Information Document - Dhaka Stock Exchange

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Management Perception: The Power Purchase Agreement with BPDB safeguards KPCL from anychanges in government regulation. The PPA agreement is valid for 15 years till 2013 and can beextended upon the consent of both parties. Moreover, in case of PPA termination, KPCL will getcompensation under the agreement from BPDB or GoB. Additionally, the huge shortage of power inthe country minimizes the chances of terminating the PPA agreement that mitigates related risks.f) Potential changes in the global or national policies, natural calamities etc:The performance of the company may be affected due to unavoidable circumstances in Bangladesh,as such political turmoil, war, terrorism, political unrest in the country may adversely affect theeconomy in general. Moreover, natural disasters like Cyclone, Tide, and Earthquake may hampernormal performance of power generation.Management Perception: The risk due to changes in global or national policies is beyond controlfor any company. Yet the company is well prepared for adoption of policies and preventivemeasures as and when required to reduce the risk. The routine & proper maintenance of thedistribution network undertaken by BPDB reduces major disruption due to natural calamities. Butsevere natural calamities, which sometimes are unpredictable and unforeseen, have the potentialto disrupt normal operations of KPCL. But with prudent rehabilitation schemes and the veryeffective and quick repair and maintenance lessened the damages caused by such disasters.Political unrest leading to strikes, hortals etc. certainly plays negative impact in any business. Butelectricity service being considered a daily necessity & in consideration of its use by allirrespective of their political thoughts is always kept out of obstructions.Furthermore, all such above risks are covered under the insurance agreement with CODAN Marine(a subsidiary of RSA Group) to compensate the damages due to such uncertainties in extremecases. Thus, the risk due to natural calamities & political unrest is minimized.g) Operational Risk: Risk associated with limited tenure of the present Power Purchase Agreement:The tenure of the present PPA between the Company and BPDB is limited to 15 (fifteen) years fromthe date of commercial operation i.e. till 13 th October, 2013.Management Perception: On the backdrop of development need for the economy, powergeneration is one of the priority sectors of the government. With the existing deficit in powergeneration capacity, the government is expected to continue with the same policy level supportfor the sector. Dispute with any one operator may lead to adverse repercussions throughout theindustry. As such, no major dispute with the government is envisaged. There is a provision in thePPA for enhancement of the project life. BPDB and KPCL have been considering to expand thecapacity of the Berge Mounted Power Plant utilizing the area of its leasehold property, KPCL wantsto install additional 7 generation units with the capacity of 15 MW each to generate total 100 MW.The strategy is to generate and produce more electricity by using fewer big engines with higher fuelefficiency. Risk associated with single party exposure:The BPDB is the single buyer who purchases total electricity generated by the Company. TheCompany’s ability to service its both existing and future financial obligations rest on the BPDB’sability to meet the tariff payments under the PPA.Management Perception: KPCL is out of the single party risk exposure as it is guaranteed by BPDBfor the payment in case the plant runs lower than 50%. Moreover, L/C issued by BPDB for twomonths’ minimum guaranteed payment. Therefore, the Implementation Agreement signed by theGovernment through Ministry of Power, Energy and Mineral Resources is considered to beGovernment guarantee to protect the Company from single party risk exposure.7
Risk associated with tariff of electricity:The BPDB is the single buyer who purchases total electricity generated by the Company. In thesecircumstances usually it is the buyer who may determine the tariff value of the electricitygenerated by the Company.Management Perception: In this case no risk is associated as BPDB and the Company have predeterminedand contracted the terms and condition regarding the tariff of electricity, expressedunder two slabs – Other Monthly Tariff (OMT) and Fuel Tariff (FT) where OMT is based on deliveredMWh and FT is pass through. Tariff for each year is adjusted and indexed from time to time inaccordance with the PPA and the said Reference Tariff is used to calculate the Tariff in Effect forany Billing Month during the Term of the Agreement. Risk associated with supply of raw materials:The main raw material for generating electricity is Heavy Fuel Oil (HFO). Any interruption ofsupplies of the fuel to the power plants will hamper the generation of electricity, the only productof the Company.Management Perception: Kuo Oil Pte Ltd. Singapore has been supplying Heavy Fuel Oil (HFO) to theCompany through United Summit Coastal Oil Limited and the risk of price fluctuation in the globaloil market is automatically done by the very FT structure which is based on fuel cost as a passthrough item. Moreover, KPCL can source HFO from other sources if Kuo Oil is unable to supply. Risk associated with supply of spare parts:The power plants are dependent on timely supply of spare parts for smooth operation purpose. Anydisruption in supply flow of spares parts will put an adverse impact on power generation.Management Perception: Under the Operations & Maintenance Contract with Wartsila, theCompany has signed a Spare Parts Support Agreement (SPSA). Wärtsilä also maintains sufficientspares parts inventory for smooth operation of KPCL plants. In addition, KPCL maintains safetyspare parts stock of US$ 2 million. Risk associated with payment:There is an impending risk in the case of delayed payment from BPDB. In case of any dispute withBPDB or failure to comply with certain rules and regulations, BPDB may stop making payments toKPCL resulting into non-payment to its lenders.Management Perception: KPCL is getting the payment regularly from BPDB. Sometimes, there aredelays in payment but that is mainly due to administrative reasons. Till date, no payment has beendefaulted. As per the PPA with BPDB, there is a penalty clause and BPDB needs to ensure minimumguaranteed payment supported by Letter of Credit. .Additionally, GoB through the Implementation Agreement provides sovereign guarantee withregard to payments, hence possibly mitigating risk of any non-payments. Risk associated with systems failure and sabotage:System failure may take place resulting into damages for KPCL. Moreover, internal conflict amongthe workers and engineers may also disrupt operation.Management Perception: There is an agreement with the O & M Contractor and equipmentsupplier to provide maintenance and equipment support. Additionally, any equipment andmechanical support will be provided for in case the plant needs to be converted from a fuel basedto a gas based plant. In addition, the company has prudent insurance coverage with CODAN Marinewhich covers all risks package including Machinery Breakdown, Business Interruption, Third PartyLiability, Sabotage and Terrorism.8
Page 7 and 8: 2. Procedures to be followed for de
Page 9 and 10: C) KPCL never compromises with the
Page 11: B. RISK FACTORS AND MANAGEMENT PERC
Page 17: • OwnershipThe ownership structur
Page 21 and 22: • The year 1999 marked one of the
Page 23 and 24: United Summit Coastal Oil Ltd. (USC
Page 25 and 26: about their energy requirements. Th
Page 27 and 28: United Land Port Teknaf Ltd.United
Page 29 and 30: DistributionDistribution Line2,71,1
Page 31 and 32: withdrawals there from). The GoB sh
Page 33 and 34: Rent payable: Taka 15.84 per square
Page 35 and 36: (14) Personnel related schemes to m
Page 37 and 38: Involvement of Directors with Liste
Page 39 and 40: United GroupName of The Director an
Page 41 and 42: Mr. Moinuddin Hasan RashidMr. Md. A
Page 43 and 44: Mr. Faridur Rahman Khan, DirectorBo
Page 45 and 46: I. EXECUTIVE COMPENSATIONRemunerati
Page 47 and 48: M. OWNERSHIP OF COMPANY’S SECURIT
Page 49 and 50: disclosure as per law and Internati
Page 51 and 52: CREDIT RATING REPORTONKHULNA POWER
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CREDIT RATING REPORTONKHULNA POWER
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CREDIT RATING REPORTONKHULNA POWER
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Khulna Power Company Ltd.Balance Sh
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Khulna Power Company Ltd.Statement
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Khulna Power Company Ltd.Notes to t
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3.1 Property, plant and equipment3.
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3.6 ImpairmentThe carrying amounts
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3.15 Earnings per shareThe company
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5. InventoriesBalance as at 1 Janua
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9. Cash and cash equivalents2009 20
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13.1Demurrage is claimed by Kue Oil
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& Mercantile Corporation (Pvt.) Ltd
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18. General and administrative expe
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21. Earnings per share (EPS)2009 20
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25. Related party transactionsNatur
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Khulna Power Company LtdProjected I
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Additional disclosure by the manage
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CSE’s observation for Direct list
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Information Document - Dhaka Stock Exchange

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