Sri Lanka’s LVL Energy Fund hit by soft-peg collapse
ECONOMYNEXT – Colombo-listed LVL Energy Fund Plc said it had to allocate more money to finance a foreign project after Sri Lanka’s soft-peg with the US dollar collapsed in 2018, forcing it to re-allocate more money from an earlier public fund raising.
LVL Energy had committed 3 million US dollars to LTL Energy (Pvt) Ltd, which was building a hydro power plant in Nepal (Makari Gad).
At the time the rupee cost was estimated at 465 million rupees, with the exchange rate at 155 to the US dollar.
The company had disbursed the equivalent of 409.5 million rupees leaving a 55 million rupee balance.
But the collapse of Sri Lanka’s unstable soft-peg which is called a ‘flexible exchange rate’ now forced the firm to pay out 70 million rupees.
The firm will use part of 115 million rupees originally allocated for a hydro power project in Pupulaketiya for the Nepal project.
Sri Lanka’s environmental authority had not renewed clearance for the hydro plan.
The balance 45 million rupees would be used to redeem preference shares held by DFCC Bank Plc. Shareholder approval will be sought for the change.
Currency depreciation destroys both private and public debt, depriving savers of wealth and investible capital for future job creation. Chronic also keeps nominal interest high, analysts have said. (Colombo/Aug04/2019)