Summit Power profit plunges 47%

Infographic: TBS

Highlights:

• Reasons cited by the company for profit slide:
• Volatile foreign currency exchange rates
• An increase in fuel costs
• Interest expenses surged due to the government delay in payment of bills

Summit Power Limited, a prominent independent power producer in the country, experienced a 47% year-on-year decline in earnings per share (EPS) for fiscal year 2022-23. 

This decline is attributed to factors such as volatile foreign currency exchange rates, an increase in fuel costs, and interest expenses surged due to the government delay in payment of bills, according to the company's financial statement approved at a board meeting held in the city on Tuesday.

The company reported an earnings per share (EPS) of Tk2.07 in FY23, down from Tk3.87 a year ago.

Furthermore, the decline in profit has led to a reduction in the cash dividend recommended by the company's board to 10%, down from 20% in the previous year.

The company has scheduled its annual general meeting for April 18 to obtain shareholder approval for the audited financial report and cash dividend. In order to determine the entitlement of shareholders to participate in the meeting, the company has set the record date for March 14.

The company outlined three significant factors contributing to the decline in EPS in its statement. 

Firstly, the global scenarios adversely affected the US dollar exchange rate and national forex reserves. Additionally, the company faced increased foreign exchange losses.

Secondly, the fuel cost exceeded fuel revenue due to adverse exchange rates. 

Thirdly, there was an increase in net finance expenses arising from working capital support through local banks, mainly due to excessive delays in payment of bills from the Bangladesh Power Development Board. 

The proprietors of private power plants currently have an outstanding bill with the government amounting to slightly over $2 billion, which is around Tk23,000 crore, in unpaid electricity bills, according to the industry insiders.

In November last year, in an effort to sustain access to loan facilities amid the ongoing dollar crisis and delayed bill payments from the government, private power producers are seeking an exemption from defaulter classification.

"We respectfully request your consideration in formulating a policy and issuing a necessary circular to exclude electricity generation companies from group or related party classification, recognising them as independent power producers," the Bangladesh Independent Power Producers Association (Bippa) wrote to the central bank governor on 2 November.

"This adjustment would enable them to access credit facilities from banks, ensuring a seamless generation of electricity," reads the letter signed by Bippa President Faisal Khan.

Regarding the letter, Faisal Khan informed a daily newspaper that as per the agreement with the Power Development Board, the government entity is obligated to settle dues within one month of receiving the bill. 

However, some power plants have had outstanding bills until January, and in many cases, arrears extend up to seven months, he said. In total, the government owes approximately $2.7 billion to private power plants, and this amount continues to accumulate monthly, said the Bippa president.

Faisal Khan highlighted an additional challenge, stating that the PDB calculates the dollar exchange rate at Tk111 when paying dues, while banks charge more than Tk120 to open letters of credit for importing fuel for power plants.

At the end of Tuesday's trading session, Summit Power share's closing price was Tk27.50 each at the Dhaka Stock Exchange.