The country's largest private sector power producer Summit Power has declared 10 per cent cash dividends for shareholders for FY23, lowest in 20 years after it recorded a 10-year-low annual profit.
The disclosure drove the stock price down 6.55 per cent to Tk 25.70 per share on the Dhaka Stock Exchange (DSE), lowest in at least eight years.
"The situation could be worse had we declared dividends earlier," said company spokesperson Mohsena Hassan, referring to the company's postponing earnings disclosure for at least twice.
Within the time, the government declared its intention to clear all dues to private power producers by collecting money through bonds, she said, which gave a sigh of relief to Summit Power.
To that end, the state authority has already begun issuing bonds.
The time for declaring financial results for FY23 was over in October last year, but the company sought more time from the stock market regulator. It awaited upward adjustment of the electricity price by the government to overcome loss of profit rendered by the currency devaluation.
An analyst, who is very familiar with the power business and knows about the company, earlier, told the FE that Summit Power was buying time maybe for the fear that earnings disclosure would create jitter in the stock market.
Even after the delay, the power generator could not avoid the stock's downward spiral on the Dhaka bourse.
The stock's relative strength index (RSI) was 23.77 on Thursday. An RSI below 30 generally indicates the stock has been oversold.
In FY23, Summit Power's profit was Tk 2.21 billion, a whopping 47 per cent lower than in the previous fiscal year.
"We are paying large sums of penalties to our foreign bond holders as there is a dollar crisis and we are unable to pay our foreign loan installments in time," said company spokesperson Mohsena Hassan.
In the Thursday stock exchange filing, Summit Power blamed the volatile exchange rate as the main reason for profit erosion. It purchased dollars at a higher rate to import heavy fuel oil (HFO) than the rate at which it was paid by the government for electricity.
Until 2014 Summit Power earned around Tk 30 in net profit out of Tk 100 revenue, but in FY22 earnings fell to only Tk 13 out of Tk 100 revenue. The company disclosed financial results for every calendar year until 2015 and then started keeping records financial year wise.
More than 80 per cent of Summit's power generating capacity relies on HFO as fuel.
Meanwhile, the government has changed its energy policy, 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.
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.
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