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CREDIT RATING REPORTONKHULNA POWER COMPANY LTD.2.0 CORPORATE PROFILE110 MWIndependent PowerProducer99.97% sharesowned by Summitand United group2.1 The GenesisKhulna Power Company Ltd. (KPCL) is an Independent Power Producer (IPP) established in1997 under the Government initiatives for private power projects. By considering that gasburning large land based power project requires relatively long preparation and constructionperiod, this barge-mounted power plant was set up to alleviate the severe power crisis as afaster track solution on short term basis. Through a public bidding process the consortium ofWartsila NSD Power Development (Asia) Ltd., Summit Industrial & Mercantile Corporation(Pvt.) Ltd. and United Enterprises & Co. Ltd. was awarded to establish this power plant inKhulna. Two principal evaluation criteria of government were: early commissioning i.e. within10 months of executing the Power Purchase Agreement (PPA) and the ImplementationAgreement (IA) and dual fuel capability. Liquid fuel fired with capacity of 110 Megawatts(MW), KPCL is selling electricity to Bangladesh Power Development Board (BPDB) under PPAbetween the company and BPDB. The plant started supply of electricity to the national gridfrom 13 October, 1998. Initially the company was started as private limited company andlater in FY2009 converted into public limited company. The corporate office is located atSummit Centre, 5th Floor, 18 Karwan Bazar C/A, <strong>Dhaka</strong>-1215. The company has planned togo public through direct listing during 2009.2.2 Ownership StructureAt present Summit Industrial & Mercantile Corporation (Pvt.) Ltd. (Summit) and UnitedEnterprises & Co. Ltd. (United) equally own 99.9664% of 2,085,930 ‘Class A & B’ ordinaryshares. Rest 0.0336% i.e. 700 ordinary shares were transferred in favor of 14 individuals at50 numbers of ‘Class-A’ shares each. Out of these shares, Summit and United each hold 3‘Class-B’ ordinary shares, which get different treatment in respect of dividend paymentcompared to ‘Class-A’ shares. However, the existing shareholders of the company on 19 July,2009, in an Extraordinary General Meeting (EGM) passed and resolved that the existingcategory of Ordinary ‘Class A’ and ‘Class B’ shares shall be reclassified as ordinary shares. Atthe inception, El Paso Khulna Power ApS (incorporated in Denmark) were holding 73.90%,Wartsila Development & Financial Services (Asia) Ltd. (incorporated in Cayman Island)6.10%, Summit and United 10% each. Later in FY2008, EL Paso and in June, 2009 Wartsilasold their holdings equally to Summit and United. El Paso determined share transfer packagethrough a competitive bid and Summit and United as existing shareholder got the first priorityto take the package. Other than ordinary shares, KPCL has issued 1,100,000 preferenceshares of Tk. 1000 each on May 2008 to four private commercial banks. These preferenceshares are cumulative and redeemable in five annual installments of 220,000 shares startingfrom 14 May 2010, the second anniversary of the issue date.3.0 SHAREHOLDERS’ GROUP PROFILEPage 2 of 153.1 Summit GroupSummit Group is one of the leading investment and industrial business houses in Bangladesh.With the inception of a small thermo-plastic moulding compound trading company “SanguineTraders” in 1972, Mr. Muhammed Aziz Khan started his business career in a specializedbusiness sector. Under his direct leadership Summit Group has become a top tier businessestablishment within a short period of time and now owns more than 10 companies. Out ofthe above companies, only Summit Power Limited and Summit Alliance Port Ltd. are publiclylisted with both the bourses of the country. The major sectors of the Group investment coverpower generation, tanks terminal, shipping, real estate, construction, civil & hydroengineering, container depots, trading etc. The sponsors of Summit Group are targeting theniche sectors of the country and abroad. This has led to the establishment of a barge mountedpower plant in Bangladesh namely Khulna Power Company Ltd., Liquefied Petroleum Gas(LPG) plant in gas starved area at Mongla, Bagerhat, Container Freight Station in Chittagongetc. The Group is keen to invest in power sector, which has been opened to privateinvestment in Bangladesh. At the end of 2008, the asset base of the group stood at Tk.21,571.87 million against Tk. 5,720.43 million outside liabilities. Share capital of the groupstood at Tk. 5,807.26 million and net profit during the last period reached to Tk. 2,949.53million.
CREDIT RATING REPORTONKHULNA POWER COMPANY LTD.3.2 United GroupThe United Group is a known name in the business arena of the country. The Group started itsbusiness career in 1978; with its Flagship company United Enterprises and Co. Ltd. During thelast almost three decades of operation, the Group has expanded its business in varioussectors of the national economy such as Power Generation, Broadcasting and Communication,Civil and Hydro Engineering, Real Estate Development, Land port Services, Hospital andhealth care, Textiles, Polymer industries, Education etc.Over the years, the Group has completed several large and unique projects that testify itsstrength and capability in project management. Such projects include the 110 MW bargemounted power plant in Khulna; 60 km Coastal Embankment Rehabilitation Project financedby the World Bank; three 11 MW power plants in Ashulia, Narshingdi and Comilla; 450 bedState -Of-The-Art hospital; Runway Overlay Project at Zia International Airport; E-cash ATMCard Networking System; land port management services at Teknaf (ongoing) and others. Atend of 2008, the asset base of the group stood at Tk. 16,395.35 million against Tk. 10,482.16million liabilities. Net worth of the group stood at Tk. 5,913.18 million and net profit for thelast period reached to Tk. 343.58 million.4.0 PROJECT/PLANT DETAILSPlant located at nearKhulna cityGuaranteedpayment for 50% ofdeemed generationPage 3 of 154.1 Plant Location & Production FacilitiesThe plant is located near the city of Khulna. The riverbank project site provides easy access tofuel shipments by river and is located next to an existing electrical substation andtransmission line. The plant consists of two barge-mounted facilities housing of a total 19Wartsila diesel engine generators of 6.5 MW capacities. Generators are featured with low NOxand dual fuel capability. Nine engines-generators are mounted on one barge and ten on theother. The barges, shipped as deck cargo on a submersible dry tow ship, are moored in aclosed basin. Each barge is approximately 91 meters long and 24 meters wide. The plant’sshore side auxiliary facilities include two Heavy Furnace Oil (HFO) storage tanks (7,500 cubicmeters each) and pumps to transfer heavy fuel oil to a buffer tank on either barge.4.2 Main Features of PPAConsidering the BPDB as the single buyer, the Power Purchase Agreement between BPDB andKPCL plays a very important role. The PPA inter alia includes the following importantprovisions:a) The term of the contract is for 15 years from the date of commercial operations;b) BPDB is committed to a minimum guaranteed payment equivalent to 50% plantfactor on a monthly basis;c) Two part monthly tariff structure: Fuel Tariff (FT); with full cost pass through andOther Monthly Tariff (OMT), 99% of which is US$ indexed;d) Allows KPCL to source its own fuel supply;e) Tariff invoices payable within 45 days of the delivery of invoices;f) Payment security back-up in the form of Letter of Credit covering two monthsminimum tariff payments;g) The minimum tariff payment obligations continue through political and Force MajeureEvents;h) Compensation amount on termination to cover 65% of the NPV of the minimum tariffpayment for the remaining term of the PPA, plus consequent termination paymentliability to KPCL in respect of the O&M agreement and Fuel Supply Agreement, plustaxes;i) KPCL is required to pay liquidated damages for lower output capacity and shortsupply of energy;j) BPDB would pay liquidity damages to KPCL in the event of failure by the GOB to meetany of; its obligations provided under the Implementation Agreement (IA).4.3 Tariff StructureThe PPA contains a two-part tariff: fuel tariff (“FT”) and other monthly tariff (“OMT”). The FTreflects the pass-through nature of fuel expenses to the extent that the plant operates at thespecified heat rate. Under the tariff structure, the fuel cost is calculated in terms of volumerather than energy content (i.e. $/liter versus $/BTU), since HFO is sold by volume or mass.
Page 7 and 8: 2. Procedures to be followed for de
Page 9 and 10: C) KPCL never compromises with the
Page 11 and 12: B. RISK FACTORS AND MANAGEMENT PERC
Page 13: Risk associated with tariff of elec
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: CREDIT RATING REPORTONKHULNA POWER
Page 55 and 56: CREDIT RATING REPORTONKHULNA POWER
Page 67 and 68: Khulna Power Company Ltd.Balance Sh
Page 69 and 70: Khulna Power Company Ltd.Statement
Page 71 and 72: Khulna Power Company Ltd.Notes to t
Page 73 and 74: 3.1 Property, plant and equipment3.
Page 75 and 76: 3.6 ImpairmentThe carrying amounts
Page 77 and 78: 3.15 Earnings per shareThe company
Page 79 and 80: 5. InventoriesBalance as at 1 Janua
Page 81 and 82: 9. Cash and cash equivalents2009 20
Page 83 and 84: 13.1Demurrage is claimed by Kue Oil
Page 85 and 86: & Mercantile Corporation (Pvt.) Ltd
Page 87 and 88: 18. General and administrative expe
Page 89 and 90: 21. Earnings per share (EPS)2009 20
Page 91 and 92: 25. Related party transactionsNatur
Page 93 and 94: Khulna Power Company LtdProjected I
Page 99 and 100: Additional disclosure by the manage
Page 101 and 102: CSE’s observation for Direct list

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