Power Grid posts first loss as strong dollar increases debt burden

Although the Power Grid Company of Bangladesh (PGCB) generates profits from its operations, it has incurred losses due to exchange rate volatility, which has increased the burden of repaying foreign loans.

The Power Grid Company of Bangladesh (PGCB) incurred losses last fiscal year – for the first time in its history – due to exchange rate volatility, which has increased the burden of repaying foreign loans.

The country's sole state-owned power transmission firm suffered a record loss of Tk1,274 crore in the fiscal 2022-23 due to currency fluctuations, according to its financials. This is significantly higher than the Tk535.79 crore loss in the previous fiscal year.

The company posted a net loss of Tk626 crore for the fiscal year, its first loss in history, despite generating an operating profit of around Tk950 crore.

Among listed government firms, the Power Grid Company – a subsidiary of the Bangladesh Power Development Board (BPDB) – was earlier able to maintain consistency in profits as it enjoyed a monopoly in business.

In FY22, its upward profit trend since 2014-15 came to an end, with its profit declining to Tk122.91 crore.

Company Secretary Jahangir Azad told The Business Standard, "These losses were due to foreign exchange fluctuations, which surpassed all previous records. Foreign loans taken for development work have to be paid in dollars. The loss has been determined on the basis of the price of the dollar on the last day of the financial year."

He said, "Not all of the loans have been repaid, and losses have been determined according to international accounting standards. At the end of the fiscal year, the dollar exchange rate was Tk106. If the dollar appreciates further in the future, the volume of losses will also increase, and consequently, the company's net loss will also continue to increase.

"This is the company's first annual loss."

Jahangir said the company takes loans under various projects every year for setting up power transmission lines.

According to the financial statements, the debt amount on 30 June 2023 stood at Tk40,167 crore. At the end of September, the loan amounted to Tk41,944 crore. In FY22, the loan was Tk30,603 crore.

Financials show Power Grid has taken loans from the Asian Development Bank, Swedish International Development Cooperation Agency, Danish International Development Agency, Nordic Development Fund, Japan International Cooperation Agency, HSBC, Islamic Development Bank, Exim Bank of India, and Asian Infrastructure Investment Bank. Out of this, loans from the ADB amount to Tk10,177 crore, which is the highest.

According to its FY23 financials, the profit from operational activities declined by 7% to Tk950 crore, which was Tk1,025 crore in the previous fiscal year.

In July 2021, the dollar exchange rate was Tk84.82, but it started rising in May last year.

The new dollar rates are Tk111 for remittances and export proceeds and Tk110.50 for import settlements. Last year, the dollar rate soared to Tk122.

The government has been funding the Power Grid from various development partners and the government's funds to build the country's power transmission infrastructure.

The money paid to the company by the government is 60% equity and 40% debt. The BPDB owns 75% of the company.

The company has announced a 10% cash dividend only for the general shareholders, except sponsor-directors.

Earlier, it paid a 10% cash dividend to all its shareholders.

Power Grid is responsible for the power transmission of the BPDB.

To continue the progress of the country's development, it has been building new power transmission lines and substations as well as transmission infrastructure since 2000 in line with electricity generation.

Its source of income is transmission charges. Income increased with the construction of new transmission lines in the last year. The Power Grid was incorporated in 1996 as a fully BPDB-owned subsidiary company.

It got listed on local stock exchanges in 2006 by offloading its 15.36% shares.

It incurred Tk101cr loss in Q1 too

Although revenue grew by 9%, it incurred a loss of Tk101 crore in the first quarter of this fiscal year, too.

Its revenue increased to Tk757 crore, which was Tk691 crore at the same time as the previous fiscal year.

Foreign exchange loss rose to Tk360 crore, which was Tk153 crore in the same period a year ago.