Information Document - Dhaka Stock Exchange

C) KPCL never compromises with the quality of operation, maintenance, safety of plant and personneland in that consideration, engaged Wartsila, Finland, a world renowned equipment manufacture (alsothe manufacturer of KPCL plant), for the operation and maintenance of KPCL plant. KPCL plantoperation has been certified by Bureau Veritas (BV) on :• Quality Management System (QMS) with ISO 9001 – 2008• Environmental Management System (EMS) with ISO 14001 – 2007• Occupational Health and Safety Administration System (OHSAS) 18001 – 2007D) KPCL plant engines are having the dual fired capability i.e it can be converted into natural gaswhenever gas will be available at the south-eastern region. Conversion into natural gas will enablethe company to earn more revenue as compared to running on furnace oil, since the gas tariffstructure as fixed by BPDB is more attractive than furnace oil based tariff structure.E) The strategic location of the KPCL plant at the south-eastern region is an added advantage for KPCL.There are only few power plants in that region and as such KPCL is required to meet major portion ofthe demand of that region. Therefore, the utilization of the entire capacity of KPCL plant through outthe year is almost certain.F) The useful life of KPCL plant is 30 years. Therefore, no further capital investment will be required forthe existing plant to carry out another extended term.G) BPDB is the only buyer of KPCL and thus the revenues are 100% realizable. Unlike DESCO or DESA,KPCL has no system loss or no bad or doubtful debt.H) In the context of Bangladesh economy, the demand for power or the demand of power sector isthriving and insatiable. At present, the demand and supply gap is 1,700 MW. In consideration ofcurrent generation capacity, also together with the future planning for generation of additionalcapacity, Bangladesh will not be able to meet the increasing demand for power. As a result, thepower sector will continue to rule as top most demanding and dominating sector in the economy andno other sectors enjoys such a high demand profile. Therefore, KPCL’s revenue earnings and itsfurther growth and future potential is highly certain beyond any doubt.I) The proposed expansion of KPCL plant will enhance the KPCL earnings almost three times higher thanthe existing one. There will be no further fixed operating expenditure except the variables for theadditional unit as the same will be run by the same management and production team. No furtherland will be required and the engines are likely to be more efficient for improved technology over theyears.J) KPCL’s long eleven years of experience in running liquid fuel power plant and proven record ofoperation will help KPCL management to run the expansion unit more efficiently and diligently and toachieve more optimization and economy of operation which will contribute to the enhancement ofKPCL’s earning.Extension for another term of the project and Expansion of the capacity for additional 100 MW(+/- 10 MW):Rationale:i) The Article 2.3 of PPA has a clear provision that the project is renewable for a further period, subject toagreement in writing by the parties at the latest twelve months prior to the expiry.ii) The KPCL plant is most reliable and efficient plant in the BPDB grid, available for 365 days of the year andwith its 19 generating units, it is the most flexible and capable to meet BPDB’s ever varying load demand.iii)iv)For dwindling natural gas production in the country, the natural gas based power plants are in deepcrisis. Natural gas is being used in 85% of total generation and due to short supply, a few of theexisting plants running on gas may face shut down in the near future. Taking the above intoconsideration, the Govt. has already adopted a policy to use liquid fuel for generation of electricity.Accordingly, the future power plants will be built based on liquid fuel operation. Therefore, theextension of the term of KPCL plant is the imperative for the BPDB to meet the shortage of power.KPCL plants runs on Furnace Oil, the least cost liquid fuel, shall be most viable commercially.v) The existing shortage in generation capacity of the country shall continue to exist much beyond theyear 2013, when the tenure of the current PPA expires. Even in the year 2013 many of the BPDB oldplants shall retire and many will face shut down or capacity reduction owing to gas shortageTherefore, the extension of current PPA with BPDB shall take place as a natural consequence.Currently maximum generation capacity of all public and private power plants together is about 4,300 MW butcountry’s peak demand is about 6,000 MW. There is a demand supply gap of 1,700 MW and it will be widenfurther as a result of the general increase of demand. Considering of the increasing demand of power and the4