Information Document - Dhaka Stock Exchange

CREDIT RATING REPORTONKHULNA POWER COMPANY LTD.The Board formulated strategic objectives and policies for the company, provides leadership inimplementing those objectives as well as supervises management of the company’s affairs.Under the supervision of the Board, Managing Director looks after the overall operationalactivities as per the delegation of power and in accordance with the Memorandum and Articlesof Association.Small managementteamOperationoutsourced formWartsilla6.2 Corporate Management and Human ResourcesAs the core operation of KPCL is completely outsourced from ‘Operation & Maintenanceoperator’ i.e. Wartsila, the supplier of the engines, the corporate management team andhuman resource size of the company is very small. The corporate management team isheaded by Mr. Hasan Mahmood Raja, the Managing Director of the company. Mr. Raja was theleading sponsor of the United Group. He is also Chairman and Managing Director of United.Managing Director is aided by Mr. Md. Abdur Rahim, the Project Director and Mr. Md. AminurRahman FCA, Financial Controller and Company Secretary. Mr. Abdur Rahim, a marineengineer having about 40 years experiences in steel, shipping, dockyard and power sector.Mr. Aminur Rahman, a professional accountant having 22 year of service experience in thefield of accounts, finance and company secretarial matters in multinational companies. Totalhuman resource stood at 10, who are mainly for support services. The company formulatedstructured ‘Employment Policy’ stating the benefits and privileges entitled by the employees.6.3 Business StrategyAs mentioned earlier, KPCL an independent power producer operates under a 15-year PPAwith BPDB. A guarantee agreement between the company and Ministry of Energy and MineralResources (MEMR) also ensures the company regarding the payment obligations of the BPDBin the event of a breach, default or non-performance of BPDB under the PPA. Operation &Maintenance is totally outsourced from Wartsilla, the engine supplier and previous shareholderof the company. Fuel is independently sourced from Singapore by KPCL and cost of fuelpassed through to the BPDB.Though the tenure of existing PPA expires on 2013, under the present electricity situation it ishighly probable that government will extend the agreement for the next tenure. After theexpiry O&M agreement in 2013, KPCL thinks to take over the O&M under own management.The existing personnel of the operator can be retained by KPCL. Moreover, Summit and Unitedgroup have been operating different power plants having about 200 MW capacity under ownmanagement.7.0 RISK MANAGEMENTPlant is adequatelyprotectedPage 5 of 157.1 Plant Protection and Risk MitigationWartsila, the plant Operator has taken adequate protection measures to protect the plant. Ithas established 42 fire hydrant points covering the key areas, 28 CO 2 flooding fixedinstallation for T1 & T3 (for control room, switchgear room and HFO separator room). Thereare also about 200 hand-held fire extinguishers which include foam, powder and CO 2 types.The Khulna power plant has been identified as a Key Point Installation (KPI) by thegovernment of Bangladesh. Hence services of the Bangladesh Rifles, Army and privatesecurity can be utilized. The Operator also established an Emergency Response Plan, whichaddress all types of emergency that may arise in the plant. KPCL is currently insured all riskspackages including machinery breakdown, increased cost of replacement payable, businessinterruption, marine and non marine liabilities, sabotage and terrorism.7.2 Operating and Maintenance RiskKPCL has signed a 15-year O&M agreement with Wartsila, a leading supplier of flexible powerplants worldwide. The operator is responsible for the activities necessary to operate the plantexcept fuel purchase. It will determine the needed spare parts and supplies and will provideall services necessary to obtain the parts and supplies. It will also employ and be responsiblefor all operating personnel. The O&M costs include a fixed fee usually of US$ 144,000 permonth prorated for partial months; however, it may extend to US$ 179,000 for any month incertain circumstances. The operator shall invoice at variable cost of US$ 5.05 per MWh during