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Dhaka Monday,  Dec 6, 2021

Most listed power companies see profits rise in first quarter

Ahsan Habib:

Most listed power generation companies saw their profits rise in the July-September period of the ongoing financial year as the economy is recovering from Covid-19, according to industry people.

“The economy is rebounding after the coronavirus pandemic so power utilisation rose,” said Badrul H Khan, company secretary of United Power Generation.

For example, production at the country’s export processing zones recovered strongly and so, the company’s profits surged as well thanks to increased power demand.

“But although profitability rose in the quarter, our earnings per share fell slightly due to the effect of a subsidiary company’s dividend adjustment,” he added.

Of the nine listed power generation companies, six logged higher profits, two registered lower profits and one incurred losses during the July-September quarter.

Profits of Baraka Power, Doreen Power, GBB Power, Shahjibazar Power Generation, Baraka Patenga Power and Energypac Power Generation rose while that of Summit Power and United Power Generation dropped. Meanwhile, Khulna Power Generation incurred losses in the quarter despite being in the green a year earlier.

“The drop in net profits occurred because there was no operation of the Madanganj Power Plant (Unit 1), a 102-megawatt (MW) HFO-fired power plant, due to the expiry of our power purchase agreement (PPA),” Summit Power said in its financial report.

However, the extension process of the PPA of said plant is ongoing, it added.

Power generation companies do not seem to have much potential because of excess capacity in the industry, said Shahidul Islam, chief executive officer of VIPB Asset Management Company.

Over the past decade, the country’s power generation capacity quintupled from 4,942MW in 2009 to 25,235MW, including captive power and off-grid renewable energy, as of September this year, according to data from Bangladesh Power Development Board (BPDB).

There was almost 50 per cent overcapacity in FY2020-21, shows the data.

“So, there is a risk whether the BPDB would extend the PPAs,” Islam said.

The BPDB is the only buyer for most listed power generation companies but people can invest in the segment if they believe that the current share prices justify expected future dividends, he said.

“As the economy is rebounding, the demand for power and profitability of power companies may increase,” he added.

Meanwhile, the government has wisely cancelled further investment in coal-based power projects, said Muhammed Aziz Khan, founding chairman of Summit Power International, in its annual report for 2020-21.

On the other hand, technological advances have reduced power consumption. For example, motors have been replaced by small chips and LED bulbs by incandescent ones that provide the same output with far less electricity.

Therefore, many countries are experiencing a “false-excess” of power. Besides, the country’s inadequate transmission grids and distribution lines are creating a parallel paradox of so-called excess installed power capacity amid power cuts.

“When the world finds green technology to replace fossil fuels as a primary energy source, we need to plan for a bridge of ‘energy mix’ to meet the power demand for expected GDP growth,” Khan said.

Summit is focusing on cross-border imports of green energy at cheaper rates. This includes wind, water or solar power from India, Nepal and Bhutan as the price of LNG has soared in international markets, he added.

Shahjibazar Power Generation logged higher profit growth in the year’s first quarter with 47 per cent, followed by Doreen Power, GBB Power, Energypac Power Generation and Baraka Patenga Power.

Doreen Power said in its financial report that its profits rose by 40.85 per cent compared to the same period last year because of a significant 28.99 per cent increase in revenue and 32.63 per cent decrease in finance cost.

(The Daily Star)

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