Transmission charge hike to help Power Grid offset VAT impact

An increased electricity transmission charge will merely help the Power Grid Company offset the impact from the VAT imposed in the last budget.  

Its revenue from nationwide bulk power transmission will go up, with the 5.27 percent hike in the wheeling charge taking effect next week. 

The company last year applied for a 50 percent hike to make the charge against transmission of per unit electricity Tk0.4202 from existing Tk0.2787. But the Bangladesh Energy Regulatory Commission (Berc) fixed the charge at Tk0.2934. 

Obviously, it is a good news for the Power Grid as the new charge will add to the company's annual revenue of over Tk1,747 crore for transmission of  6,362 crore units of power in the last fiscal year. 

The country's only power transmission company has earned transmission revenue of over Tk959 crore in the first six months of the current fiscal year, because of an increase in the volume of transmission. The revenue is expected to grow further because of the charge hike the energy regulator announced yesterday. 

"But it is merely going to offset the 5 percent VAT on our transmission charge imposed in the last budget, and will not add too much to our net profit after taxes, at least this year," said Golam Kibria, managing director of the listed state-owned company. 

It made a net profit of Tk384 crore in fiscal year 2018-19. The then Tk460 crore paid-up capital company posted an earnings per share of Tk8.33. 

In the first half of the current fiscal year, it earned a net profit of Tk239 crore. The increased revenue from the rising wheeling of power nationwide helped the company achieve the profit growth. 

Meanwhile, the company has increased its paid-up capital to Tk713 crore in the current fiscal year by issuing more than 25 crore new shares at face value. The share issuance was in favour of its mother organisation the Bangladesh Power Development Board against a portion of its decades-old inputs. 

The around 55 percent increase in the number of shares has pushed down the company's earnings per share from the expected level. 

The issuance of new shares to the government at face value has been criticised by minority investors in the capital market as it benefitted the government and deprived the minority shareholders. 

Its net asset value is Tk842 crore now. Net asset value per share came down to Tk106 in the first half of the current fiscal year from Tk143 on June 30, 2019 because of the drastic increase in the number of shares.  

However, alongside the main business, the company is trying to increase its revenue and profit from internet bandwidth supply business under a nationwide telecommunication transmission network license. It owns 6,000 kilometres of optical fibre network in Bangladesh.   

Share price of Power Grid Company at the Dhaka Stock Exchange (DSE) fell by 2.08 percent yesterday to close at Tk47.1. 

The company was listed in the DSE in 2006. The government, through its power board, now owns 84.64 percent shares of Power Grid Company. 

The government has plans to offload more shares of the company to the capital market investors in the coming days.