United Power to amalgamate three subsidiaries to save costs

United Power Generation and Distributions Ltd (UPGDCL), a publicly traded power generation conglomerate, is going to amalgamate three of its four subsidiaries to improve efficiency, according to its filings with the Dhaka Stock Exchange (DSE).

The listed firm owns 99% stake in each of the subsidiaries – United Anwara Power Ltd, United Energy Ltd, United Jamalpur Power Ltd – which it acquired in recent years to boost revenue and profits.

The company would acquire the remaining 1% stake of the three subsidiaries from the minority shareholders at net asset value before bringing all their assets and liabilities under its direct control through dissolving the entities, said its officials.

UPGDCL Managing Director Moinuddin Hasan Rashid told The Business Standard, "The three subsidiaries will be under one legal entity after the amalgamation, which we expect will improve efficiency in terms of cost optimisation, taxation, and ensure better management synergy from single point."

Maintaining separate companies always involves some additional costs behind administration, accounting, and auditing.

The amalgamation scheme, already approved by the board of the company, is subject to the approvals from the High Court, shareholders, regulators, and creditors.

UPGDCL began its journey in 2008-09 as the only commercial independent power producer of the country. Unlike all other private-sector power producers, its two plants at the export processing zones of Dhaka and Chattogram can directly sell power to factories at a negotiated price, usually higher than what the national grid pays.

In 2015, the company was listed on the capital market and with the help of its debt-free and cash rich balance sheet, it emerged as the highest dividend paying local company in the bourses of Dhaka and Chattogram.

Later, responding to the call of its growth-seeking shareholders, the company began acquiring successful power projects owned and operated by its entrepreneurs.

Through acquiring a majority stake in six power plants in the last couple of years, the listed firm grew its total power generation capacity to 895MW, from the 158MW it began with, boosting UPGDCL's consolidated revenue to more than five times in five years.

However, since the new plants are not commercial ones like the first two, they did not proportionately boost the net profits, which instead nearly tripled.

Meanwhile, the debt-free company took over Tk706 crore of the debts of acquired plants in the fiscal year 2018-19. But a fast repayment nearly halved the total debt in two years, according to the company's 2020-21 annual report.

UPGDCL shares closed 2.65% higher at Tk240 each on the Dhaka Stock Exchange on Thursday.