United Power eyes expansion - Share market analysis of dhaka stock exchange, Bangladesh

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20 March, 2016 10:05 AM Source: The Daily Star Bangladesh

United Power Generation and Distribution Company plans to expand its generation capacity to 100MW each in two of its units at the Dhaka and Chittagong export processing zones in the next five years.

There is no alternative to expansion in the power sector for industrialisation, economic development and an increase in per capita power consumption, said Moinu-ddin Hasan Rashid, managing director of the company.

“If the market supports, we will continue to invest in the power sector,” he said in an interview with The Daily Star at his Gulshan office recently.

The existing power generation capacity of its plant in Dhaka Export Processing Zone is 88MW and that in Chittagong Export Processing Zone 72MW.

Both the plants have already received government permission to enhance their power generation capacities. “We have applied for gas for the expansion.”

Industrial units within the Dhaka and Chittagong export processing zones, and Power Development Board and Rural Electrification Board are the major clients of United Power.

There are huge opportunities to supply the additional power to areas adjacent to the Dhaka export processing zone, Rashid said.

He said per capita power consumption in Bangladesh is only 279kw per hour, while the consumption is 744kw in India, 527kw in Sri Lanka, and 452kw in Pakistan.

Presently, the country generates around 7,000MW, and the government's plan is to produce 60,000MW by 2041.

“So, there is an investment opportunity for $53 billion, as $1 million of investment is required for every 1MW of power.”

In line with its investment strategy, United Power recently acquired two of its power generating units for Tk 652 crore.

The company acquired United Ashuganj Power Ltd for Tk 556.8 crore and Shajahanullah Power Generation Company for Tk 95.2 crore.

With the merger, United Power's total generation capacity increased about 50 percent to 240MW. Revenues are projected to rise about 25 percent.

Net profits will swell 23 percent and earnings-per share 22 percent due to the merger, while total assets of United Power expanded 51 percent.

The merger will result in a reduction in the cost of capital and production per unit and ensure proper deployment of human resources leading to greater operational efficiency of the company, Rashid said.

“We want to make United Power the flagship company of our group,” he said, adding that the United Group has a generation capacity of around 700MW across its eight power plants.

It has plans to merge all the eight units into one, but it depends on the success and response of the latest merger, he said.

“We want to be the best company in the power sector in terms of quality, not in terms of quantity,” Rashid said, adding that quality power means right voltage and frequency and it is their responsibility to ensure these.

United Power was listed on the stockmarket in 2015. At the end of 2014, its net profit stood at Tk 246.46 crore and basic EPS Tk 8.3, up from Tk 177.44 crore and Tk 5.98 respectively a year earlier.

On the Dhaka Stock Exchange on Wednesday, the last trading day of the week, each United Power share traded between Tk 162.4 and Tk 158 before closing at Tk 158.5.

Sponsors hold 90 percent stakes in United Power, while institutional investors own 5.5 percent and the public 4.5 percent, according to DSE data. 

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