IPO Note Doreen Power Generations and

Systems Limited
Key Comps

Date: 6 April, 2016

Ticker:
DOREENPWR

Offer Price

Post IPO EPS

(Audited)

Pre- IPO
EPS
(Audited)

Post IPO EPS

(Annualized)

Post-IPO
NAV

Post IPO
Audited P/E

Sponsor %

Public %

Year end

Latest Q
No.

29

1.69

2.25

0.98

26.9

17.18

75%

25%

June

Premium

Number of
Securities
(MN)

Free Float
Number of
Securities
(MN)

Company vs
Industry

Audited
Income

Annualized
Vs Audited
Growth

Current
Quarter

Audited

Annualized
P/E

P/B

Y-o-Y

P/E

80

20

19

Y-o-Y
DOREENPWR

-16.47%

-42%

-59.72%

17.18

29.59

1.08x

Fuel & Power

-0.10%

-9.10%

-18.70%

12.3x

13.5x

1.7x

Doreen Power Generations and Systems Limited (DPGSL) generates and

supplies electricity under private sector power generation policy of Bangladesh which incorporated in 2007. DPGSL currently has three power plants
which produces a total of 66 MW electricity. The power plant in Tangail (22
MW), Feni plant (22 MW) supplies electricity to Bangladesh Power Development Board (BPDB) while the plant in Narshingdi (22MW) supplies electricity to Rural Electrification Board (REB). The present power plants are Gas
based and commissioned with GE Jenbacher Gas fired engines. The company has set up an agreement period of 15 years with BPDB and REB to supply electricity from these plants.
The company is in the process of implementing two new power plants totaling 110 MW. One plant is in Manikganj and the other one is in Nababganj
with a capacity of 55MW each. Two special purpose entity has been formed
in lieu with this project. The estimated project cost is BDT 7565.77 million
and expected to be implemented within 15 months from power purchase
agreement. Power Purchase Agreement between two SPCs and Bangladesh
Power Developments Board has been signed on 7th January 2013.
DPGSL has two subsidiaries (Dhaka Southern power generation Limited &
Dhaka Northern Power Generations Limited) and one holding company
(Asian Entech Power Corporation Limited).

Products of DPGSL
Generation and supply of electricity is the only product of the Company.
The company supplies electricity from its existing three power plants under
PPA term which was signed in 11 October, 2007 for a tenure of 15 years.

Sources of Raw Material

Major raw materials for DPGSL are natural gas, spare parts, lube oil, greese
and maxiguard. It sources natural gas from Titas Gas for Narsinghdi &
Tangail power plant & sources from Bakhrabad Gas system for Feni power
plant. The maximum daily gas usage for these plants are 148,000 Sm3. It
imports Spare parts from several destinations like Austria, Switzerland,
India etc. Lube oil has been supplied solely from MJL Bangladesh Ltd.
Gresse and maxiguard is also procured from local markets.

Major Customers
The company has signed power supply agreement with BPDB and REB on
11 October 2007 for a term of 15 years. As per the agreement DPGSL is
require to provide 44 MW power to Bangladesh Power Development
Board (BPDB) which is 67% of total production and 22 MW Power to
Rural Electrification Board (REB) which is 33% of total Production. It gets
its payment in two forms, capacity payments and energy payment.

Nature of power plants in Bangladesh

Fuel Type
Coal
Gas
Hfo
HSD
Hydro
Imported
Total

Capacity
250 MW
7280 MW
2507 MW
916 MW
230 MW
500 MW
11683 MW

Total (%)
2.14%
62.31%
21.46%
7.84%
1.97%
4.28%
100%
1

IPO Note Doreen Power Generations

and Systems Limited

Features of Doreen Ijara Bond

Capacity Utilization & expansion plan

The current capacity of three plants is cumulated as 66 MW while average
utilization rate is 78%, in 2014 the utilization rate was 71%. DPGSL has
a vision to expand its capacity to 200 MW. Convening to its plan it
moves to expand its current capacity by 110 MW with establishing two
HFO based plants in Manikgonj & Nababgonj. The two plants will sell
electricity to BPDB and REB at a flat rate of 6.9898/Kwh. The project is
to be financed with 75% of debt . NCC bank and Trust Bank ltd is arranging the loan through IPFF fund of world bank. DPGSL also issued
Debt securities termed as, Doreen Ijara Bond which aims at raising
funds of BDT 80 crore for this expansion project. Islami Bank is the sole
subscriber of this bond. 25% equity financing will be done through utilization of its own fund and subscription through IPO.

Liquidated damage under PPA

Under the power purchase agreement with BPDC & REB the following
rules apply:
Delay in commercial operation: The project company shall pay REB/
BPDB a sum equal to BDT 1,00,000 (US$ 1,428.57 and assume 1US$=
BDT 70) per day or fraction thereof for each day of delay.
Contracted capacity: If the company fails to maintain guaranteed capacity
i.e 22 mw then it has to pay BDT 70,000 for each KW of shortfall up to
5% shortfall and BDT 140,000 for each KW of shortfall up to 10% shortfall drop from the guaranteed capacity of 22 MWPH.
An excerpt from management discussion about the current status is as
follows:

Dhaka Northern power: As per clause of PPA, if the commercial

operation of the facility has not occurred by the Required Commercial Operation Date and such date has not extended in accordance
with agreement by the parties as Force Majeure event, project Company shall pay BPDB as liquidated damages for delay in Commissioning a sum equal to Tk. 100,000 per day and in no event shall the
total damages assessed under the foregoing Articles exceed Tk. 10
million. In compliance with the clause a letter Memo no. 2763/
BPDB (Sectt)/Dev-197/2010 dated 21.12.2014 was issued by BPDB
regarding the liquidated damages. In reply to BPDB letter the company request BPDB by letter no DSPGL/BPDB/IPP CELL3/1214/031 dated 24.12.2014 to deferred the LD payment until
commercial operation of this project otherwise cash flow will disturb
to start operation within due time subscenquently we did not get any
reply from their end.
Dhaka Southern Power: As per clause of PPA, if the commercial
operation of the facility has not occurred by the Required Commercial Operation Date and such date has not extended in accordance
with agreement by the parties as Force Majeure event, project company shall pay to BPDB as liquidated damages for delay in Commissioning a sum equal to Tk. 100,000 per day and in no event shall the
total damages assessed under the foregoing Articles exceed Tk. 10
million.

Name of Debt Instrument

Fund to be raised
Effective Yield
Maturity
Grace Period
Approval availed

Ijara Bond
800,000,000
17%
5 Year
12 months
12 November, 2013

Key Financials
(mn BDT)

2011

2012

2013

2014

2015

Revenue

1,084.7

1,084.3

1,041.3

1,049.0

1,082.4

Gross Profit
EBITDA
Operating Profit
Net Income
Total Asset

506.3
449.4
449.4
271.4
2,655.5

498.4
431.4
431.4
245.2
2,635.7

429.1
485.9
344.7
132.9
3,499.5

423.0
477.2
339.3
149.8
4,275.6

436.0
482.8
327.2
125.1
9,133.7

Total Debt

1,935.6

1,649.9

1,457.0

2,029.1

6,681.4

599.2

833.9

1,877.9

2,027.6

2,152.7

2011

2012

2013

2014

2015

Gross Profit Margin

46.67%

45.97%

41.21%

40.32%

40.28%

EBIT margin

41.43%

39.79%

33.11%

32.35%

30.23%

ROE

0.00%

34.22%

9.81%

7.67%

5.98%

ROE Decomposition

2011

2012

2013

2014

2015

25.02%

22.62%

12.77%

14.28%

11.56%

0.41

0.34

0.27

0.16

Total Equity

Profitability

Net Profit Margin

Asset Turnover

Financial Leverage

0.00

Growth

2011

3.69

2.26

1.99

3.21

2012

2013

2014

2015

Sales Growth

-0.04%

-3.97%

0.74%

3.18%

Gross Profit Growth

-1.55%

-13.92%

-1.41%

3.07%

Operating Profit Growth

-4.00%

-20.09%

-1.56%

-3.57%

Net Profit Growth

-9.65%

-45.79%

12.66%

-16.48%

Risk

2011

2012

2013

2014

2015

Debt to Capital

0.76

0.66

0.44

0.50

0.76

Interest Coverage

2.73

2.23

1.63

1.87

1.68

DPGSL incurred a liquidated damage of BDT 9.214 million in the FY

2015 for failure to supply electricity as per requirement of BPDB in tangail plant. As on 30 June, 2015 BDT 6,143,114 is outstanding out of this
total charge.

IPO Note Doreen Power Generations and

Systems Limited

Investment Facts:

DPGSLs two subsidiaries are yet to start its commercial operation and assigned a pending date of February-March, 2016.

If If the Two Subsidiaries become online within 4th Quarter of 2015-16, the annual estimated EPS of the company will be BDT 3.65 (assuming operating margin at a rate of 25% due to fixed costs), At forward P/E of 10x and 15x price would be BDT 36.5 and BDT 54.8 respectively.

If If the Two Subsidiaries remains offline in 4th Quarter of 2015-16, the annual estimated EPS of the company will be BDT 0.21 (assuming operating
margin at a rate of 19% due to fixed costs).

If the Two Subsidiaries become online for the full year in 2016-17, the annual estimated EPS of the company will be BDT 9.09 (assuming operating
margin at a rate of 30% ), At forward P/E of 10x price would be BDT 91.0.

Expected LD charge BDT 20.0 million is payable to BPDB for Dhaka Southern Power Generations LTD.

The company has a CAGR in revenue of -0.05% for the last 5 year while its net income dwindled 17.61% in last 5 year (CAGR).

The company is exempted from paying taxes on income from power generation for fifteen years from the date of commercial production which is on
12 November, 2008.

EPS for the period 2015 plunged 13% in consequence of issuing Ijara Bond since financial expense shoot up 7% in 2015 compared to the previous
fiscal.
In the year 2012-13 the management of the company has reviewed the useful lives of overhauling equipment's and assigned a depreciation rate of 20%
which was previously 3.33%.

Ownership structure & Lock in Provision

The directors hold 75.0% of the total share of the company. Rest of the shares are held by external shareholders.
Presently DPGSL has 60,000,000 outstanding shares which is subjected to a lock in provision of three years. The lock in ends at 13 January,
2018.

Ownership Position & Number of Shares Hold

Nomination
Asian Entech power
corporation

DPGSL
DPGSL
DPGSL
DPGSL

Name
Tahzeeb Alam
Tanzeer Alam
Arvinda Gupta
Parveen Alam
Anjabeen Alam
Others

Position
Managing Director
Director
Shareholder
Director
Director
Shareholder

Share Capital

% of Share Capital

57,545,450
54,550
1,900,000
491,810
8190

71.93%
.07%
2.38%
0.61%
0.001%

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