Escolar Documentos
Profissional Documentos
Cultura Documentos
by
Fatima Begum
ID: 0330011
by
Fatima Begum
ID: 0330011
_________________________________
Dr. Osman Gani
Assistant Professor
School of Business
Independent University, Bangladesh
SEPTEMBER 09, 2007
Assistant Professor
School of Business
Dear Sir,
Power Sector”. I am submitting this report as the part of my internship (BBA-499A) at IDLC
Finance Limited. This report will help the organization to find out the prospect of investment
This is the first time I have done this kind of study in a complete form and I have tried my
level best to complete the study in proper way. It is true that it could have been done in better
way if there would not be the limitations due to confidentiality and sensitive issue.
I hope you will asses my report considering the limitations of the study. Your kind advice
Fatima Begum
ID: 0330011
Acknowledgement
At the very beginning, I would like thank the omnipotent Allah for giving the chance to
complete my internship and preparing the internship report. In the preparation and finish this
internship report, I acknowledge the encouragement and assistance given by a number of people
and institution. I am most grateful to IDLC Financial Limited to give me the opportunity to
complete my internship in their organization. Thus I want to mention the name of Bilkis Jahan,
the head of HR, for allowing me to do the internship in the organization. I would like to express
my gratitude to my, organization supervisor Hosam Md. Sheraj, Assistant Manager, Merchant
Banking Division; for providing me the opportunity and much needed feedback to furnish my
qualities in the real job world. I also want to show my up most respect to Mahmudul Bari,
Assistant General Manager, Merchant Banking Division; for providing me a smooth and very
gracious learning period in the organization by teaching me, literally by hand on practice.
University, Bangladesh (IUB) for providing me much needed assistance and diluting time
Finally, I would like to thank some persons who had given me appointment from their
precious time to collect related data of my report and also helped me to understand many related
matters and gave me their precious time to me more then once, they are Mahbub Murshed,
Assistant Director (Finance), Bangladesh Power Development Board (BPDB); Md. Ataur
Rahman Patwary, Deputy Maneger (Finance), Power Grid Company of Bangladesh Ltd. (PGCB);
KNM Tariqur Rashid, Executive Director, Summut Power; Md. Faridul Haq, Deputy General
Manager, Dhaka Electric Supply Company Ltd. (DESCO); Md. Nurul Huda, Company Secretary,
Dhaka Electric Supply Company Ltd. (DESCO); Tanvir Hasan Zoha, Consultant (E-
Securities Limited.
Table of Content
List of Tables I
List of Figures I
Executive Summery II
1.0 Introduction: .......................................................................................................................1
2.0 Purpose of the Study:.........................................................................................................2
3.0 Methodology: .....................................................................................................................3
3.01 Analysis Design: ......................................................................................................... 3
3.02 Analysis Instrument:................................................................................................... 3
3.03 Data Collection: .......................................................................................................... 3
3.04 Data Analysis: ............................................................................................................. 4
4.0 Limitations:.........................................................................................................................5
5.0 Background of Power Sector:............................................................................................5
6.0 Overview: ...........................................................................................................................8
7.0 Current Power Sector Structure: .................................................................................... 10
7. 01 Power Division: ....................................................................................................... 10
7.02 Energy Regulatory Commission (ECR):................................................................. 12
7.03 Power Cell ................................................................................................................. 13
7.04 EA & CEI: ................................................................................................................. 14
7.05 Bangladesh Power Development Board (BPDB) ................................................... 14
7.06 Ashuganj Power Company (APS) ........................................................................... 14
7.07 Electricity Generation Company Bangladesh (EGCB) .......................................... 15
7.08 Power Grid Company of Bangladesh (PGCB) ....................................................... 15
7.09 Dhaka Electric Supply Authority (DESA) .............................................................. 15
7.10 Dhaka Electric Supply Company (DESCO) ........................................................... 15
7.11 West Zone Power Distribution Company (WZPDC)............................................. 16
7.12 Rural Electrification Board (REB) .......................................................................... 16
7.13 Palli Bidyut Samity (PBS): ...................................................................................... 16
8.0 Government’s Vision and Policy for Power Sector:..................................................... 16
8.01 Government’s Vision:............................................................................................... 17
8.02 Policy Objective:....................................................................................................... 17
9.0 Current Power Situation: ................................................................................................ 18
9.01 Demand Forecast: ..................................................................................................... 18
9.02 Generation Capacity and Maximum Demand Served:........................................... 19
9.03 Net Generation and Capacity of Private and Public Sector: 20
9.04 Electricity Growth and Availability: ....................................................................... 21
9.05 Technology Lacking:................................................................................................ 21
9.06 Load Shedding and System Loss:............................................................................ 22
9.07 Management Inefficiency:........................................................................................ 23
9.08 Corruption Exists in Power Sector: ......................................................................... 24
9.09 Effect on Economy: .................................................................................................. 24
10.0 Government Future Plan:.............................................................................................. 27
11.0 Power Sector Reform and Restructure: ....................................................................... 28
11.01 Reform Objective:................................................................................................... 28
11.02 Components of Reform .......................................................................................... 29
12.0 Power Market Structure:............................................................................................... 30
13.0 Investment Opportunity:............................................................................................... 30
13.01 Fiscal Incentives: .................................................................................................... 31
13.02 Facilities and Incentives for Foreign Investors:.................................................... 32
13.03 Private Investment in Power Sector: ..................................................................... 33
13.04 Foreign Investment in Power Sector: .................................................................... 35
14.0 Investment Analysis:..................................................................................................... 35
14.01 Power Generation: .................................................................................................. 35
14.02 Power Generation Mix: .......................................................................................... 36
14.03 Power Generation Cost:.......................................................................................... 36
14.04 Fuel Availability: .................................................................................................... 37
14.05 Technology:............................................................................................................. 38
14.06 Analysis:.................................................................................................................. 38
15.0 Managing Finance:........................................................................................................ 39
16.0 Capital Market Performance of Power Sector: ........................................................... 40
16.01 Market Capital of Power Sector: ........................................................................... 42
16.02 Current Market Capital of Three Power Companies:........................................... 42
16.03 Dividend Distribution and Major Sponsors Three Power Sector Companies: ... 43
17.0 Participants in Capital Market:..................................................................................... 44
17.01 General Information of DESCO ............................................................................ 44
17.02 Future Prospect of Desco: ...................................................................................... 44
17.03 General Information of PGCB:.............................................................................. 47
17.04 Future Prospect of PGCB:...................................................................................... 47
17.05 General Information of Summit Power:................................................................ 50
17.06 Future Prospect of Summit Power:........................................................................ 51
18.0 Conclusion:.................................................................................................................... 52
Reference 54
Bibliography 55
I
LIST OF TABLES
2. Year wise Installed Capacity, Production Capacity and Maximum Demand Served 18
3. Segregation of Power Generation 19
4. Year wise Growth, Access and Per Capita Generation of electricity 21
5. Year wise power generation and load shedding and system loss: 21
6. Contribution to country’s GDP: 23
7. Government’s future plans: 25
8. Segregation of Power Generation Mix 27
9. Segregation of Power Generation Cost: 36
10. DSE sectoral performance – June 2007: 37
11. Position of Power and Fuel in Capital Market 41
12. Participants of Power Industry in Capital Market and Their Market Position 42
13. Dividend Distribution and Major Sponsors of Power Industry in Capital Market 43
LIST OF FIGURES
Page
Executive Summery
to alleviate poverty. Proper and enough electricity supply have a great positive impact on
our national economy as well as on GDP of the country, where GDP is one of the
important measures of the economic condition for a developing country like Bangladesh
to attract foreign investment. But Bangladesh is going through a huge power crisis for a
long time. Demand of power is very high but supply is not adequate. Only 42%
population of Bangladesh has access to electricity which is very low compared to other
developing country. This power crisis is slowing down the economic growth of the
country. Now to reduce this power crisis huge additional power generation is required
and to increases power generation huge investment is required in this Bangladesh power
sector. For this reason Bangladesh government created the environment for private and
foreign investor to invest in power generation in power sector through approving “Private
sector power generation policy” and through reforming and restructuring the power
sector. Increasing demand and very low supply of power created an investment
investment so this power sector has a huge prospect for investment in power sector. In
this report the prospect of investment in power sector in power generation has been
elaborately discussed. As power sector is a rising sector, the companies which are listed
in capital market are also doing very well and the future prospects of those companies are
also very good so investing in capital market in power sector will also be profitable. In
this report investment prospect in capital market in power sector has also been discussed.
The report will help an investor to know the prospect of investment in power sector.
1.0 Introduction:
alleviate poverty. The supply of electricity has a great impact on the national economy.
Proper and enough reliable electricity supply have a great positive impact on our GDP
and GDP is one of the key measures to understand the economy of a country. Because
when the foreign investors want to invest in any country at first they observe the
economic growth or the GDP growth rate of the country and for the developing country
like Bangladesh, investment of foreign investors is very necessary to develop the country.
generation of power is not increasing. Only 42 % of the country’s population has access
to electricity, which is very low compared to other developing countries of the world.
And per capita generation is 164 kWh which is also lower compared to the neighboring
countries. This current power crisis is slowing the pace of our GDP growth rate.
Currently, Bangladesh GDP growth rate is 6.51% which need to be increased a lot to
have a stable economy. To increase the GDP growth rate, available and reasonably priced
The main reason for the current power crisis is the demand of power is very high but
the generation capacity is very low and for that there is a huge short fall of power. Huge
upgraded and transmitted power need to distributed with a minimum system loss to
Prospect of investment in Bangladesh Power Sector 2
There is huge gap existing in Bangladesh power sector. For this reason government is
attracting foreign and private investors through vision and policy guideline, making
Bangladesh power sector are promising for private sector and foreign investors.
The growing future of any country is totally dependent upon the socio-economic
situation. Power is a very important ingredient to improve the socio economic situation.
Power sector one of the most important sectors which need a huge investment. Huge
power crises exist in Bangladesh. Demand for power is very high but supply of power is
very low. This demand supply gap has created an investment opportunity. Currently net
generated power is not enough more power need to be generated. For new generation of
power huge investment is needed in power sector. Bangladesh government alone can not
invest such a big amount in power sector. So government opened the door for private and
investing in power sector in capital market will also be very profitable. Thus the purpose
3.0 Methodology:
The study was conducted to uphold and demonstrate the investment pros and corns in
Bangladesh power sector. Thus secondary data was collected. To present the data in a
handy manner the analyst absorbed the descriptive analysis by employing descriptive
statistics. Because a Descriptive study tries to discover answers to the questions who,
what, when, where and sometimes how. The researcher attempts to describe or define a
subject, often by creating a profile of a group of problems, people, or events. Such studies
may involve the collection of data and the creation of a distribution of the number of
times the researcher observes a single event or characteristic (Cooper & Schindler, 2003).
Based on various secondary data regarding statistical facts, the thoughts and
The analyst of the current paper has used secondary data. The analyst conducted in-
depth interview with the various designated professional of the power sector in
Bangladesh. And to collect the secondary data, different books, valid web sites and
various annual reports and brochures of different company has been used.
Secondary data used in the paper has been personally collected by the analyst. The
data has been collected over phone and also by going to designated personnel work place.
The data was collected by the in-depth interview with experts, different insights, and
Prospect of investment in Bangladesh Power Sector 4
opinions. Appointments were fixed prior going to the personnel as dedicated time would
be provided to the analyst, which ensures to get the maximum information. Interviewed
Development Board (BPDB); Zahangir Azad, Assistant Maneger (Account), Power Grid
Company of Bangladesh Ltd. (PGCB); Md. Ataur Rahman Patwary, Deputy Maneger
(Finance), Power Grid Company of Bangladesh Ltd. (PGCB); KNM Tariqur Rashid,
Executive Director, Summut Power; Md. Faridul Haq, Deputy General Manager, Dhaka
Electric Supply Company Ltd. (DESCO); Md. Nurul Huda, Company Secretary, Dhaka
Electric Supply Company Ltd. (DESCO); Tanvir Hasan Zoha, Consultant (E-Governance),
Limited. Secondary data was collected from different prescribed web sites of the
Anticipated study is a descriptive study where industry of power sector has been
analyzed from the investor’s perspective. Thus various numeric projections, rules and
regulations and historic information has been provided in the paper. Based on secondary
data, various analyses have been conducted in this paper. Different statistical data has
been presented in this paper. The data has been presented in different tables and the
explanation of those tables has been provided. Again based on the secondary data, trend
analysis of different graphs has been provided to project the future. In addition the whole
analysis has been done to show the prospect of investment in Bangladesh power sector.
Prospect of investment in Bangladesh Power Sector 5
4.0 Limitations:
As most of the data were taken from the web sites, though the cross check was
conducted; still the depth of reliability varies as by the nature of web sites. For data,
interviews were taken and most of the data used in this paper are government published
data, so the verification of this data was not possible. Lastly the limited knowledge of the
analyst, who is conducting such report for the first time, has its effect on the paper.
At the very beginning the zamindar of Bhawal (Gazipur district) is known to have
been the first consumer of electricity in East Bengal. He acquired an electric generator in
the nineteenth century. A private enterprise, Octavia Steel Company took the overall
responsibility of power generation and distribution in Dhaka city and in Dhaka, electric
light was first introduced on 7th December 1901. The power generation capacity of this
company was very limited and power was supplied to only posh areas of Dhaka. In 1933,
another private company, with a name “DEVCO”, set up a power station at Paribagh and
started generation and distribution of electricity on commercial basis for the common
people. Then in 1957, the government of East Pakistan took over all private power
generation houses and distribution lines and established Power Development Board
(PDB) in 1959 as an associate of the East Pakistan Water and Power Development
Authority. It became an independent body in 1972 and it’s headquarter was in Dhaka. Its
At first BPDB used to generate transmit and distribute power. Then Bangladesh
distribute power to mainly the urban areas except the metropolitan city of Dhaka. The
Authority (DESA). Later, DESA went through lots of controversies and corruption, so
government created a new subsidiary named Dhaka Electric Supply Company Ltd.
http://banglapedia.search.com.bd/HT/P_0241.htm )
A well planned and organized rural electrification program did not exist till 1970s.
One of our main earning sources is agriculture and for irrigation purpose power is very
much needed. Bangladesh was being developed after independence and development
The firms studied overall related issues in depth and gave recommendation for a
sustainable and viable rural electrification program. Then in late 1970s Government of
Bangladesh (GOB) created Rural Electrification Board (REB) through REB ordinance LI
electrification program the Board established Palli Bidyut Samities (PBS) based on the
PBS at present, the rural people are under coverage of electrification, which created new
job opportunities and access to electronic media. This also improved the standard of rural
people’s living. Electricity is now available to operate 86,766 irrigation pumps, 62,875
small and cottage industry units, 373,119 commercial setups and 8,733 other
rural area. The main reason of REB’s success was the introduction of the Performance
Target Agreement (PTA), which encouraged rural electric societies to improve their
But Bangladesh power demand was much higher then the supply, so the necessity was
felt to generate more power. Government owned power plants were not enough to fulfill
the power demand. But additional generation capacity required huge investment so
generation and more importantly to increase power supply to alleviate the shortage.
In 1996, the independent power producers (IPP) started coming to generate power.
REB signed contracts with Independent Power Producers (IPPs) to purchase power from
them. IPPs came in power market under the condition given by government that they will
be run on build-own-operate (BOO) basis. All the produced power of IPPs is purchased
by REB. Later small power producers (SPP) came in power market to generate power
and to serve those areas which were not electrified. SPPs own generation plant of 9.9
MW to 30 MW. But some remote areas and isolated islands are still not covered by
Prospect of investment in Bangladesh Power Sector 8
national grid because of the maintenance of the National Grid and transportation of fuel is
very highly expensive, difficult and risky. This areas are being Electrifying with
renewable energy. REB has taken initiatives to use Solar Photovoltaic Systems (Solar
PV) for producing electricity. For the first time in Bangladesh BPDB implemented a pilot
project of 0.09 MW capacity of the Grid Connected Wind Energy (GCWE). BPDB also
established a Wind Resource Assessment Station (WRAS) in Cox’s Bazar. BPDB also
Later based on necessity many new entities entered in power sector and in between
6.0 Overview:
Till date in Bangladesh the power sector has been under the authority of government
directly or indirectly. The power sector in Bangladesh has been managed, facilitated and
regularized by the government in such a way that delivers the flourished outcome.
Generation
Transmission
Distribution
Samities (PBS)
Power Division
ERC (Ministry of Power, Energy and Mineral
Resource)
Transmission PGCB
7. 01 Power Division:
The Government created power division and gave it the responsibilities to observe the
following matters:
• Administration of Electricity act, rules made there under and allied matters.
Adviser.
o Power Cell.
• Fees in respect of the subjects allotted to this Division except fees taken in courts.
Prospect of investment in Bangladesh Power Sector 12
agreement etc.
The National Energy Policy was prepared in 1995 and adopted in 1996. This policy
separated power sector’s generation, transmission, and distribution entities. Then later
Electricity Regulatory Commission Act 2003 (Act No. 13 of 2003) was passed in the
parliament in March 2003 to regulate electricity gas and petroleum sector. The Energy
Regulatory commission, (ERC) was established and started functioning under Electricity
rules and regulation to ensure transparency in the management, operation and tariff
determination in electricity, gas and petroleum sector. This commission will protect
• Frame codes and standards and make enforcement of those to ensure quality of
service.
• Resolves dispute between licensees and between licensees and consumer and refer
• Promote competition.
Power Cell has been created by the government under Power Division, Ministry of
Power, Energy & Mineral Resources under “TA for Implementation of Bangladesh
power sector reform”. Power cell was created in 1995 to design, facilitate, and drive
reform measures. The objectives of the reform program can be stated as (not limited to):
• To structure financial & business plan of the existing & emerging entities.
utilities.
• To develop & Implement the centrally well designed MIS & IT system of power
sector.
Prospect of investment in Bangladesh Power Sector 14
• To develop the power sector master plan incorporating the updated data.
The office of the Electrical Advisor and Chief Electrical Inspector has been
established under section 36 of the Electricity Act 1910. EA & CEI office performs the
responsible to distribute power mainly urban areas except Metropolitan City of Dhaka.
There is lots of Independent Power Producers (IPP) who generate and sell power to
BPDB. BPDB's retail sale accounts for about 40% of total retail sales.
was created in 2002. The installed generation capacity of APS is 728 MW. APS generate
power through comprising steam, combined cycle and gas turbine generating unit. The
Prospect of investment in Bangladesh Power Sector 15
gross energy generation was 3387 Gwh during 2003, which was about 25% of total
PGCB was established under the Company's Act, 1994. It is a subsidiary of BPDB.
PGCB is responsible for operation the grid network of 230kV and 132kV system. PGCB
is 100% responsible for power transmission. The company has a massive program to
build new facilities in the coming years including transmission lines and sub-stations, for
mass departure of power with the objective to help electrify more new villages and towns
adjustment area. It purchases power from BPDB at 132 kV. DESA's retail sale accounts
responsible for distribution of electricity in Mirpur, Gulshan, Baridhara and Uttara area of
BPDB’s one of the subsidiary distribution company is WZPDC. WDPDC was created
under company act 1994. The company starts functioning since July 2003. The Company
http://www.powerdivision.gov.bd/ )
REB is responsible for distribution of electricity in rural areas through a system of co-
operatives known as Palli Biddyut Samities (PBS). It purchases power from BPDB and
different IPPs and SPPs at 33 kV. REB's retail sale accounts for about 38% 0f total retail
national sales. Sixty seven (70) PBS's are operating at present in rural areas. REB
electrified 46640 numbers of villages and they have 61 numbers of districts under their
Palli Bidyut Samity (PBS) is a consumer owned entity organized on the basic
principles of Co-operative for distribution of electric power to its members and other
http://www.reb.gov.bd/about_reb.htm )
The vision is the first step of any project. If the vision has been projected through the
right path, the implementation will become more attainable. As a sole owner of the
regulation of the power sector, Bangladesh government had to go for a feasible vision of
Prospect of investment in Bangladesh Power Sector 17
this sector to ensure that it leads a flawless result. Thus the Vision statement and policy
In order to realize the vision, the Government has set a number of objectives for the
• Making the power sector financially viable and able to facilitate economic
growth.
• Using natural gas as the primary fuel for electricity generation and exploring the
earnings.
• Ensuring reasonable and affordable price for electricity by pursuing least cost
options.
Prospect of investment in Bangladesh Power Sector 18
At present Bangladesh is in huge power crisis. High demand and less supply of power
technology lacking etc are some reasons behind this current power situation. This current
As per the Power System Master Plan (PSMP) of 1995 demand forecast is given
bellow:
Table1
Power demand forecast
Fiscal Year Demand Forecast MW
2004 4256
2005 4597
2006 4967
2007 5368
2008 5802
2009 6271
2010 6779
2011 7311
2012 7887
2013 8508
2014 9180
2015 9907
Source: Bangladesh Power Development Board. (Demand forecast, retrieved from,
http://www.bpdb.gov.bd/plan_gen.htm
Prospect of investment in Bangladesh Power Sector 19
It can be observed that demand is increasing on an average around 8% every year. But
now it has been observed that demand of electricity is increasing more than, that was
forecasted. For an example, demand of 5368 MW was forecasted for the year 2007 but
topped the chart of the problems of our country. Demand has gradually increased over
time but compared to that the amount of demand served is very low due to low power
generation. Demand is more then which was forecast. Professionals say in year 2006
peak demand of power was about 6000 MW (more then forecasted in PSMP-1995) but
against that maximum demand was served only 3587 MW. Because sufficient
production capacity were not been added. Moreover compared to current installed
production capacity, dependable production capacity is very low. A table is given below:
Table 2
Year wise Installed Capacity, Production Capacity and Maximum Demand Served
Installed Production Dependable Production Maximum Demand
Financial Year
Capacity (MW) Capacity (MW) Served (MW)
1995-96 2908 2105 2047
1996-97 2908 2148 2114
1997-98 3091 2320 2136
1998-99 3611 2850 2449
1999-00 3711 2665 2665
2000-01 4005 3033 3033
2001-02 4230 3300 3218
2002-03 4710 3600 3458
2003-04 4710 3700 3622
2004-05 5025 3900 3751
2005-06 5275 4150 3812
2006-07 ( Dec, 06) 5275 4150 3587
Source: Bangladesh Economic Review, 2007
Prospect of investment in Bangladesh Power Sector 20
In financial year 2005-2006 dependable production capacity was only 78% of installed
production capacity which is very low and only 91% of production capacity was served
against maximum demand which was only 3812 MW. Not only that year, for the last 10
years production capacity was 72% to 78% of installed capacity which is resulting low
generation of electricity. Installed capacity is also very low to produce sufficient power to
meet the power demand. Power plant efficiency is negatively related with the age of
power plant. The more the power plant gets older its efficiency decreases. Most of the
power plants owned by BPDB are 20 to 30 years old. Some of the power plants are 50
years even more then 50 years old. Production capacity of these power plants are less
installed capacity. Production capacity is decreasing day by day but to supplement this
trend new capacity installed are not sufficient. On the other hand power demand is
capacity and increasing demand are responsible for current power crisis. There is about
Many IPPs and SPPs are doing fantastic job in generating power and adding good
amount of power to national grid. Private sector generates power and sells it to BPDB.
Almost all power plants of Private sector generate 100% of its installed capacity. In FY
2006-2007 installed capacity of public sector was 75.55% and private sector was 24.45%
and in same year public sector generated 65.24% and private sector generated 34.76% of
total generated power. Net generation was 11,503 kWh, here public sector generated
Table 3
Segregation of Power Generation
Year 2007 Public sector Private sector
Production
75.55% 24.45%
Capacity
Net Generation 65.24% 34.76%
Source: Bangladesh Economic Review, 2007
demand, supply is inadequate. Only 42% of the total population has access to electricity
which is very low compared to other developing country. Per capita generation is only
141 kWh which is also very low compared to other neighbor countries. Other neighbor
excellence, like India has per capita generation of 473 kWh, Pakistan has 431kWh and
Table 4
Year wise Growth, Access and Per Capita Generation of electricity
2000- 2001- 2002- 2003- 2004- 2005-
Item
2001 2002 2003 2004 2005 2006
Growth of electricity % 7.6 7.78 7.29 9.19 8.54 7.45
Access to electricity % 25 30 32 35 38 42
Per capita generation
129 136 144 155 158 141
(kWh)
Source: Data Book, Power Cell, 2006
required in generation system, transmission system and distribution system for more
efficiency. Technology inefficiency is one of the reasons for low generation capacity.
transmission and distribution system is resulting system loss. Because of system loss a
junk amount of power is being lost from the net generation. There are also other technical
problems like leakage in transmission line and distribution line, as well as gas
Significant load shedding due to lack of generation occurred in each of the historical
years. As maximum amount of produced power are being provided to the main load
centers like to industrial and commercial areas to keep the economy run smoothly and
deficit of electricity are being passed to the domestic areas and domestic areas are under
huge load shedding. Dhaka alone has around half of the customer of electricity as it is
one of the pick lode centers. Another load center is east zone (Chittagong) for
commercial use. Still huge load shedding accurse in industrials and commercial areas.
Power generation is increasing but at the same time load shedding is also increasing.
power. Hugh power theft was also a reason for the load shedding.
Another reason for power shortage is system loss. Because of system loss a substantial
amount of power are being lost from the net generation. System loss accrues at the time
of transmission and distribution. System loss of a weak power plant is higher then strong
power system. Total (transmission and distribution) standard system loss of a weak
power system is 16.5% and for strong power system is 8.75. Though system loss
decreased year to year, still high system loss exist in power sector. In 2006 system loss
was 20.97% which is much higher then standard system loss of a weak power system.
Prospect of investment in Bangladesh Power Sector 23
Table 5
Year wise power generation and load shedding and system loss:
Load Shedding
Financial year Actual generation (MW) System Loss (%)
(MW)
1996 2087 545 31.20
1997 2114 674 30.40
1998 2136 711 31.30
1999 2449 774 31.80
2000 2665 536 31.60
2001 3033 663 28.47
2002 3248 367 27.97
2003 3458 468 25.69
2004 3622 694 24.49
2005 3751 770 22.79
2006 up to
3812 891 20.97
Mar,06
Source: Power Sector Data Book, Power Cell, (2006)
power sector for the absence of proper guide line. Existing guide lines are not being
followed. Different foreign companies are interested for investing in power sector of
Bangladesh. Foreign companies bid for different tenders but due to lack of efficiency
BPDB and other public companies till the tenders get approved tender cost goes up then
those investors don’t have any interest for the tender. Many tenders were stopped at the
mid stage because of all these situations. Then process of bidding restarts. For these
reasons many foreign bidders are losing their interest to bid for Bangladesh power sector.
People of Bangladesh are suffering for huge power crisis at this stage additional power
need to be added in national grid as soon as possible but for public sector slow processes
One of the major reasons of today’s power problem is corruption. Corruption is at all
level from top management to operational level. Management is also very poor and long
term and short term plans are not strategically managed. Lack of commitment is an
additional problem. It has been seen that, a foreign bidder bid for a project at a certain
cost but for the power sector management irregularities executing on the project gets late
and due to inflation the cost of the project gets high and then the bidder don’t have any
more interest on the project. Inefficiency exists in linkage between project plan and
financing plan. Public sector employees also lose their commitment to their work because
of top level corruption. For this corruption DESA ran at loss for many years. DESA went
through lots of controversies. Many engineers and professionals who are committed to
their work can not successfully work on their business plan because political persons
make many changes on the business plan for their personal benefit. Problem multiplies
because of inefficient linkage between project plans and financing plans. Small power
plants are cost effective for captive consumption. But sponsors face lots of problem to get
alleviate poverty. This power crisis has been the number one problem of Bangladesh.
This power short fall is affecting our economy. Economy of any country is highly
dependent on power supply. Industrial and commercial activities are being interrupted for
this power crisis. At present electricity coverage in Bangladesh is only 42% and per
capita electricity consumption is about 140 kWh which is one of the lowest in the World.
Prospect of investment in Bangladesh Power Sector 25
Table 6
Contribution to country’s GDP:
2001- 2002- 2003- 2004- 2005- 2006-
Particulars
2002 2003 2004 2005 2006 2007
Share of electricity on GDP
1.27 1.3 1.34 1.37 1.38 1.35
%
Growth of electricity sub-
7.78 7.29 9.19 8.54 7.45 4.52
station %
GDP growth rate% 4.42 5.26 6.27 5.96 6.63 6.51
Source: Bangladesh Economic Review, 2007
the same time urbanization is taking place to a great extent so the share of electricity on
GDP is growing with the growth of electricity as well as with the GDP growth rate. But
expansion of electricity sub-stations is near to the ground then required and this low
growth rate is affecting GDP growth rate. Low growth rate of electricity is slowing down
GDP growth. Another significant point is growth in the urban population considerably
In Bangladesh, 51% of total man power is involved in agriculture. For irrigation and
being interrupted for insufficient power supply. And as a result the cost of production
rises and the timing of the irrigation hampers also. Again when the fuel is used instead of
electricity, the extra cost is charged to the final user and again the farmers are having less
margin. As the prices are high, the cumulative savings go down in the households as they
have to spend more and their fewer saving generates less investment and thus it had its
Not only agriculture industrial and commercial sector are also incurring huge loss for
power short fall or load shedding. The daily commutation is hampered as the electricity is
having mishaps on its production. Thus to cover up, commercial sector have depend on
Prospect of investment in Bangladesh Power Sector 26
the alternatives and again the cost goes high. This electricity also hampers the living
condition of the labors as the alternative power sources does not permit to have normal
working condition as it would have with electricity thus it reduces the productivity of the
employees.
To manage load of the power, caretaker government ordered all commercial and
shopping malls and grossary shops after caretaker government order. Production level is
decreasing in garments and factories. Small to big businessmen, all are incurring huge
Load shedding is also interrupting school, collage university students. The shortfall in
the power sector is hampering the normal practice of our educational sector. The students
of today not only have to deal with the books they also had to plan their time of studying
while matching with the availability with the electricity. Thus it also hampers the broader
Many cottage industries and SMEs are increasing and creating new job opportunities
and our economy is having a positive out come. This improvement also demands fluent
power supply.
The effect of electricity has a huge impact to play on the economy of a country like
Bangladesh, the improvement on electricity will reduce the general cost of production,
from agriculture to the manufacturing sector, thus the normal households will be allowed
to have better savings, the country will have more cash inflow to the economy as those
collective savings will be invested, thus the investment will provide more jobs and the
To deal with the current power crisis, to realize the vision of the Government to
provide electricity to most of the population at reasonable price and to achieve overall
(up to 2007), medium-term (up to 2012) and long-term (up to 2020) development plans.
The plans had been developed based on techno-economic analysis and least-cost
Table 7
Government’s future plans:
Item 2005-2007 2008-2012 2013-2020
Installed capacity, MW 6441 9666 17765
Peak demand, MW 5368 7887 14600
Net generation, MKWh 26651 39157 76545
Transmission line, Km 4898 7180 8396
Capacity of grid S/S, MVA
230/ 132 KV 5950 11575 19075
132/ 33 KV 9642 17920 27367
Distribution line, Km 266375 345530 477558
No. of consumers, million 9.03 12.75 20.76
Per capita generation, KWh 190 260 450
Access to electricity 47% 65% 100%
Investment requirement (billion Tk) 115 307 575
Source: Power Division (Future development plan, retrieved from
http://www.powerdivision.gov.bd/index.php?page_id=222 )
Government has taken steps to create conducive environment for Private Sector
Government alone can not fulfill this plan. Huge investment is required in power
sector. To mobilize finance government seek for foreign and private investment in power
sector. Bangladesh Government reformed and restructured power sector time to time to
create an environment and room of investment for private and foreign investors.
Government’s reform objective and components of reform has been stated below which
was collected from (“3-Year Road Map for Power Sector Reform (Year 2007-2009)”
GOB issued its Vision and Policy Statement on Power Sector Reforms in February,
• Bringing the entire country under electricity service by the year 2020 in phases.
• Making the power sector financially viable and able to facilitate economic growth
• Ensuring reasonable and affordable price for electricity by pursuing least cost
options.
separate services and creation of BPDB holding company as a head body where
• Introduction of cost reflective tariff for financial viability of the utilities and
framework.
• Capacity building and HRD for sector entities and corporative bodies.
Prospect of investment in Bangladesh Power Sector 30
At present power market has been designed as a single buyer model. BPDB is
functioning as a single buyer. Single buyer purchases all the power from generators and
Multi buyer and competitive pool may be adopted when the market becomes mature and
stable.
Power sector is a capital intensive industry. Huge investment is required to serve the
Private sector participation will help to mobilize finance. Only 42% of populations in
requirement for Bangladesh. So for foreign and private sector opportunities exist in
developing new plants (barge-mounted and other, large, small and mini), constructing
supplying a variety of support services. Investment opportunities also exist under build-
Sector Power Generation policy of Bangladesh” in October 1996. This policy encouraged
privet sector to invest in power sector. Bangladesh government has created a good
investment climate for foreign and private investors through reform and restructure in
partnership in power sector. Investment is also well protected by law and practice in
Prospect of investment in Bangladesh Power Sector 31
generation policy for private and foreign investors to invest in power sector.
Fiscal incentives stated in “Private sector power generation policy of Bangladesh (revised
• The private power companies shall be exempt from corporate income tax for a
period of 15 years.
• The companies will be allowed to import plant and equipment and spare parts up
to a maximum of ten percent (10%) of the original value of total plant and
payment of customs duties, VAT (Value Added Tax) and any other surcharges as
• Exemption from income tax in Bangladesh for foreign lenders to such companies.
• The foreign investors will be free to enter into joint ventures but this is optional
• Private power companies will be allowed to buy insurance of their choice as per
• The Instruments and Deeds required to be registered under local regulations will
• Power generation has been declared as an industry and the companies are eligible
• The private parties may raise local and foreign finance in accordance with
(BOI).
plants.
The following facilities and incentives would be provided to private power producers:
• Tax exemption on capital gains from transfer of shares by the investing company.
agreements.
• Exemption of income tax for up to three years for the expatriate personnel
facilities for repatriation of their savings and retirement benefits at the time of
their return.
and employees.
investors.
current account.
Huge demand gap created investment opportunities in power sector and government
Bangladesh” in October 1996. This policy encouraged privet sector to invest in power
sector. With the name of Independent Power Producer (IPP) private sector started
generating power. To increase small power generation Government also adopted a “Small
Power Generation Policy”. This policy encourages small local generation projects to
server electricity in under served areas. Inviting private sector and allowing to setup such
a small power plants has been proved to be an effective solution to manage the power
Prospect of investment in Bangladesh Power Sector 34
crisis with in a very short time. Because, such small plants need very low investment and
different places to help to overcome power crisis situation. Independent power producers
Producer (SPP).
Under the policy guideline it was stated that entrepreneurs have to take license from
the Electricity Regulatory Commission (ERC) before setting up any power plants in any
place of the country. It was also approved that, the government will buy electricity from
private power plant through mutual agreement. IPP’s projects will be implemented on
Build-own-operate (BOO) basis. BOO projects may involve limited resource financing
and funds will be raised with out guarantee of repayment. Minimum requirement of
There are seven IPP they are: Khulna Power Company Ltd.(KPCL) of 110 MW,
Baghabari, WESTMONT of 90 MW, NEPC, Haripur of 110 MW, Rural Power Co. Ltd.
(RPCL) of 140 MW, AES, Haripur of 360 MW, AES, Meghnaghat of 450 MW, Summit
Power Co. Ltd of 70 MW all together these IPPs are contributing 1330 MW in net
generation of power. There are five small power producer those are M/S Meghna Energy
Ltd of 9.9 MW, M/S Rahim Energy Ltd of 30 MW, M/S Surma Energy Ltd of 30 MW,
M/S Amirate Power Co. Ltd of 10 MW, M/S Unique Power Plant Ltd of 10.8 MW and
these SPPs are contributing 90.7 MW to the net generation. (Power Cell, Bangladesh
Lots of foreign investors have invested in Bangladesh power sector and there are also
many foreign investors who are interested to invest in Bangladesh power sector. Energy
sector is the largest recipient of all foreign investment in Bangladesh. Foreign investors
bid for tenders offered by BPDB and the lowest bidder gets the tender. Recently, Dhabi
Group of United Arab Emirates, Tata Group of India showed their interest to invest in
power. Till now Bangladesh government allowed fully private sector investment for
Bangladesh power sector, as main problem in power sector is low power generation,
enough transmission and distribution line is available now. Many private IPPs and SPPs
are doing profitable business by generating power, as Bangladesh has huge power
demand.
A power plant generally set up close to the load center to lower the transmission cost.
Transmission of fuel is also a huge cost so setting the power plant close to fuel is also
necessary. So a cost benefit analysis needs to be done before setting up a power plant. A
power plant needs to be set up beside the river, for cooling the plant. A sound, safe place
is also a prerequisite. Generation plant near the peak demand is also needed to minimize
Prospect of investment in Bangladesh Power Sector 36
the transmission cost. So factors such as expense and availability of fuel, cooling water,
transportation of heavy equipment, proximately to grid network and load center etc are
considered for plant setting. Bangladesh has favorable environment for power generation.
Power is generated from different types of power plants and transmitted through
national grid. Most of the power plants are gas fired in Bangladesh. Mainly gas and some
percentage of hydro, liquid fuel, and coal are being used as fuel to generate power. As in
Bangladesh gas is available and cheaper then other materials of generating power.
Table 8
Segregation of Power Generation Mix
Fuel type 2004-05 2005-06 2006-07
Gas 91% 86% 81.53%
Hydro 2% 3% 4.06%
Liquid fuel 7% 8% 9.74%
Cole - 3% 4.74%
Source: Bangladesh economic review, 2007
Depending on different region other materials are also being preferred to generate
power. Like, in west side gas is not very available so most of the liquid fuel is being used
in west side and as gas is more available in east side so most of the plants are gas fired.
Gas as a fuel is cheaper but efficiency level is a bit low on the other hand imported liquid
fuel is expensive but its efficiency level is comparatively high. One year ago coal was not
being used as fuel for generating power but Bangladesh has huge prospect on coal.
Power generation cost depends upon the power plant type, fuel type and source of
finance. On an average generation cost per kilo watt calculated by BPDB is given below:
Prospect of investment in Bangladesh Power Sector 37
Table 9
Segregation of Power Generation Cost:
Power generation cost using hydro power is lowest and generation cost using liquid
fuel is highest. Generation cost using liquid fuel is four to five time higher then
generation cost using other type of fuel. Bangladesh exports liquid fuel different
countries from the four types of fuel and the other three types of fuel are available in
Bangladesh.
Gas: Bangladesh has sufficient gas reserve, more exploration and development is
needed. Bangladesh explored 23 gas fields. Huge amount of gas is reserved in those gas
fields. Many foreign companies exploring Bangladesh gas reserve and many other
foreign companies are interested to for exploration. As exploration proceeds there will be
Coal: There is also enough coal to produce power but only five coal basins are been
source of energy to produce power. Coal can be a very cost effective fuel to generate
power. Barapukuria Coal Mine in the north-west side of Bangladesh is supplying good
amount of coal for Barapukuria power plant. Phulbaria Coal Project mines will provide
adequate coal supply for power generation. The Geological Survey of Bangladesh (GSB)
Prospect of investment in Bangladesh Power Sector 38
is responsible for locating coal resources present in Bangladesh. Eminent geologist and
former chief of GSB, Khurshid Alam said, 13 coal basins was identified in the northern
region of the country. Experts say 5,000 MW of electricity could be generated for upto 90
years by coal.
fuel for generating power and exports the other 50% of liquid fuel. Reserved liquid fuel
of Bangladesh is not enough moreover it is very expensive to generate power from liquid
fuel.
Hydro power: Hydro power is not very available in Bangladesh. Currently used
14.05 Technology:
Power generation plants are not so technically efficient. But private power producers
power generation efficiency. By using modern technology, setting up a power plant with
14.06 Analysis:
In Bangladesh, still there are many suitable sites for generating power near the rivers.
All kind of power plants need to be set up near the river and Bangladesh is very lucky in
that case, as Bangladesh is full of rivers and it is called “the land of river”. As power
generation cost through liquid fuel is very high so lowering the percentage of using liquid
fuel, usage of gas, coal and hydro power can be increased. From the generation mix it can
be observed that only 4.74% of power is generated through coal but 9.74% of power is
generated through liquid fuel where liquid fuel is very expensive and generation cost of
Prospect of investment in Bangladesh Power Sector 39
power using liquid fuel is very high. Percentage of producing power through liquid fuel
can be reduced by increasing generation of power through coal. Bangladesh has only one
coal power plant at Barapukuria. A coal power plant at Phulbaria will be set up after coal
mining. Some more coal power plant can be set up near the coal plant. Increasing the
percentage of using coal for power generation will also decrease the generation pressure
Bangladesh has enough reserve of gas and coal, also a favorable environment for
generating power. There are also some new sites which can be explored and can be
invented as very cost effective sites for power generation. Technological improvement
will also increase efficiency in generation and transmission. So by setting up new power
plants and by replacing old power plants from the existing sites, huge additional power
can be produced and can be add to the national grid and private sector can make good
profit.
Energy sector is the largest recipient of all foreign investment in Bangladesh. In the
year 2005, 3.2% of Foreign Direct Investment was provided to power sector which was
27.2 million of U.S doller. Asian Development Bank (ADB) is also providing huge
amount of lone to Bangladesh Bank (BB) for power sector every year and Bangladesh
Bank provides lone to private power generation companies like IPPs and SPPs. Many
private commercial banks are giving lone to many IPPs and SPPs. Infrastructure
operation, ownership and maintenance of them. IDCOL provides long-term senior and
subordinate debt financing for viable infrastructure projects in the private sector. It
finances up to 40% of the total project costs. So managing funds will not be a problem to
invest in power sector, more over power sector always gets some priority every where.
Bangladesh capital market had a tremendous growth from last year and also has a
people are feeling risk free to invest in capital market. Both foreign and local investors
are taking part in trading of securities in wide scale. As a result, both turnover and market
improving price of stocks are also increasing as well as new companies are also being
In capital market, power sector is increasing day by day and this sector is always on
investor’s concentration. In power sector there are three companies and price of these
three companies are increasing at an increasing rate. As to meet the power demand and to
over come from the current power crisis many initiatives and development plans have
been taken and power sector in improving tremendously and investors are being
interested to invest in power sector. In capital market Fuel and power has second highest
percentage of total market capital which is 11.69%. Market capital of this sector
Table 10
DSE sectoral performance – June 2007:
% of total Mkt % of total Mkt
sector June May
Cap Cap
Financial Sector
Banks 231,127.95 56.16% 206,300.70 54.39%
Insurance 12,023.45 2.92% 9,714.01 2.56%
Investment 5,327.66 1.29% 4,938.41 1.30%
Total 248,479.06 60.38% 220,953.12 58.25%
Manufacturing
Foods 6,764.53 1.64% 6,622.30 1.75%
Pharmaceuticals 37,901.81 9.21% 36,194.37 9.54%
Textile 10,961.71 2.66% 10,197.37 2.69%
Engineering 10,469.52 2.54% 10,207.28 2.69%
Ceramics 595.36 0.14% 608.48 0.16%
Tannery 3,325.50 0.81% 3,118.93 0.82%
Paper & Printing 271.79 0.07% 272.09 0.07%
Jute 142.4 0.03% 137.6 0.04%
Cement 30,593.00 7.43% 31,895.71 8.41%
Total 101,025.62 24.55% 99,254.13 26.17%
Service & Miscellaneous
Fuel & Power 48,099.58 11.69% 45,418.66 11.97%
Service & Real
Estate 1,828.29 0.44% 1,811.50 0.48%
IT 2,251.24 0.55% 2,117.13 0.56%
Miscellaneous 9,863.19 2.40% 9,737.68 2.57%
Total 62,042.30 15.08% 59,084.97 15.58%
Total
Prospect of investment in 411,546.98
Bangladesh Power Sector 100.00% 379,292.22 100.00%3
Source: Dhaka stock exchange, Monthly review, June 2007.
Prospect of investment in Bangladesh Power Sector 42
Table 11
Position of Power and Fuel in Capital Market:
Sector Till August-2007 % of Market Capital
Power 41561.34 86.41%
Fuel 6538.24 13.59%
Total Fuel and Power 48099.58 100%
Fuel and power has BDT 48099.58 million of market capital. Out of fuel and power
sector market capital, individually power sector has BDT 41561.34 million of market
capital which is 86.41% of total fuel and power sector market capital.
There are three listed companies of power sector in capital market. Those are:
Distribution Company.
transmission company.
These companies have huge growth prospect. Stock price of this companies are
increasing at an increasing rate. Power sector has always been the focus of investors. As
power sector is improving, so these companies are getting new projects and also getting
huge amount of foreign investment which will increase net profit of these companies and
stock price will increase. So investors are investing in power sector, as they are finding
Prospect of investment in Bangladesh Power Sector 43
this sector almost risk free. As Bangladesh power sector will improve and investing in
Table 12
Participants of Power Industry in Capital Market and Their Market Position:
No of Share Market % of Market
Institution Market Cap.
Outstanding Price as on Cap in power
Name (BDT mn)
(Dividend Adjusted) 15.08.07 sector.
DESCO 12,711,940 978 12,432.28 28.10%
Power Grid 36,435,810 532.75 19,411.18 43.88%
Summit Power 8,580,000 1,445.00 12,398.10 28.02%
Total 57,727,750 44,241.56 100.00%
16.03 Dividend Distribution and Major Sponsors Three Power Sector Companies:
DESCO has 12711940 number of shares outstanding from these government has
9533955 number of shares which is 75% and public has 3177985 number of shares which
Power Grid has 36,435,810 numbers of shares outstanding and from these, government
has 75% and public has 25% which is 27,326,858 and 9,108,953 numbers of shares
Table 13
Dividend Distribution and Major Sponsors of Power Industry in Capital Market:
Dividend Distribution
Company Major Sponsors (%)
(2006-07)
Cash Bonus Right Gen.
Director Institution Foreign Govt.
Name (%) (%) (%) Public
DESCO 20% - - 25 - - 75
Power
Grid 10% - - - 25 - - 75
Summit
Power - 20% - 64 36 - - -
Source: Dhaka stock exchange, Monthly review, June 2007.
Summit Power has declared 20 % bonus share in year 2007. So after adjusting 20% of
bonus share summit power has 8,580,000 number of share outstanding. As it is a private
Prospect of investment in Bangladesh Power Sector 44
company so board of directors of this company has 64% of outstanding share which is
5,491,200 numbers of share and public has 36% of outstanding share which is 3,088,800
number of share.
The participation in capital market by the power sector industries has opened a door
for the general people particularly for the medium and small investors and to facilitate
them with the current market position and future prospect, general information of the
responsible for distribution of electricity in Mirpur, Gulshan, Baridhara and Uttara area of
Metropolitan City of Dhaka. DESCO became a listed company in year 2006 with a face
value of 100 Taka. (DESCO, annual report, 2006) In 2007 price of this share highest
reached to 1080 taka. Now till August its price range is around 950-990 Taka. In year
2005-06 EPS was 45.52. Growth prospect of DESCO is very high and this company is
improving tremendously. They are working on some new projects for expansion and
ADB also providing lone for technical improvement. In future price can be higher based
Half Yearly net profit of DESCO was Tk 450 million (end of 2006), with an EPS of
Tk. 35. Roughly, year end EPS on June 2007 is expected to be Tk. 70. However, EPS
DESCO incurred Tk. 200 million exchange loss because of currency devaluation
against its U$D 43 million ADB loan, last year. However, as their last year calculated
exchange rate is Tk. 69.72, there is a possibility that exchange rate will remain below Tk.
69.72 in June 2007, because of the current demand supply scenario. Thus, there is a
possibility of exchange gain instead of loss. Even if DESCO will not incur exchange loss
of Tk. 200 million this year, comparing to the last year an extra EPS of Tk.15 will be
added with each share in addition to the normal profit. This is a significant profitability
expected to increase its net profit by 25% by the next financial year. Previously, DESCO
was distributing 400MW electricity. For the inclusion of TONGI, distribution demand
profit margin in the TONGI area is more than twice comparing to the commercial and
residential consumption. For example, per unit gross profit margin for TONGI area is Tk.
3.50 where else per unit average profit margin in other distribution area is Tk. 1.60.
14% by the end of this financial year. 1% reduction of system loss contributes Tk. 75
The company has signed a loan Agreement with the ADB on 28.06.07. Accordingly,
DESCO will receive USD 100,170,000 as loan bearing an interest rate of 5.5% per
including a grace period of 5 years. The proceeds of the loan will be applied to,
Prospect of investment in Bangladesh Power Sector 46
distribution system in Gulshan Circle including Tongi Sales & Distribution divisions.
So it can be expect that the EPS of DESCO will be around Tk. 80 for the year ended
in June, 2007. Then the price will go up from the current price and it will be proved to be
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From the graph it can be observed that in September 2006 the price of the stock of
DESCO was around 500 Taka. Then in February after declaration of half yearly EPS the
price went up and reached at around 700 Taka then the price of the stock gradually
increased and now its price is 1050 Taka. As the company has good growth prospect and
the company is improving so the stock price is also increasing and based on their future
PGCB was established under the Company's Act, 1994. It is a subsidiary of BPDB.
PGCB is responsible for operation the grid network of 230kV and 132kV system. PGCB
is 100% responsible for power transmission. (PGCB, annual report, 2006) The company
has a massive program to build new facilities in the coming years including transmission
lines and sub-stations, for mass departure of power with the objective to help electrify
more new villages and towns of the country. The main business of the company is to
opportunity of the company because of its monopoly in electricity transmission and only
42% of the population has access to electricity. PGCB has no upcoming threats.
PGCB became a listed company in year 2006 with a face value of 100 Taka. In 2007
price of this share highest reached to 640 Taka. Now till August its price range is around
650-600 Taka. In year 2006 EPS was 17.01. Growth prospect of PGCB is very high and
this company is improving tremendously. They are working on some new projects for
expansion and ADB also providing lone for technical improvement. In future price can be
higher based on some future prospect. So investing in this share will be profitable in
the highest government body that examines, appraises and finally approves all
power plants and reconstructing of existing two. Besides, government also taking
initiatives to encourage setting up of independent power plants and find ways to import
Prospect of investment in Bangladesh Power Sector 48
power from neighboring courtiers like Myanmar or Bhutan. Also, government has
planned to set up more large power plants. Including all, it can be reasonably expected
that minimum1200 MW additional power will be generated within the next two years. So
in future PGCB will transmit more power and earn more revenue.
By 2008, PGCB is expected to bring all over Bangladesh under Optical Fiber
Network. PGCB has the potential to earn additional Tk 1,000 million per year by giving
Optical Ground Wire (OPGW) network as rental along with its high voltage transmission
Considering the above, it can be reasonably expected that the revenue of PGCB will
be increased by at least 43% (33% for increased power supply and 10% for increased
Importantly, the company has no direct Cost of Goods Sold. This has a dynamic effect
Hence, small extension of capacity will have dynamic effect on the growth of EPS.
Though the main business of the company is transmission of power, it has another
revenue head, comes from leasing of OPGW. The total revenue of Tk. 45 million (year
2006) from this portion was net contribution to the profit, as there is no extra operating
cost for this service. The infrastructure of PGCB is very suitable for telecommunication
and IT companies for their extension of service through fiber optic. Reportedly, as the
fiber optic technology is going to available in Dhaka within a month, Grameen Phone is
in the process of Tk. 700 million leasing contract with PGCB. It can be expected that the
of the country.
Prospect of investment in Bangladesh Power Sector 49
and already sanctioned low cost loan for the development of PGCB, on an average 30%-
40% continued growth of EPS can be expected for the next three years.
However, the price could be even more, as always, at least until 2012, there will be
upcoming prospect of even more investment in the power generation. So, as the prospect
of the stock will be there always, institutions, foreign investors and public will keep
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From the graph it can be observed that in November 2006 the price of the stock of
PGCB went down and was around 200 Taka. Then in February after declaration of half
yearly EPS the price went up and reached at around 500 Taka then the price of the stock
gradually decreased due to market fluctuation but now its price is around 570 Taka and
Prospect of investment in Bangladesh Power Sector 50
now the price trend is in upward trend. As the company has good growth prospect and the
company is improving so the stock price is also increasing and based on their future
company. On June 2004 the company was converted to Public Limited Company under
the companies Act 1994. Face value of Summit Power was 100 Taka. In 2007 price of
this share highest reached to 1658 Taka. Now till August its price range is around 1250-
1658 Taka. In year 2006 EPS was 25.66. Growth prospect of Summit Power is very high
The company had initially established three 11MW power plants for sale of electricity
to Rural Electrification Board (REB) on Build Own and Operate (BOO) basis at Savar,
Narsingdi and Comilla. After a subsequent capacity expansion, Comilla plant is now
generating a total 24.50 MW of electricity from 15th November 2006 and Narshingdi
2006. The entire generated electricity is sold to Palli Biddut Samity (PBS) under Power
Purchase Agreements signed with REB and implementation Agreement signed with
generation and Summit Power has the experience and support to grow its business every
year.
The company’s capacity will increase further because the company has informed that
it has decided to form two new Special Purpose Companies (99% share of these
companies will be held by Summit Power Ltd. and the remaining 1% by Summit
Plant at Ullapara, Sirajgonj and 33 MW Gas-fired Power Plant at Maona, Gazipur under
Gas-fired Power Plant at Jangalia, Comilla under the second company on a Build, Own
and Operate (BOO) basis subject to the approval of Power Cell, Power Division, Ministry
Bangladesh.
By observing, Summit’s present expansion plans along with the long term vision of
growth by the management, the current government’s initiatives to reforming the power
sector and the existing gap between demand and supply in the power sector it can be
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From the graph it can be observed that the stock price of summit power was with in
the price range of Taka 500 to 700 from September 06 to May 07. Then after their
expansion and declaration of getting their new projects the price of the stock gradually
increased.
18.0 Conclusion:
The need of electricity in Bangladesh can not be expressed in words; the effect of
power in each and every growing sector of Bangladesh is undeniable. The economic
goals of the country can not be achieved without flourishing the power sector of
Bangladesh. At present, it is way over the time that we still locating the gaps and
Prospect of investment in Bangladesh Power Sector 53
shortfalls on the power sector, now it is the time to act. A jam-packed plan needs to be
implemented as soon as possible to make the power sector effective. Though, still
government holds the key of this sector but the private sector is always encouraged to
participate in Bangladesh power sector to fulfill the government future plan of power
sector. Private sector needs to play an important role to upgrade the contemporary
condition of the power sector in Bangladesh. Government has taken lots of initiatives
through reform and restructures programs and policy to facilitate private sector to invest
in this immerging sector. Lots of encouraging incentives has been provided by the
government to the private sector. More over demand for electricity will always exist so
growth opportunity will always exist. Again, private sector can grasp a good amount of
profit from this sector. Demand of electricity in Bangladesh is very high and still
electricity is no available to more then half of the country. Thus the investment in this
sector will only produce profit margins. And also the medium or small investors can also
play their part on the capital market as it indicates the potential growth of the power
sector. Only the combined investment of both large and small investors can manage the
much needed improvement of the power sector of Bangladesh. Hopefully this paper let an
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