United Power's profit hits new high, yet investors react to restrained dividend

United Power Generation & Distribution Company has posted an impressive 48 per cent year-on-year growth in profit to Tk 11.98 billion in FY25 - the highest annual profit since its listing.

It attributed the profit increase to higher production, a hike in bulk tariffs, stable foreign exchange rates, and lower finance expenses.

The company's consolidated earnings per share (EPS) rose to Tk 20.66 in FY25 from Tk 14.01 a year ago, according to its audited financial statements.

The board of directors has declared a 65 per cent cash dividend for the year, up from the 60 per cent paid for FY24. Investors will therefore receive Tk 6.50 per share out of the Tk 20.66 earned per share in FY25, meaning the company will retain most of its earnings.

United Power has remained consistent in distributing dividends - between 60 per cent and 170 per cent annually - over the past five years, supported by stable earnings and strong cash flows.

Revenue from the sale of electricity also grew 12 per cent year-on-year to Tk 39.08 billion in FY25 as demand increased amid the bulk price hike.

The government in March last year raised the bulk electricity price by 5 per cent on average to Tk 7.04 per unit. The average retail price was also increased from Tk 8.25 to Tk 8.95 per unit.

United Power stands out among its peers, driven by factors such as long-term power purchase agreements (PPAs) with its clients and increased revenue from key government establishments and export processing zones, industry insiders say.

"Due to its medium- to long-term power supply agreements, United Power benefits from a stable revenue stream with predictable cash flows," said EBL Securities in its equity analysis.

United Power operates eight power plants - six gas-fired and two heavy fuel oil-based - across the country, with a total production capacity of 895 megawatts.

It is the country's first commercially independent power producer (IPP) and the only power producer authorised by the Bangladesh Export Processing Zones Authority (BEPZA) to operate within Export Processing Zones (EPZs), giving it a unique, competition-free position.

Unlike other private power producers, two of United Power's plants in the export processing zones of Dhaka and Chattogram sell electricity directly to factories at negotiated prices.

"This exclusivity - coupled with long-term power purchase agreements (PPAs) and a stable industrial client base - distinguishes it from other IPPs exposed to demand volatility and shorter contract terms," said EBL Securities.

The company has a 30-year power supply agreement with BEPZA, extendable by another 30 years, while five of its power plants have power purchase deals signed with the Bangladesh Power Development Board for different tenures.

The company is yet to make the detailed financial statements for FY25 public.

However, revenue from the Bangladesh Rural Electrification Board, Bangladesh Export Processing Zones, and the Bangladesh Power Development Board increased 53 per cent, 28 per cent and 15 per cent respectively year-on-year in the nine months through March this year.

Another factor that boosted profits was a reduction in finance expenses after partial clearance of high-cost loans. Finance expenses fell sharply to Tk 0.71 million in the nine months to March this year from Tk 517 million in the same period last year.

United Power will hold its annual general meeting on December 30. The record date for entitlement to dividends is set for November 17.

Listed in 2015, United Power is the ninth-largest stock by market capitalisation - Tk 83.88 billion as of Monday.

Investors, frustrated by the relatively low dividend declaration despite record profits, dragged the company's share price down 7.6 per cent to Tk 133.7 per share on the Dhaka Stock Exchange on Monday.

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