Baraka Patenga Power’s bid to raise Tk 225 crore from the public on Tuesday got the green light from the Bangladesh Securities and Exchange Commission.
The power-generating company can now discover its cut-off price under the book-building method.
Book-building is the process by which the issue manager attempts to determine the price at which an initial public offering (IPO) will be offered. The process of price discovery involves generating and recording investor demand for shares before arriving at an issue price that will satisfy both the company offering the IPO and the market.
“Our mission is to become the largest power generating company in the private sector by developing more power plants across the country,” Gulam Rabbani Chowdhury, chairman of Baraka Power Patenga, told Dhaka Tribune.
The private sector now dominates Bangladesh’s power generation.
As of December 2018, its contribution was 54.4 per cent of the total electricity against 45.7 per cent produced by the state-owned power plants.
By the Power Division data, the country's total power generation capacity reached 20,343 MW in the year, of which 11,057 MW came from private sector producers.
The private companies developed 50 power plants with an investment of $12 billion in the ten years to 2018 and many of them planned for further investment.
Established in 2011, Baraka power Patenga is one such company.
“Baraka Patenga Power intends to play a big role in the government's target to ensure electricity for all by 2021 by installing more power plants,” Chowdhury said.
Of the IPO proceeds, Baraka Power Patenga, whose parent company Baraka Power is already listed on the bourses since 2011, intends to spend Tk 144.3 crore on equity investments in Karnaphuli Power and Baraka Shikalbaha Power, and Tk 74.9 crore to pay back bank loans..
Baraka Power Patenga holds 51 per cent shares of both the two companies, whose main role is to set up power plants and supply electricity to the national grid.
The equity investments would be used to settle the deferred obligations for genset procurement, he said.
A genset refers to an equipment whose function is to convert the so-called heat capacity into mechanical energy and then into electrical energy.
“Both the companies, otherwise, would have to look for alternative sources of financing to meet such deferred obligations, which might be much costlier resulting in lower profitability.”
After the repayment of long-term debt of Baraka Power Patenga with a portion of the IPO proceeds, the company's profitability would increase as it would lessen the strain on cash flow.
Located at Patenga, Chittagong, Baraka Power Patenga’s plant can generate 50 megawatts of electricity.
The plant, which started its commercial operation in May 2014, used eight brand-new Rolls Royce Engine having a capacity of 6.984 MW each.
Besides, the company set up a co-generation secondary power plant with capacity of 3.20 MW, which was brought under operation on April 2015. The plant run by heat recovery with Rolls Royce gensets exhaust gas without burning any fuel.
For the first time in the power sector in Bangladesh, a desulphurisation plant was introduced to the project to reduce sulphur emission to an acceptable low level, according to the company.
The selling price of the Baraka Power Patenga’s shares would be set through the electronic bidding process with the participation of eligible investors.
The company cannot declare bonus dividends for five years from the date of issuance of consent letter over its IPO.
The commission also directed the company to hold 51 per cent shares of its subsidiary companies at all times.
In its 2019-20 financial year that ended on June 30, the company logged in Tk 67.4 crore as profit, up a staggering 123.9 per cent.
LankaBangla Investment will act as the issue manager of the IPO.
