Power Grid shares drop 16% as no dividend declared for FY24

Infographic: TBS

Shares of Power Grid Company of Bangladesh plummeted by nearly 16% yesterday after the company announced it would not distribute any dividend to shareholders for the fiscal year 2023-24.

During the trading session at the Dhaka Stock Exchange (DSE), the state-owned power transmission company's share price fell by 16%, closing at Tk33.30. This marks its lowest level in over two years, as the absence of a circuit breaker limit on the first trading day following the dividend declaration amplified the decline.

The sharp drop in share value led to a reduction in the company's market capitalisation by Tk576 crore, bringing it down to Tk3,042 crore.

In a statement filed with the DSE yesterday, Power Grid said the decision to forgo dividends was driven by financial losses. 

The company further noted that its retained earnings had turned negative, leaving it unable to use reserves to distribute dividends.

According to DSE, Power Grid has failed to declare a dividend for the first time since its listing on the stock exchanges.

The company's audited financial statements reveal that, while Power Grid generates operating profits, it incurred losses in FY24 due to exchange rate volatility, which significantly increased the burden of repaying foreign loans.

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

The company was listed on the stock exchanges in 2006. Its shareholding structure comprises 58.50% held by sponsors and directors, 22% by the government, 14.56% by institutional investors, 0.01% by foreign investors, and the remaining 4.93% by general investors.

Power Grid first reported losses in FY23, a trend that continued into FY24 as the rising exchange rate volatility caused the repayment obligations for foreign loans to surpass its operating income.

The country's sole state-owned power transmission company incurred a loss of Tk457 crore in the last fiscal year, compared to a loss of Tk712 crore in FY23.

Despite generating an operating profit of Tk1,142 crore in the last fiscal year, the company faced a repayment obligation of Tk1,819 crore, including interest, which contributed to its financial losses.

On condition of anonymity, a senior officer of the company said, "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, "The company settled the loan repayments at a dollar exchange rate of Tk120, significantly higher than the exchange rate during the loan acquisition period." 

The company takes loans under various projects every year for setting up power transmission lines, he added. 

In the July-September quarter, the company continued its losing streak, reporting a Tk256 crore loss – 154% higher than the loss recorded during the same period the previous year.

Due to consecutive losses over the last two years, the company's retained earnings turned negative, amounting to Tk715 crore as of September 2024.

Loan burden mounting

According to the financial statements, the company's debt stood at Tk51,418 crore as of 30 September 2024, representing a 68% increase from Tk30,603 crore in FY22.

The financials reveal that Power Grid has secured loans from various international organisations, including the Asian Development Bank (ADB), Swedish International Development Cooperation Agency (Sida), Danish International Development Agency (Danida), Nordic Development Fund (NDF), Japan International Cooperation Agency (JICA), HSBC, Islamic Development Bank (IDB), Exim Bank of India, and the Asian Infrastructure Investment Bank (AIIB). 

Of these, loans from the ADB are the highest, totalling Tk11,809 crore.