Khulna Power Company Ltd (KPCL) has agreed with US firm Excelerate Global Operations LLC to sell its 110MW barge-mounted power plant for $15 million or Tk130 crore as the plant has been sitting idle since 2018 amid no renewal of the power purchase deal with the government.
The agreement to re-export the two-decade-old plant is subject to the approval of the Bangladesh Power Development Board and other authorities, the company said in a regulatory filing on Sunday.
The 110MW dual-fuel barge-mounted plant established in 1997 was the first private sector power plant in the country and, following the contract expiration, an independent international valuer estimated the value of the idle plant assets to be at Tk227 crore a few years back.
It appears as a disappointment to the KPCL shareholders that the asset is being sold at 43% discounts that would reduce their company's book value.
"Our board has taken a very pragmatic decision not to wait for a higher price. This is the best deal we have found after several years of exploration in the international market," said Engineer Al Mamun M Atiqul Islam, managing director of the company.
"Market context sometimes dictates that waiting for a better price only keeps costing you further," he told The Business Standard while explaining the deal.
The plant has been costing the company several crores of taka each year for maintenance only, while over time the age of the machine would only increase which translates into a further low price, said Atiqul Islam.
Most importantly, if the company would wait further and failed to get an international buyer at the desired price, it would incur additional costs of plant dismantling and huge taxes.
The capital machinery for the power plant was a duty-exempted import on condition to re-export later and any local sale would cost the company huge taxes, he went on to say.
Responding to the question "Was the book value of Tk227 inflated?" the managing director said, "Not at all."
Several factors caused a decline in the value of the plant over the last three years since the third party valuation, he said adding that the soaring cost of fuel nowadays is one of them.
Older machines cost less in capital expenditure but consume little more fuel and the international buyers are ready to pay less than what they used to before the fuel price hike last year.
Before the pandemic, KPCL began exploring the international market with an asking price of Tk334 crore.
The US buyer, however, is procuring the plant built out of reciprocating Wartsila engines to set it up in an Eastern European country working on some short-term solutions to power shortages.
KPCL engineers will be responsible to help set the plant there and training the new user's employees to operate the plant, said Atiqul Islam.
This is the first instance of a power plant being sold abroad and the exporting of relevant technical expertise from the country, he added.
KPCL, the first private sector power producer in the country, is depending on its 155MW capacity in its units II and III for less than its previous revenue until April 2024, while the company also owns a 35% stake in its sister concern United Payra Power's 150MW plant having a contract life of more than a decade to come.
KPCL shares having a face value of Tk10 each inched down to Tk31.5 on the Dhaka Stock Exchange on Sunday.