Why Energypac Power Generation got rid of its power subsidiary

Infographics: TBS

Recognising the potential for further losses in its power subsidiary, the publicly listed Energypac Power Generation PLC has sold off Energypac Power Venture to Sonargaon Leather & Rexine Cloth Industries, another entity of the Energypac Group.

The parent Energypac Power Generation held a 99% stake in Energypac Power Venture, which operates two independent power plants and two joint venture ones.

The listed firm had bought Energypac Power Venture's shares at a cost of Tk29.95 crore and has now sold them for Tk31 crore. In total, the listed firm earned Tk1.04 crore from the disposal of the subsidiary.

Officials said the parent company decided to offload the subsidiary owing to a possibility of further losses because of factors like difficulties in opening letters of credit (LCs) for fuel imports, and dollar price fluctuation.

Also, Energypac Power Venture, a supplier of electricity to the national grid, faced a working capital shortage due to government payments overdue for six to seven months, officials added.

In the fiscal 2022-23, the listed company reported a consolidated loss of Tk68.94 crore, while on a solo basis, it made a profit of Tk14.34 crore. Consolidated revenue also declined by 60.61% year-on-year to Tk800.83 crore.

Owing to this huge loss, the company halved its dividend compared to the previous fiscal year and declared 5% cash, that too only for its general shareholders, for FY23.

Lutfor Rahman, chief financial officer (CFO) at Energypac Power Generation told TBS, "The subsidiary incurred losses because of complexities in LC opening that caused a supply chain disruption and in turn, reduced the company's operations."

"This is why, keeping the interest of its shareholders in mind, Energypac Power Generation opted to divest from its loss-making subsidiary. Hopefully, the listed firm's financial health will improve, enabling it to pay substantial dividends in the coming years," the CFO added.

Energypac Power Venture is an Independent Power Producer (IPP) company in Bangladesh which was formed in 2007. At present, it has a total capacity of 288 MW, according to its website.

The two power plants it operates are Energypac Power Venture Chittagong Limited, which has been running since 2011 with a 15-year contract with the Bangladesh Power Development Board, and Energypac Power Venture Thakurgaon, which had started operations in July last year. It also owns a power generation plant in Habiganj with a capacity of 11MW.

Energypac Power Generation entered the capital market in 2021 by raising Tk150 crore for business expansion. It began its journey in 1995 as an electrical and engineering business.