Power Grid allowed to issue preference shares in favour of govt
The newly issued shares will be incorporated into its existing pool of ordinary shares
The Bangladesh Securities and Exchange Commission (BSEC) has granted conditional approval to Power Grid Company's proposal to issue both ordinary and preference shares in exchange for government funds – known as share money deposits – received over the years to support various projects.
As per the approval granted during the second week of the month, the shares will be issued in two phases.
In the first phase, the state-owned company will issue 20.11 crore ordinary shares at Tk20 each, including a Tk10 premium on the face value. The total cost of the shares will be Tk402 crore.
The approved amount will augment the company's paid-up capital, and the newly issued shares will be incorporated into its existing pool of ordinary shares.
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During the second phase, the government's sole power transmission company will issue 764.11 crore irredeemable and non-cumulative preference shares for Tk7,641 crore, with each share priced at Tk10. This sum will not be included in the paid-up capital; consequently, it will not impact the earnings per share.
The company must submit return or yield documents for share money deposits to the commission dating back to 1996. Share money deposits represent payments made for shares that have not yet been issued.
In accordance with the Financial Reporting Council circular issued in February 2020, share money deposits must be converted into the company's capital within six months.
As of the end of December 2023, the total share money deposit of the state-owned firm amounted to Tk10,985 crore – the highest among all listed firms. Of this amount, Tk10,549 crore had accumulated until June of the previous year.
Power Grid Company sought to issue both ordinary and preference shares against this sum in favour of the Power Division secretary.
The company submitted documents to the commission reflecting a Tk8,043 crore share money deposit, based on the audited financial statements of fiscal year 2021-22. The remaining Tk2,942 crore was accumulated over the following one and a half years, until December 2023.
Reasons for issuing two types of shares
Power Grid Company has clarified that it has accumulated funds from the government over several years in the form of share money deposits to support various projects.
However, issuing solely ordinary shares against the entire sum would lead to a significant increase in the number of shares, consequently affecting earnings per share (EPS).
Currently, Power Grid's paid-up capital stands at Tk71.27 crore, which would also expand if only ordinary shares were issued.
Therefore, in order to mitigate the impact on EPS, the company has decided to issue a substantial number – 764.1 crore – of preference shares, along with only 20.1 crore of fresh ordinary shares. This strategic approach is aimed at benefiting both the company and its shareholders.
In June of the preceding year, the company's board opted to issue two types of shares to the government. This decision is based on the proposed conditions, wherein higher profits from Power Grid would result in dividends being disbursed to the government against preference shares. Conversely, in the event of a loss, no dividends would be allocated.
As the shares are irredeemable, they will not raise the firm's paid-up capital, and because of their non-cumulative nature, the company will not have to pay the government any previous year's unpaid preference share dividends.
Unlike ordinary shareholders, preference shareholders are not the owners of the company. However, they have priority over ordinary shareholders in terms of dividends and redemption rights in the event of bankruptcy.
In the July-December period of the current fiscal year, the revenue of the company stood at Tk1,349.83 crore, which was Tk1,225.91 crore in the same period of the previous year.
During the period, its foreign exchange loss stood at Tk337.91 crore, compared to Tk729.58 crore the company incurred a year ago.
The company made a loss of Tk19.37 crore in the July to December period, which was Tk281 crore one year ago.
Its per share loss stood at Tk0.27, and its net asset value per share was Tk165.76 at the end of December 2023.
As of 31 January 2024, sponsors and directors jointly held 75% of shares, institutions held 17.48%, foreign investors held 0.01%, and general investors held 7.51% of the company.
The share price of the company closed at Tk51.90 on the Dhaka stock exchange on Tuesday.
