Sri Lanka’s troubled Kalpitiya Beach Resorts project points finger at former regime
May 21, 2015 (LBO) – Sri Lanka’s Kalpitiya Beach Resort, a subsidiary of Citrus Leisure PLC, has said that the hotel project was held back due to former government incompetency to attract occupancy and build tourism infrastructure.
In 2011, Kalpitiya Beach Resort has raised 283.5 million rupees from an initial public offering stating that the funds will be utilized partly to finance a construction of a resort hotel in Kalpitiya.
Even though the company has vowed to start commercial operations of the completed hotel early this year, the SEC at a meeting held on 10th March has expressed ˜grave concerns” for not constructing a hotel within the stipulated time.
Replying to this Kalpitya resort said, the company would await the new Government’s vision and intent to implement the development plans for Kalpitiya with clear time lines, so that the Company may review the appropriate time to commence the project.
It also said, that it will not depend on Kalpitiya as a location to develop the project and looks for feasibility of an alternative location, within Sri Lanka or Maldives.
On March 20th, SEC ordered Kalpitiya Beach Resort to call an EGM for not complying with the construction work stated in its prospectus.
However the EGM which was supposed to held 08 May was postponed by another month, on a directive by SEC.
SEC said, the movewas made to enable the Company to come up with a precise direction on the future course of action on how the Company proposes to safeguard the minority shareholder interests prejudiced by the delays caused in constructing the resort hotel, Citrus Kalpitiya.
The full statement reproduced below:-
Kalpitiya Beach Resorts PLC (KBR PLC) is a subsidiary of Citrus Leisure PLC, and is one of three ambitious resort ventures undertaken by the Group.
Two of those projects, in Hikkaduwa and Waskaduwa were completed as scheduled and are now operational, resulting in the addition of 200 rooms to Sri Lanka’s tourism inventory.
The proposed venture in Kalpitiya was held back due to the government’s proposed Kalpitiya Integrated Tourism Resort project replete with tourism infrastructure and attractions not being implemented to date.
This factor has been clearly identified as an essential component and a potential risk in the prospectus issued for the Initial Public Offering of KBR PLC.
The Company has regularly made transparent disclosures regarding the postponement of the project via its Annual Reports, Annual General Meetings and disclosures to the CSE as early as 20 December 2013 (http://cse.lk/cmt/uploadAnnounceFiles/881387772263_1107.pdf).
The shareholders have been regularly updated and been fully aware of the current status.
The Company has not commenced the project as planned because the desired occupancy levels cannot be achieved if KBR PLC were the only disproportionately large operator in the area, leading to potential significant financial losses.
The company has continuously conducted credible market research with travel agents to this effect.
Moreover, at all times, the company has acted with the interest of commencing the project in a feasible manner; in fact, along with the architectural plans, all statutory approvals and permits relating to tourism, construction, environment and utilities etc., have been obtained.
Furthermore, the directors, management and senior executives of the parent company have made several efforts to attract potential partners who may assure guaranteed occupancy and access to new markets. To this effect, we have participated at several presentations, road shows and investor meetings and explored opportunities to offer uniquely marketable products at the location. These included discussions with global tour operators, specialized tourism product developers from Singapore and India, and hotel investors from Russia, Chile and East Asia, and road shows in France and Japan.
As the last disclosure was made on 20.12.2013, and as per The Securities and Exchange Commission (SEC), directive dated 20 March 2015 requesting an EGM where KBR PLC could apprise shareholders of its financial position and pass a resolution on an alternative course of action, the Company informed shareholders of the same by a circular dated 07 April 2015.
Moreover, the Company guided by the SEC, is in the process of setting out a more detailed course of action to be taken up at the EGM for shareholder approval, in the near future.
The Board of Directors added that with the new government showing positive intent to revive the Kalpitiya tourism zone, it is hopeful of working closely with the authorities and developing KBR PLC to become as successful as initially envisaged, in a timely manner.
It is also noteworthy to mention that Citrus Leisure PLC is on the verge of establishing its presence in the City of Colombo through the management of a city hotel, and is firmly dedicated to positively contributing to the tourism offering of the country.
As one of the newest entrants to the tourism market of Sri Lanka, we have made a considerable impact in a very short time.
It is deeply regrettable that Kalpitiya Beach Resorts PLC has become targeted by parties with vested interests who have gone to extraordinary lengths to damage and defame our genuine efforts.
