Oil-fired power plants' downward trend in revenue and profit will only get worse in the years to come as the government has decided to rely more on cheaper coal and gas for electricity.
A majority of the listed oil-based electricity producers have shown a poor performance in the latest earnings reports, compared to the same periods of the previous year. Their financial health is unlikely to gain strength for the government's position to not renew the deals that have paid for using the plants' capacity to generate power.
So, investors' hopes for return from these companies will only get dashed.
"The outcome was predictable as all these projects were short-term. Investors should have made investments, keeping that in mind," said Shahidul Islam, managing director of VIPB Asset Management.
Some power plants, especially the small ones, may get shut down permanently, while others will run on a small scale, depending on the energy need.
At present, coal and gas account for more than 65 per cent of the country's electricity production capacity, and heavy fuel oil (HFO) and diesel another 27 per cent.
Bangladesh's energy policy has changed, having seen an escalation in oil price in the global market since the Russia-Ukraine war broke out, which mounted a pressure on the foreign exchange reserves; it has tilted towards cheaper coal as the nation has already been suffering from a gas crisis.
"Quick rental power [oil-reliant] was not a sustainable solution. So, now more and more electricity will be generated from coal [apart from gas] as is seen in the rest of the world," said energy specialist M Tamim.
He explained that the demand for energy was about 14,000 megawatt at the peak of last summer, which may go up to 16,000 MW this year. More than 85 per cent of that is projected to come from gas and coal, while the rest from fuel oil.
Therefore, oil-fired power plants will remain idle for most part of the year.
There are, in fact, concerns over operations of private power plants being limited to the peak summer season.
However, Monzur Kadir Shafi, managing director of Baraka Patenga Power, emphasized that the energy demand would keep growing in future.
The Baraka Power has one HFO (heavy fuel oil)-based plant with generation capacity of 50MW.
"Every country needs diversified sources of power. Oil was cheaper before the war. The situation may change in future.
"We will not become irrelevant. We will continue operations on no-electricity-no-pay basis," added Mr Shafi.
Of the seven companies that recently disclosed income for the October-December quarter of FY24, Doreen Power Generations and Systems, and Shahjibazar Power returned to profit in the second quarter, from losses a year ago. Others were in the red or saw a plunge in profit in the second quarter of FY24 from the same quarter a year earlier.
Shahjibazar Power has already provided a message of alarm to investors in its latest earnings note. Its 15-year-long "Rental Agreement for Power Purchase" with the Bangladesh Power Development Board expired on February 9 this year.
Its plant will remain shut and will add no power to the national grid until the deal is renewed.
Shahjibazar Power said it had requested for renewal of the agreement for five years "under no-electricity-no-payment" basis. That means even if the deal gets renewed, Shahjibazar Power's income will not be as high as it was including capacity charges.
According to Doreen Power, its earnings per share rebounded year-on-year because of better financial results of its subsidiaries that experienced a decline in finance cost for lower foreign exchange losses in Q2 FY24 than Q2 FY23.
Doreen Power has four gas-based plants and three HFO-based plants.
Meanwhile, Summit Power has been pushing back time to publish its financial statement for FY23, awaiting an upward adjustment of energy prices. It has several plants with long-term deals with the government, generating electricity from both gas and HFO.
Speaking with The Financial Express earlier, an analyst, who is very familiar with the power business and knows about the company, said Summit Power was buying time maybe because its financial performance for FY23 would look bad and that would create jitter in the stock market.
The company has also sought more time to disclose its earnings results for the first and second quarters of FY24.
"The companies having one or two plants producing electricity from fuel oil only will not survive, but the ones that use multiple sources of energy will stay in business," said M Tamim, professor of petroleum and mineral resources at the Bangladesh University of Engineering and Technology.
Whatever happens, that will be translated into financial pain and drain of investors.
"The companies were listed to rob investors of money. No one considered their interest," said Prof M Shamsul Alam, energy advisor to the Consumers Association of Bangladesh.
farhan.fardaus@gmail.com