Bureaucracy holds back Energypac from being listed for last 6 years

Energypac has become one of Bangladesh's leading power engineering companies. The company is engaged in engineering, procurement and construction contracts; building and operating CNG refueling stations plus fitting conversion kits; as well as installing and maintaining services for power plants. The company has entered into a new business arena by founding Steelpac brand to provide the complete steel construction of industrial, commercial and residential buildings. 

The company's Managing Director and Chief Executive Officer (CEO) Humayun Rashid elaborated on Energypac's journey in a recent conversation with The Business Standard's Staff Correspondent Eyamin Sajid: 

The infrastructure and technology sector promotes "think globally act locally." What global-standard products has Energypac introduced?

Rashid: At the time Energypac was established, Bangladesh did not manufacture generators – so it had to import them. We wanted to create a local base for engineering in technology, and after some time, we began production. We now have world standard generator production plants in our country. We are also producing the country's biggest transformers, plus multiple types of switchgear, in our country. 
Though we started with a program training engineers, later we broadened our horizons to include manufacturing. We did this because we believed that as a developing country, Bangladesh's development would gradually increase if we added engineering value. New jobs and employment were created as we started adding value.
In addition, we prioritised job creation and Energypac has employed over 850 engineers. 

Energypac won the gold award in Export Trophy 2018. Where are you exporting now and how did you reach the foreign market?

Rashid:  Engineering is not a business where you can make a profit in the future if you invest now. However, you will definitely profit once the engineering is accepted by the community. Energypac has been investing in this factor for the last 38 years.  

We have been exporting electrical machinery to India and Nepal for the last three years and it won us the Gold Export trophy for earning foreign currency.

It is not easy to penetrate the foreign market. Before exporting goods, a company must maintain the importing country's product quality standards. In addition, the company has to qualify in that importing country's laboratory tests. Otherwise, the potential importer will not buy the company's products.  

Is there anything you want to introduce but cannot due to local limitations? 

Rashid: The power sector is more structured than any other department – for example, with its power purchase agreements. 

However, the working area and space for the local private sector is limited; operations and maintenance pose some of the biggest challenges. 

The government should encourage local private companies to do the engineering procurement construction (EPC) business of every power plant – because they need to engage in operation and maintenance work after a project is completed. Otherwise, we will have to depend on foreign companies for the task.

Engineering will be in the main service to boost Bangladesh's economy if local companies prioritise EPC businesses. It will massively help us in the near future and we will be able to export EPC services to African countries. 

Photo: Saikat Bhadra

However, to reach that outcome the government should engage private companies in the EPC contracts of 400-500MW power plants.

There is speculation about engaging the private sector in the transmission and distribution system. Are you ready to invest in transmission and distribution? 

Rashid: Earlier, the generation sector was prioritised, but now the government is focusing on the transmission and distribution sector. Proper distribution and quality power can be ensured but they depend on the protection and instrumentation of the system. Assigning the work to local companies will help the government in the long run as they will get the warranty support in a moment of crisis. 

The government can purchase expensive equipment from a foreign company, but it will not provide a warranty. However, local manufacturing companies can be tracked and their work monitored. Therefore, if the government wants to provide real services to its citizens, it has to prioritise local companies. If the government addresses the issue properly, the local private sector will be prioritised over foreign companies.

I must add that Energypac has a huge advantage in such projects.

Energypac is currently working as an EPC contractor to build substations for different projects. However, projects are not being completed on time. Why is that so? 

Rashid: Land acquisition is Bangladesh's first and the biggest challenge, for both government and private companies' projects. 

As a private company, we can manage land acquisition more easily than public companies. But the situation is more painstaking for the government when it tries to acquire land. 

The second challenge is the poor infrastructure – more precisely the road and transportation system. 

A power plant implementing company cannot transport a 30 tonne generator to a countryside project site due to narrow roads. 

The roads and culverts constructed by the local government are unable to support the trucks. 

The third challenge is that foreign companies are making LC payments, while local companies face complicated modes of payment. In addition, contracts become one-sided where public-private partnerships are not followed. 

For example, the construction of the Padma Bridge is delayed but no penalty has been imposed on the company. However, if it was a local private company, it would have to count liquidated damages. Imposing one-sided penalties discourages local companies. I believe projects will be delivered in a timely manner if these issues are addressed. 

Energypac had plans to be listed on the stock market. What is the update on this?

Rashid: For six years we have been trying to be listed on the stock market but we have yet to be registered. This is because of strong bureaucracy. I think being listed on the stock market is a possible way to raise funds from the market. I wonder why companies are not going to the market, despite having the possibility to do business with the capital market's money. I am sure the lengthy process discourages companies like us, who want to raise money from the capital market. 

Photo: Saikat Bhadra

In which new areas is Energypac investing now? 

Rashid: Energypac is investing heavily in electrical and mechanical businesses to keep the future infrastructure demand its core focus. I think this sector has huge potential to employ future generations. For example, we are investing in pre-fabricated buildings under Steelpac company and we are building a majority of the steel buildings at the Rooppur Nuclear Power Project. Earlier, we used to import complete built track, but now, we are assembling it in Bangladesh. For that, we had to buy some technical equipment from China and train our manpower. Additionally, we had to set up a testing bay and equipment. 

What is the market response to the commercial vehicle and bus venture? How do you see the market in the coming decade? 

Rashid: As per the pattern of economic growth, the market growth of commercial vehicles will be excellent in the future. Energypac has been selling commercial vehicles since 2007. Our commercial vehicles such as pick-ups, buses and trucks can carry loads ranging between 850kg to five tonnes. However, the only challenge is the regulatory reformations. Euro-3, Euro-4 and Euro-5 engines are available on the market but the Bangladesh Road Transport Authority has not adapted to it as its technology has yet to be updated. If we do that, we will see the real success of investment in the engineering sector. The government should focus on reforming policy such as prioritising road safety. 

What is the profile of Energypac Group, its manpower, and publicly declared annual turnover?  

Rashid: Energypac proudly employs more than 10,000 people – including its engineers. We have five companies under the group: Energypac Engineering Ltd, Energypac Power Generation Ltd, Energypac Electronics Ltd, Energypac Fashions Ltd and Steelpac Company Ltd. Among them, Power Generation Ltd is a public listed company and its annual turnover was Tk911cr in the 2018-19 fiscal year. At the same time, Energypac Engineering Ltd's total revenue is about Tk1,500cr. 

Tell us about the company – why is it called Energypac and what does it mean? 

Rashid: There is a numerological value behind the name of Energypac or Pac the Energy. It means that energy should be saved for the next generation. We named it 38 years ago when no-one thought about saving energy. We are now realizing that the justification for, and future of, our company's name was always there. We hope future generations will also feel the justification for the company's name.