Taking yet another strategic step towards focusing heavily on the expansion and strengthening of the LPG business, LAUGFS Gas PLC (LGL), the only private sector player in the LPG market in Sri Lanka announced the restructuring of its non-core businesses. Accordingly, LAUGFS Gas PLC will consolidate LPG downstream activities in Sri Lanka and Bangladesh, LPG sourcing, LPG maritime logistics and the Terminal operations under one pillar.
LAUGFS Power Ltd, LAUGFS Leisure Ltd and LAUGFS Eco Sri Ltd will be individually listed on the Colombo Stock Exchange (CSE), subject to necessary regulatory approvals from the SEC and the CSE, consequently enabling the management of the three companies to concentrate further on developing and expanding their respective businesses by leveraging on existing market opportunities. Capital Alliance Partners Limited, a leading investment bank, assisted the restructuring process. As a prelude to the proposed restructure, LAUGFS Gas PLC (LGL) held an investor forum for a cross-section of investors and a media briefing to communicate the strategic objectives that shaped the decision to restructure. The larger vision and opportunities that this process would provide to all stakeholders with vested interest in individual companies as well as LAUGFS Gas PLC as a whole were also presented during these events.
On the 28th December 2017, the Board of Directors of LGL approved the restructuring initiative to be facilitated via a Scheme of Arrangement and initiated the process of obtaining the necessary regulatory, legal and shareholder approvals. The subsidiaries, LAUGFS Power Ltd, LAUGFS Leisure Ltd and LAUGFS Eco Sri Ltd witnessed a restructuring of their shares via a share split to mirror their shareholding with LGL’s shareholding structure. As a part of the segregation process, all the shareholders of LGL will be entitled to an identical shareholding in the individual companies, thereby ensuring that they do not lose value as a result of this process. Once the segregation is completed, all different entities will be in a position to operate as independent entities.
Commenting on the larger strategy behind the restructuring, LAUGFS Chairman Mr. W. K. H. Wegapitiya stated, “In view of the strategic expansion drives that are already taking place in each of these sectors and particularly in the LPG sector, we wish to allow a broader growth expanse to each company and strengthen focus on developing each individual business segment through concentrated efforts and resource allocation.
The restructuring process will empower management of each business sector to focus more on performance enhancement of their respective businesses, which in turn will create more value for the LAUGFS Group. This aligns well with the LAUGFS approach and culture of exploring opportunities beyond the ordinary and reaching our full potential. Ultimately, this move will enable each business sector to reach their full potential and create enhanced value for our shareholders. We are confident that this move will attract favourable interest of both local and foreign investors.”
The strategic restructuring process is likely to create an avenue for greater inflow of FDI, for each business segment by encouraging regional investors that look to invest in individual and focused business ventures as opposed to diversified businesses, especially unrelated diversification.
The management of LGL believes that the LPG business in particular will benefit from the restructuring process by attracting foreign strategic investors with specific knowledge in the energy segment. LGL’s core business interest mainly consists of the LPG downstream activity, which has been actively pursuing a regional expansion drive with the established extension into Bangladesh as well as the ongoing extensions to Myanmar and Maldives. LGL through its subsidiary LAUGFS Terminals has already extended its dominance in the LPG sector through moving mid-stream by investing in the setting up of one of the largest LPG Import and Export Terminal facilities in South Asia with a 30,000 MT LPG storage capacity, scalable upto 45,000 MT, at the strategically located Hambantota Port. LGL’s LAUGFS Maritime provides maritime energy logistics support, operating its own fleet of LPG vessels, while SLOGAL Energy DMCC operates LAUGFS’s energy trading businesses headquartered in Dubai.
Moreover, the proposed restructuring will clear the path for interested parties including fund managers, individual investors as well as the country as a whole to explore development opportunities in the leisure and renewable energy sectors as LAUGFS continues its journey of success on an upward trajectory.
Gearing Up for Rapid Expansion
LAUGFS Gas
As a leader in the energy sector, LAUGFS Gas has established itself as a trusted brand in Sri Lanka serving millions of customers through its energy solutions. With a nationwide network of over 6,000 dealers and 31 distributors (business partners), LAUGFS Gas caters to the growing demands of the domestic, commercial and industrial sectors in the country. “With a strong commitment to maintain service excellence and deliver quality products, we have continuously actioned multiple initiatives to strengthen our footprint in the industry”, commented LAUGFS Gas Chief Executive Officer, Ashan De Silva.
“Our ongoing project “Praja Saviya” aims at increasing domestic LPG users in the country while supporting rural sector development. In the last financial year, we have enhanced the lives of over 150,000 families, which has enabled us to further strengthen our presence in the domestic sector. With the overall growth in the past financial year, our contribution to the industrial sector has also significantly increased with the addition of eight industrial sector partners. With strong investments in LPG midstream, we have been able to strengthen our presence in the LPG supply chain through LAUGFS Terminals, LAUGFS Maritime, and SLOGAL Energy DMCC. This has enabled us to ensure supply security and gain cost advantages, which in turn we could pass on to our customers,” he further added.
LAUGFS Gas Bangladesh
Marking its third year in Bangladesh, LAUGFS Gas has established itself as one of the largest LPG downstream distributors in the country, serving the growing LPG demand. Presently, LAUGFS Gas Bangladesh imports, stores, bottles and distributes over 60,000 MT of LPG every year and operates a world-class LPG import, bottling and distribution facility in Mongala, which is on its way to expand its capacity upto 5000 MT.
“LAUGFS Gas has seen a steadfast growth in the last financial year and we are determined to meet the rising demand for LPG in the Bangladesh market through our rigorous expansion plans,” remarked LAUGFS Gas Bangladesh Chief Executive Officer, Mohammed Saidul Islam.
We have made significant investments in strengthening our infrastructure and distribution network in Bangladesh. We are setting up the first state-of-the-art cylinder requalification plant in the country, which is currently under construction. A new tanker fleet has been added to meet the supply and demand of our domestic, commercial and industrial customers. In addition, we will be extending our Regional Distribution Centers (RDCs)
with two more by the end of the current financial year and hope to increase our dealer outlet reach to over 3500 within the next financial year, which will significantly enhance our nationwide distribution. We also launched the 33kg cylinder recently as a new SKU for our commercial customers,” he further added.
LAUGFS Terminals
To meet the growing demand for LPG within the region, LAUGFS Terminals Ltd. embarked on establishing one of the largest LPG Import & Export Terminals in South Asia at the strategically located Hambantota port. The Terminal is expected to serve as a central storage hub for LPG in the South Asian region.
“With the project nearing completion, the commercial operations at the Terminal is set to take off in August this year. Built in conformity with stringent international safety standards, the Terminal constitutes a storage capacity of 30,000 metric tonnes. The more complex task of the project is the construction of the ten 6 million litre tanks, however at present we have completed 80% of the project. The Terminal has been designed to perform efficient operations with the use of state-of-the-art hi-tech information systems and fully automated equipment. By being the only Terminal in the country to import LPG in Very Large Gas Carriers (VLGC) and by minimizing the turnaround time of the stored material in the Terminal, our goal is to pass on the yield to the customers by extending the lowest price,” remarked LAUGFS Terminals General Manager, Heshan De Silva. “Our aim is to strengthen our presence in the Sri Lankan market and expand to regional markets in Bangladesh, Maldives, India, East Africa and Myanmar, which will give us the opportunity to serve the LPG needs of nearly a half a billion population,” he further added.
LAUGFS Power
LAUGFS Power engages in renewable energy solutions with a firm commitment to meet Sri Lanka’s growing energy demands. Supplying to the National Grid, LAUGFS Power owns the largest Solar Power project in Sri Lanka and operates three mini-hydro power plants in the country.
“A number of Hydro and Solar Power Projects are in the pipeline to further strengthen our contribution to the National Grid. Currently, the construction of a 2 MW Hydro Power Plant is underway at Ginigathhena, which will be completed by August this year, followed by an additional 1.5 MW Hydro Power Plant to be setup within the next two years,” explained LAUGFS Power General Manager, Mahinda Senarath.
“In addition to the existing Solar Power Projects, plans are underway to launch three more projects within the next 18 months. We have secured licenses to set up two Solar Power Projects of 1MW each in Embilipitiya under the Surya Bala Sangramaya Program. Also, the newly initiated Rooftop Solar Power Program will roll out in April with solar panels installed at LAUGFS Corporation (Rubber) factory in Horana, and will be further expanded to all suitable LAUGFS buildings. Additionally, a 10 MW Solar Power Plant in Hambantota has been awarded to LAUGFS Power as a joint scheme, although the license for the project is in the final stage of approval. In the medium term, LAUGFS Power is geared to generate over 80 MW capacity of energy with combined contributions from Solar, Hydro and Wind Power, and will continue to produce sustainable renewable solutions with the aim of expanding beyond national borders,” he further added.
“LAUGFS Power is geared to generate over 80 MW capacity of energy with combined contributions from Solar, Hydro and Wind Power, and will continue to produce sustainable renewable solutions with the aim of expanding beyond national borders,” commented LAUGFS Power General Manager, Mahinda Senarath.
LAUGFS Eco Sri
LAUGFS Eco Sri facilitates the government-run mandatory Vehicle Emission Testing (VET) program as one of the two VET service operators in Sri Lanka. A pioneer in air quality management, LAUGFS Eco Sri introduced Sri Lanka’s first Vehicle Emission Testing (VET) centre in 2008. Since then, it has expanded its network of VET centres, today operating over 100 testing centres and a fleet of mobile testing units serving 126 mobile locations across the country.
“As the market leader in vehicle emission testing, we have continued to strengthen our market position and increase market share during 2017/18. With increasing vehicle registrations in the country every year, our focus is on building our operational capabilities and infrastructure to serve the continuously growing market demand. In this respect, we are planning on further expanding our fixed and mobile testing network and developing the current infrastructure of our existing VET centres in 2018. We are also continuously building our technology capabilities, and will expand the Octopus Router system developed by our in-house R&D team, rolling it out in over 50 centres during 2018/19 period. This will enable us to deliver a seamless and faster service to our customers, reinforcing our promise to provide an efficient and effective customer experience,” commented LAUGFS Eco Sri Chief Operating Officer, Bimal Weerasinghe.
“Driven by the commitment to build a cleaner, safer and greener tomorrow, we will continue to invest in R&D and technology to strengthen our technology infrastructure with stringent parameters and standards of testing,” he further elaborated.
LAUGFS Leisure
LAUGFS Leisure operates the award-winning Anantaya chain of luxury resorts. Combined with its unique eco-luxury concept, Anantaya Resorts & Spas offer exotic getaways for discerning travelers to indulge in star-class luxury. Nestled between the picturesque Chilaw lagoon and the breathtaking Indian Ocean, Anantaya Chilaw offers beauty and serenity with 91 luxurious rooms. Anantaya Passikudah is a 5-star Resort facing the beautiful Eastern coast, and is equipped with 55 luxury rooms adorned with its iconic architecture.
“At Anantaya, our focus is on maintaining the highest standards in the guest experience we offer, for which we have been recognized at numerous international platforms,” remarked LAUGFS Leisure Director/Chief Executive Officer, Roshan Perera. “The segregation of LAUGFS Leisure from diversified LAUGFS Gas PLC group and operating independently will create the opportunity for us to partner with an international investor with world-class expertise in the hospitality industry. This will provide greater momentum to our expansion plans and enable us to continue to amplify our service delivery standards.”
“Our medium-term plans include the completion of phase 2 of Anantaya Passikudah, which will increase the room portfolio to 100. Based on demand growth, we are also looking at possibilities of expanding Anantaya Chilaw to 120 rooms. Anantaya Waskaduwa is another exclusive project we are planning to launch together with a possible partnership with a strategic investor. This could be a unique addition to Sri Lanka’s hospitality industry and will enable us to strategically position the southern belt to attract high-end clientele,” he explained.
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