Costly dollar pushes Desco into loss again

Infographics: TBS

Dhaka Electric Supply Company Limited (Desco), a state-owned electricity provider, took a hit again as it posted a net loss of Tk32.24 crore in the first quarter of the current fiscal year, primarily due to foreign currency fluctuation losses.

Despite once being a fundamentally strong and profitable electricity supplier to retail customers, Desco has faced financial challenges recently, incurring annual losses of Tk541 crore in FY23 and Tk505 crore in FY24 due to disproportionate hikes in bulk and retail electricity tariffs, as well as dollar rate volatility.

According to its unaudited Q1 financial report, Desco's losses narrowed compared to the previous fiscal year's Q1 loss of Tk152 crore.

However, foreign currency losses significantly impacted the company's performance. 

According to Desco's finance officials and the financial report, earlier, the company bought a dollar for Tk118 to repay its foreign loans, but Q1 FY25, the cost surged to Tk120, raising its foreign currency fluctuation loss to Tk71.37 crore, compared to Tk44.15 crore in the same period last year.

Md Mominul Islam, Desco's general manager, told The Business Standard, "Although gross profit and distribution revenue grew substantially, foreign currency fluctuation losses led the company into a net loss." 

For the July-September quarter, Desco's distribution revenue jumped by 159% to Tk232.75 crore, and gross profit rose by 560% to Tk160.65 crore.

Mominul said in February, the government increased electricity prices by 8% at the retail level and 5% at the bulk level, which helped boost distribution revenue. 

However, foreign loan repayments have amplified currency losses, which rose by 62% year-on-year, he added.

According to Desco's financial statement, it has Tk2,795 crore in loans, primarily from foreign sources such as the Asian Development Bank (ADB), Japan International Cooperation Agency (Jica), and the Asian Infrastructure Investment Bank (AIIB), amounting to Tk2,551 crore at the end of September, with the remaining Tk243 crore from the government.

Following significant losses in the outgoing fiscal, Desco recommended a zero dividend for its shareholders for FY24. In FY23, it paid a 10% cash dividend to its shareholders.

Desco, which supplies electricity to most parts of the Dhaka North City Corporation, was listed on the Dhaka Stock Exchange (DSE) in 2006. As per its previous data, after incurring losses from FY99 to FY02, it operated profitably for 20 consecutive years until FY22. 

As of 30 June this year, Desco's customer base increased to 12.79 lakh, up from 12.40 lakh a year earlier on 30 June 2023. 

Additionally, Desco's system loss declined to 5.58% as of June 2024, down from 5.72% in the previous fiscal year.

Yesterday, its shares closed at Tk20.40 on the Dhaka Stock Exchange.