PGCB’s financial stability, backed by its monopoly in the industry, is fortified by strategic financial operations and loans secured from various international institutions
The Power Grid Company of Bangladesh, a key player in the nation’s power transmission sector, has recently reported a significant upswing in its quarterly profits, attributing the success to a combination of increased revenue and stabilizing foreign exchange rates. The company’s financial resurgence marks a noteworthy turnaround from the same period a year prior, where it faced substantial losses.
In the fiscal quarter spanning January to March of the current year, Power Grid witnessed a profit surge, amounting to Tk2.17 billion. This remarkable achievement starkly contrasts the corresponding period in the previous fiscal year, which saw the company grappling with a loss of Tk0.5 billion. Such reversal underscores the company’s resilience and strategic adaptations amid fluctuating economic landscapes.
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As of June 2022, Bangladesh’s utility electricity sector operates with a single national grid boasting an installed capacity of 25,700MW. Despite this infrastructure, the nation’s energy sector faces challenges, falling short of optimal performance.
Exchange Rate Stability
The approach to exchange rate management serves to stabilize the external value of the currency and also to contribute to maintaining stability in the domestic price level.
Asif Khan, the Chairman of EDGE Asset Management, emphasized the pivotal role of exchange rate stability in Power Grid’s resurgence. He pointed out that the company, like many others with foreign debts, reaped substantial benefits from the stability in foreign exchange rates. Notably, the absence of significant deviations in exchange rates during January-March of the current fiscal year provided a conducive environment for Power Grid’s financial operations.
“All companies with foreign debts availed of the benefits of the stability in foreign exchange rates,” said Asif Khan.
In addition to stability in the dollar-taka exchange rates, Md. Jahangir Azad, the company secretary of Power Grid, highlighted a slight decline in the Euro against the local currency during the third quarter. This nuanced shift alleviated the repayment burden for the company, contributing further to its positive earnings for the quarter.
Power Grid’s Remarkable Turnaround
Power Grid’s financial resurgence is not solely attributed to exchange rate dynamics but also to its diversified revenue streams. The company experienced marginal year-on-year growth in revenue income generated from transmission/wheeling charges in Q3 of the current fiscal year. Moreover, notable increases in rental and grant income, along with escalated income from deposits due to higher interest rates, underscore the company’s adaptability and strategic financial management.
Implications and Future Prospects
The stability in the currency market has not only bolstered Power Grid’s quarterly performance but has also positioned the company favorably for sustained profitability in the long term. With a reported profit of Tk1.97 billion for the nine months ending in March of the current fiscal year, compared to a substantial loss during the same period in the previous fiscal year, Power Grid’s trajectory signals resilience and adaptability amidst challenging economic conditions.
Market Reflections
While Power Grid’s financial resurgence has been well-received, market dynamics have presented some fluctuations. The company’s stock experienced a decline in value from Tk52.10 per share on February 22 to Tk39.5 per share on April 18, albeit showing signs of recovery with a closing price of Tk41.60 per share. Such fluctuations underscore the dynamic nature of the market and the need for investors to carefully monitor developments.
PGCB at a Glance
The Power Grid Company of Bangladesh Ltd. (PGCB) holds the exclusive responsibility, as mandated by the Government of Bangladesh, for the transmission of power across the nation.
Operating as a government-owned Public Limited Company, PGCB is listed on both the Dhaka and Chittagong Stock Exchanges.
Since its inception in 1996, PGCB has been expanding the electricity transmission network system with the primary objective of ensuring the effective management of Bangladesh’s national power grid. To achieve this goal, PGCB undertakes essential planning, conducts preliminary feasibility studies, engages in research, prepares designs for substations and transmission lines, and oversees the construction of transmission lines and grid substations. Moreover, PGCB is responsible for the operation and maintenance of transmission lines, grid substations, and the National Load Dispatch Center (NLDC), utilizing a robust internal communication network comprised of optical fiber infrastructure.
Currently, PGCB boasts an extensive network of 400 kV, 230 kV, and 132 kV transmission lines spanning the country. Additionally, it operates various types of grid substations, including 400/230 kV, 400/132 kV, 230/132 kV, 230/33 kV, and 132/33 kV substations. Furthermore, PGCB has established connectivity with India through a 1000 MW 400 kV HVDC Back-to-Back station featuring two blocks.
In alignment with the government’s power sector Master Plan and the ambitious ‘Vision 2041’, PGCB is progressively reinforcing the national grid network to meet future demands.
Transmission Line Length
Substation Owned by PGCB
However, the primary role of PGCB revolves around transferring energy from various power stations, including those owned by BPDB, Government Generation Companies, IPP, and Adani-Power-India, to distribution entities via the transmission network.
PGCB charges its clients (distribution entities) for this energy transfer at rates set by the Bangladesh Electricity Regulatory Commission (BERC). Additionally, PGCB generates significant revenue by leasing its dependable optical fiber to ISPs.
Financial Strategy and Government Monopoly
Amidst listed government entities, the Power Grid Company, a BPDB subsidiary, historically upheld profit stability due to its monopoly in the industry.
In its financial operations, Power Grid has secured loans from various international institutions including the Asian Development Bank, Swedish International Development Cooperation Agency, Danish International Development Agency, Nordic Development Fund, Japan International Cooperation Agency, HSBC, Islamic Development Bank, Exim Bank of India, and Asian Infrastructure Investment Bank. Notably, loans from the Asian Development Bank total Tk10,675 crore, standing as the highest among these sources.
In conclusion, Power Grid’s remarkable turnaround in Q3, supported by stable exchange rates and diversified revenue streams, underscores its resilience and strategic acumen. As the company navigates through evolving market landscapes, its ability to adapt and capitalize on emerging opportunities positions it for sustained growth and profitability in the foreseeable future.
