DESCO endures record loss as foreign debt repayment balloons but profit shrinks

Dhaka Electric Supply Company (DESCO) endured record loss in FY23 for selling electricity with a narrow profit margin and for the faltering taka against the dollar.

Electricity distribution to the consumer level resulted in a loss of Tk 1.13 billion in the fiscal year since the profit made could not cover the expenses, according to the financial statements published on Monday.

On top of that, DESCO had to pay much higher against its foreign debts as the taka lost value against the dollar in the year, expanding the annual loss.

The state-owned electricity distributor has reported a loss of Tk 5.41 billion for FY23 as against a profit of Tk 667 million for the year before.

Managing Director Kausar Ameer Ali said they purchased bulk electricity from the Bangladesh Power Development Board (BPDB) at a much higher rate, compared to the previous fiscal year, but could not increase the prices at the consumer level as much.

The bulk price at which DESCO buys power jumped more than 28 per cent to Tk 6.70 per kilowatt since November last year in two phases while the retail price at which it charges consumers rose about 15 per cent to Tk 7.86 in three phases since January this year.

The state-run power distributor was in profit until the first half of the fiscal year despite a marginal loss in the second quarter due to the bulk price hike in November.

The third quarter through March this year witnessed a loss of Tk 1.45 billion. The quarterly loss escalated in the fourth quarter to Tk 4.04 billion.

Other power distribution companies, including Dhaka Power Distribution Company, West Zone Power Distribution Company, Northern Electricity Supply Company and Bangladesh Rural Electrification Board, are in similar business turmoil.

However, DESCO's 80 per cent loss came from foreign exchange transaction loss. Loans taken from foreign lenders must be paid in dollars. The company earns in taka but pays back foreign debts in dollars.

The US dollar has appreciated more than 30 per cent against the taka since February last year, making DESCO pay Tk 4.28 billion in excess to the lenders in FY23.

DESCO has more than Tk 29 billion in foreign loans, including debts from the Asian Development Bank, Japan International Cooperation Agency, and Asian Infrastructure Investment Bank.

An official of DESCO requesting not to be named said that when they had taken out the loans the exchange rate was around Tk 82 per dollar. The rate has been elevated to Tk 109 to Tk 110, leading to the additional cost.

"If the electricity price at the consumer level is not raised and the local currency continues to lose value against the dollar, it will be difficult [for DESCO] to come back to profit in the coming quarters," the DESCO official said, requesting for anonymity.

The company's electricity sales revenue increased 14 per cent year-on-year to Tk 53.72 billion in FY23, as consumption and the number of users rose, but distribution revenue slumped almost 49 per cent year-on-year to Tk 2.68 billion.

The loss per share has been estimated at Tk 13.61 for FY23, as opposed to a profit of Tk 1.59 per share for the year before.

Despite enduring the huge loss, the company will pay 10 per cent cash dividend only to general shareholders, which is approximately Tk 128.58 million.

The money will come from the company's reserves of Tk 22.21 billion.

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