munasinghe who has reached the age of 75 years.

5) To pass an ordinary resolution as per the circular to shareholders dated 01 August 2019.

6) To re-appoint Messrs. KPMG, Chartered Accountants, as the Auditors of the Company to hold office until the Conclusion of the Company at a remuneration to be agreed with by the Board of Directors and to audit the Financial Statements of the Company for the accounting period ending 31 March 2020.

7) To authorize the Directors to determine contribution to charities for the ensuing year.

FOR AGAINST

Signed this…………… day of ………………………. Two Thousand and Nineteen.

………………………*Signature/s

Note:1) *Please delete the inappropriate words.2) Instructions as to completion are noted on the reverse hereof.


INSTRUCTIONS AS TO COMPLETION

1. Kindly perfect the Form of Proxy after filling in legibly your full name and address and signing in the space provided and

filling in the date of signature.

2. A Member entitled to attend and vote at the Meeting is entitled to appoint a Proxy who need not be a member, to

attend and vote instead of him. Please indicate with an “X” in the boxes provided how your Proxy is to vote on each

resolution. If no indication is given, the Proxy in his discretion will vote as he thinks fit.

3. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed

Form of Proxy for registration, if such power of attorney has not already been registered with the Company.

4. In the case of a Corporate Member, the Form of Proxy must be executed in the manner prescribed by the Articles of

Association.

5. The completed Form of Proxy should be lodged with the Company not less than forty eight (48) hours before the

Meeting.










Associate Companies

Registered O�ce










Mr. A.J.Alles

Mr. T.W.De Silva

Mr. A.R.Munasinghe

Mr. M.R.Abeywardena

Mr. M.A.Wijetunge


Mr. M.M.Wijetunge






Auditors | KPMG






































Associate Companies

Registered O�ce










Mr. A.J.Alles

Mr. T.W.De Silva

Mr. A.R.Munasinghe

Mr. M.R.Abeywardena

Mr. M.A.Wijetunge


Mr. M.M.Wijetunge






Auditors | KPMG





























LVL ENERGY FUND PLC

ANNUAL REPORT2018/ 19

2018/ 19 annual report...date of incorporation | 26 june 2006 name of company | lvlenergy fund plc...

Documents