Information Document - Dhaka Stock Exchange

CREDIT RATING REPORTONKHULNA POWER COMPANY LTD.Low MaintenanceRiskNo counter partyrisk due to hugepower shortageMinimum ForeignExchange RiskExposes fuel priceescalation riskLow supplies riskthe months when capacity factor is below 30% or above 60% and US$ 4.6 per MWh whencapacity factor is between 30% and 60%. Variable cost will be subject to annual adjustmentin certain circumstances. KPCL is responsible for unplanned maintenance in excess ofUS$100,000 per event and extraordinary expenses for additional work. The operatorguarantees an annual availability rate for the plant at 85%. For each percentage below up toa maximum of 13% the operator will pay KPCL US$15,000 and vice versa.7.3 Counter Party RiskBangladesh Power Development Board (BPDB) is the only purchaser of electricity from theKPCL. According to the agreement BPDB will pay all the net electricity output delivered to thegrid system from the plant with commitment to a minimum purchase equivalent to 50% plantfactor on a monthly basis. As additional, payment security is backed by Letter of Creditcovering two months of minimum tariff payments (and a Government of BangladeshGuarantee). Tariff invoice is payable within 45 days of the delivery of invoice. In last 12months, the company received payment on an average 10 days ahead of due date. There hasbeen no dispute with BPDB regarding meter readings or invoice amounts. At present KPCLdoes not seem counter party risk, because the country faces huge power shortage.7.4 Foreign Exchange RiskKPCL faces minimum foreign exchange risk. Presently there is no foreign currencydenominated loan amount. The company receives revenue almost fully in US dollars. The PPAprovides exchange rate protection with the pass-through fuel cost and 99% of OMT (OtherMonthly Tariff) indexed to the exchange rate as applicable on the date of credit equivalent USdollars in the company’s account.7.5 Fuel Price Escalation RiskThe pass through of the fuel cost under the PPA is limited to the fuel cost if the plant wasrunning at the heat rate as specified in the PPA. As the plant may not be running at thatspecified rate due to variation in fuel quality, the extra fuel cost will not be passed throughand there is a risk that earnings will be affected by extra cost especially in the period ofhigher fuel prices in the international market However, the OMT portion of the tariff generatessufficient revenues till present period to absorb the price escalation risk.7.6 Supplies RiskKPCL has formal Fuel Supply Agreement (FSA) with United Summit Coastal Oil Ltd. (USCOL),a sister concern of Summit and United for only inland carrier. KPCL imports fuel on its ownaccount i,e. full responsibility bestowed on KPCL. KUO Oil (Singapore) PTE LTD, a foreigncompany, commercially agreed to render the offshore services (such as procurement, freight,FOB cost differential risk, inspection, supervision of loading). USCOL acts only onshore(Bangladesh) in connection with the portion of services of unloading, storage, transportationand delivery to the discharge port. KPCL faces low supply risk as it can import fuel from anycommercially viable supplier and MOPS (Mean of Platts Singapore) indexed fuel costs passthrough to BPDB.8.0 BUSINESS PERFORMANCEBetter OperationalPerformancePage 6 of 15IndicatorsLicensed Capacity (MWh) [110]Energy Generation (MWh)Net Energy Output (MWh)Plant Factor (%)Economic Efficiency (TK/MWh)Operational Efficiency (%)* 6 Months operation (January – June)*1H 2009 2008 2007 2006477,840 963,600 963,600 963,600416,707 705,384 730,987 776,653410,301 693,544 718,985 764,22289.27 74.05 74.66 79.446,267.70 10,866.16 7,051.65 7,419.6887.21 73.20 75.86 80.60KPCL has dispatched 693,544 MWh of energy to national grid during FY2008 against 718,985MWh of energy in FY2007 whereas licensed capacity was 963,600 MWh in both of the periods.