KHULNA POWER COMPANY LIMITED Disclaimer: The contents of this presentation are entirely based on disclosures made by the Company. Therefore, DSE does not assume any responsibility on the authenticity of the facts and figures presented thereof. (If there is any contrary information please communicate with DSE through e-mail: listing@dsebd.org)

Brief Overview of the Company: 1.Date of Incorporation : 15th October, 1997

2.Date of Commencement of Business : October, 1998.

3.Authorized Capital : TK. 5,000 mn.

4.Paid up Capital : Tk.2,085.93 mn. (As on 15.06.09)

5.Business : To own and operate barge mounted power plants in Khulna and supply electricity to the national grid of Bangladesh. 6. Offloading of 5,21,48,250 Ordinary shares of Tk. 10.00 each.

7. Issue Manager : AAA Consultants & Financial Advisers Limited. 8. Auditor : Rahman Rahman Huq

Khulna Power Company Ltd. (KPCL) At a glance

Information about the Company Background In 1997 the Bangladesh Power Development Board (BPDB) was faced with the challenge to ease a critically short power supply in the South Western Zone of Bangladesh. The electrical demand had been consistently higher than available capacity, and generation costs in the area had been very high due to the low efficiency of existing equipment and the heavy use of expensive, low-availability fuel. In October 1997, BPDB signed a Power Purchase Agreement with Khulna Power Company Ltd. for a 110 MW floating base load power plant at Khulna, to help ease the electricity shortage. Description Khulna Power Company Ltd. is a public limited company which was incorporated as a private limited company in Bangladesh on October 15, 1997. Its paid up capital is BDT 2085.93 million (US$ 44.10 million) It is the first independent 110MW barge-mounted power plant that commenced operation in October 1998 under a 15 year PPA from the government (expiry 2013). When established, KPCL shareholders were Coastal Power Company (later Coastal was merged with El Paso Corporation, USA) through its direct wholly-owned subsidiary El Paso Power Khulna Power Aps., Summit Industrial & Mercantile Corporation (Pvt.) Ltd. (Bangladesh), United Enterprises Co. Ltd. (Bangladesh) and Wärtsilä WDFS (Asia). Now only local shareholders hold 100% ownership of the company. KPCL project was initially financed by the IFC and the sponsors’ equity with a debt-to-equity ratio of 54:46. The total initial project cost was USD 96.07 million The principal activity of KPCL is to own and operate barge mounted power plants in Khulna and supply electricity to the national grid of Bangladesh. The plant came into operation in October 1998. Nine engines generators are mounted on one barge and ten on the other. The barges, shipped as deck cargo on a submersible dry tow ship, are moored in a closed basin. Each barge is approximately 91 meters long and 24 meters wide. These two barge-mounted plants were connected to the national grid. The plant consumes about 600 MT of Heavy Fuel Oil daily to generate 110 MW power by the 19 generators on the two barges located in Khalishpur, Khulna. The project was one of the first IPPs implemented under the then new Government of Bangladesh guidelines for private power projects. As Bangladesh has enjoyed steady growth in recent years, the infrastructure to supply electricity to the economy has not kept pace with this growth. Reliability of electricity supply, which has been a growing problem over the years, has now reached crisis proportions. Peak demand is about 5500-6000 MW, whereas available generation is about 4200-4500 MW. The demand supply imbalance has now become a major bottleneck to economic growth. The Khulna power project is a fast-track response to the power shortage.

KPCL plant was designed to alleviate the severe power shortages in the Khulna and adjacent areas, identified as industrial growth Centres by the Government of Bangladesh, while improving the overall reliability of the country's power supply. The facility displaced the generating capacity of the older, less efficient, and high-cost plants in the region. The plant conformed to all applicable environmental standards. The plant has already changed the economy of the adjacent region directly and positively. It has provided employment to over 110 people from the surrounding areas and many of the jobs are technical and managerial in nature. Significant numbers of jobs have been created at the fuel terminal, barges, restaurants, transportation services, and other ancillary businesses created to serve the needs of the plant. New industrial and commercial establishments have been opened to take advantage of the stable and reliable power, and existing establishments do not require back-up generators. In addition, the plant has contributed significant funds toward social causes in the region. The plant is managed by the O&M operator – Wärtsilä, a globally recognized power plant manufacturer and operator. A team of skilled technical people are engaged in the operations of the plant. The operational process has been developed by an expert team. For any technical assistance, the equipment suppliers extend their support, this is backed by other consultants support as and when needed. Management team is professional and has a successful track record and possesses requisite expertise to run the operations. KPCL financials is audited by Rahman Rahman Huq, a member of KPMG. The company has shown stable performance with steady sales as in any typical utility companies. The company has received a power tariff of BDT 7.30/kWh during the January – June 2009 period, whereas it received a tariff of BDT 10.51/kWh during the January – June 2008 period. The differences between the period was due to tariff slabs variation of cost of fuel and foreign currency rate. This is an environmental review category B project. Environmental and social issues associated with the project include: site selection and land use, site contamination from past activities, air emissions and noise from construction and plant operation, liquid effluents, liquid and solid waste disposal, oil transportation safety and spill potential, social impacts, fire prevention and emergency response, employee health and safety programs, and impact management and monitoring. KPCL has prepared an environmental assessment for the project to address these issues and demonstrate that the proposed project will comply with applicable governmental and World Bank requirements. The proposed site for the project was identified by BPDB in their RFP for the project. The project is located on an uninhabited, vacant property owned by PADMA, the state oil company. No resettlement of residents or economic displacement was required. Expansion plan During establishment of the company, the project concept envisaged expansion. KPCL is now discussing the next expansion plan of the company with BPDB, which the management wants to finalize within one year. The experience gathered by the management during the implementation of initial 110 MW project will be applied for formulating new strategy in tariff determination and operation of the future projects. Accordingly management took the strategy of

negotiating with BPDB for the revised Power Purchase Agreement (PPA) and other project documents for easy operation, maintenance and better return of the expansion project. Accordingly the BPDB and KPCL have been considering the agreements to expand the capacity of its Berge Mounted Power Plant to land based power plant. With the area of its leasehold property, KPCL wants to install additional 100 MW capacities with power generating engines. The strategy is to generate and produce more electricity by using fewer engines. The expansion plan will be for 22 years effective from Commercial Operation Date. DIRECTORS AND OFFICERS Name and Position of all Directors:

Name of The Directors Position Mr. Muhammed Aziz Khan Chairman Mr. Hasan Mahmood Raja Managing Director Mr. Muhammed Farid Khan Director Mr. Anjuman Aziz Khan Director Mr. Md. Latif Khan Director Ms. Ayesha Aziz Khan Director Mr. Jafer Ummeed Khan Director Mr. Ahmed Ismail Hossain Director Mr. Khandaker Moinul Ahsan Shamim Director Mr. Akhter Mahmud Rana Director Mr. Faridur Rahman Khan Director Mr. Abul Kalam Azad Director Mr. Moinuddin Hasan Rashid

Director

Involvement of Directors with Listed Company in terms of Dividend & Category:

Name of The

Director

Name of Listed Company where Directors are involved

Position Listing Category

in DSE/CSE

Mr. Muhammed Aziz Khan

Summit Power Limited Chairman A

Mr. Muhammed Farid Khan

Summit Power Limited Director A

Mr. Anjuman Aziz Khan

Summit Power Limited Summit Alliance Port Limited

Managing Director

Chair Person A Mr. Md. Latif Khan Summit Power Limited Director A

Summit Alliance Port Limited

Ms. Ayesha Aziz Khan Summit Power Limited Summit Alliance Port Limited

Director A

Ms. Adeeba Aziz Khan Summit Alliance Port Limited

Director

Mr. Jafer Ummeed Khan

Summit Power Limited Executive Director A

Involvement of Directors with another Company: Summit Group

Name of The Director and associated Companies

Position

Mr. Muhammed Aziz Khan

Summit Industrial & Merchantile Corporation Pvt. Ltd.

Chairman & Managing Director

United Summit Coastal Oil Ltd. Chairman Summit Shipping Ltd. Chairman Summit Properties & Construction Co. (pvt.) Ltd.

Director

Cosmopolitan Traders (pvt) Ltd. Chairman Summit Equities Limited Chairman Khulna Power Company Ltd. Chairman Ocean Container Ltd. Chairman Summit Pipeco Ltd. Chairman Baridhara Properties Ltd. Chairman Summit Alliance Port Ltd. Chairman Summit Power Limited Chairman Alliance Leasing and Finance Co. Ltd. Director Summit Electricity Limited Chairman Summit Euro Refinery Ltd. Chairman Summit Purbanchol Power Co. Ltd. Chairman Summit Uttaranchal Power Co. Ltd. Chairman Summit Holdings Limited Chairman Summit Investment Limited Chairman

Mr. Muhammed Farid Khan

Summit Corporations Director Summit Industrial & Mercantile Corporation Pvt. Ltd.

Director

Summit Pipeco Ltd. Director Cosmopolitan Traders (Pvt.) Ltd. Director

Summit Properties & Construction Co. (Pvt.) Ltd.

Director

Ocean Container Ltd. Director Summit Shipping Ltd. Director Baridhara Properties Ltd. Director Summit Power Limited Vice Chairman Summit Alliance Port Ltd. Director Alliance Leasing and Finance Co. Ltd. Director Summit Holdings Limited Director Summit Electricity Limited Director Summit Euro Refinery Ltd. Director Summit Purbanchol Power Co. Ltd. Director Summit Uttaranchal Power Co. Ltd. Director Khulna Power Company Ltd. Director Summit Communications Limited Director Summit Investment Ltd. Director

Mr. Anjuman Aziz Khan

Summit Power Limited Managing Director Summit Properties & Construction Co. (Pvt.) Ltd.

Director

Cosmopolitan Traders (Pvt.) Ltd. Director Ocean Container Ltd. Shareholder Summit Pipeco Ltd. Director Summit Equities Limited Director Baridhara Properties Ltd. Director Summit Alliance Port Ltd. Chair Person Summit Shipping Ltd. Director Summit Electricity Limited Director Summit Euro Refinery Ltd. Director Summit Industrial & Mercantile Corporation Pvt. Ltd.

Director

Summit Purbanchol Power Co. Ltd. Director Summit Uttaranchal Power Co. Ltd. Director Khulna Power Company Ltd. Director Summit Holdings Limited Director Alliance Terminal Limited Director

Mr. Md. Latif Khan

Summit Industrial & Mercantile Corporation Pvt. Ltd.

Managing Director

Cosmopolitan Traders (Pvt.) Ltd. Director Summit Shipping Ltd. Director Baridhara Properties Ltd. Director Syenergey Services Director Summit Purbanchol Power Co. Ltd. Director Summit Uttaranchal Power Co. Ltd. Director Khulna Power Company Ltd. Director Summit Power Limited Director Summit Alliance Port Ltd. Director

Ocean Container Ltd. Director Alliance Terminal Limited Director Sumcynet Limited Chairman Summit Communications Limited Director Summit Holdings Limited Director

Ms. Ayesha Aziz Khan

Summit Equities Limited Shareholder Summit Industrial & Mercantile Corporation Pvt. Ltd.

Director

Summit Surma Petroleum Co. Ltd. Director Cosmopolitan Traders (pvt) Ltd. Director Summit Shipping Ltd. Director Khulna Power Company Ltd. Director Summit Power Limited Director Ocean Container Ltd. Shareholder Baridhara Properties Ltd. Director Summit Alliance Port Ltd. Director

Ms. Adeeba Aziz Khan Summit Industrial & Mercantile Corporation Pvt. Ltd.

Director

Summit Alliance Port Ltd. Director Alliance Terminal Limited Director Ocean Container Ltd. Director Summit Communications Limited Director Summit Holdings Limited Director Khulna Power Company Ltd. Director

Mr. Jafer Ummeed Khan

Summit Industrial & Merchantile Corporation Pvt. Ltd.

Director

Khulna Power Company Ltd. Director Summit Power Limited Executive Director

United Group

Name of The Director and associated Companies

Position

Mr. Hasan Mahmood Raja United Enterprises & Co. Ltd. Chairman & Managing

Director United International University Chairman & Board of

Governors Malancha Holdings Ltd. Chairman & Managing

Director Khulna Power Company Ltd. Managing Director United Makkah Madina Travel & Associate Co. Ltd.

Chairman

United Hospital Ltd. Chairman Neptune Commercial Ltd. Chairman Comilla Spinning Mills Ltd. Director United Management & Trading Services Ltd. Director

United Polymers Ltd. Chairman United Rotospin Ltd. Chairman Neptune Land Development Ltd. Chairman United Land Port Teknaf Ltd. Chairman Neptune Properties Ltd. Director Novo Healthcare And Pharma Ltd. Chairman Hafez Zamiruddin Fisheries Ltd. Chairman Gulshan Properties Ltd. Chairman

Mr. Ahmed Ismail Hossain United Enterprises & Co. Ltd. Director United International University Member, Board of

Governors Malancha Holdings Ltd. Director Khulna Power Company Ltd. Director United Makkah Madina Travel & Associate Co. Ltd.

Director

United Hospital Ltd. Vice Chairman Neptune Commercial Ltd. Director Comilla Spinning Mills Ltd. Managing Director United Management & Trading Services Ltd. Director United Polymers Ltd. Director United Rotospin Ltd. Managing Director Neptune Land Development Ltd. Director United Land Port Teknaf Ltd. Director Neptune Properties Ltd. Director Novo Healthcare And Pharma Ltd. Managing Director Hafez Zamiruddin Fisheries Ltd. Director Gulshan Properties Ltd. Director Chicken King International (BD) Ltd. Chairman KMC Global Food Ltd. Chairman Bari Studio Ltd. Director Sight and Light Director BM Cine Lab Services Director

Mr. Khandaker Moinul Ahsan Shamim United Enterprises & Co. Ltd. Director United International University Member, Board of

Governors Khulna Power Company Ltd. Director United Makkah Madina Travel & Associate Co. Ltd.

Director

United Hospital Ltd. Director Neptune Commercial Ltd. Director Comilla Spinning Mills Ltd. Director United Management & Trading Services Ltd. Director United Polymers Ltd. Director United Rotospin Ltd. Director Neptune Land Development Ltd. Director United Land Port Teknaf Ltd. Director Neptune Properties Ltd. Director Novo Healthcare And Pharma Ltd. Director

Hafez Zamiruddin Fisheries Ltd. Managing Director Gulshan Properties Ltd. Director

Mr. Akhter Mahmud Rana

United Enterprises & Co. Ltd. Director United International University Member, Board of

Governors Malancha Holdings Ltd. Director Khulna Power Company Ltd. Director United Makkah Madina Travel & Associate Co. Ltd.

Director

United Hospital Ltd. Director Neptune Commercial Ltd. Director Comilla Spinning Mills Ltd. Director United Management & Trading Services Ltd. Director United Polymers Ltd. Director United Rotospin Ltd. Director Neptune Land Development Ltd. Director United Land Port Teknaf Ltd. Director Neptune Properties Ltd. Director Novo Healthcare And Pharma Ltd. Director Hafez Zamiruddin Fisheries Ltd. Director Gulshan Properties Ltd. Director

Mr. Faridur Rahman Khan United International University Member, Board of

Governors Malancha Holdings Ltd. Director Khulna Power Company Ltd. Director United Hospital Ltd. Managing Director Neptune Commercial Ltd. Director Comilla Spinning Mills Ltd. Director United Management & Trading Services Ltd. Director United Polymers Ltd. Director United Rotospin Ltd. Director Neptune Land Development Ltd. Director United Land Port Teknaf Ltd. Director Neptune Properties Ltd. Managing Directors Novo Healthcare And Pharma Ltd. Director Hafez Zamiruddin Fisheries Ltd. Director Gulshan Properties Ltd. Director

Mr. Abul Kalam Azad United International University Member, Board of

Governors Malancha Holdings Ltd. Director Khulna Power Company Ltd. Director United Hospital Ltd. Director Neptune Commercial Ltd. Director Comilla Spinning Mills Ltd. Director United Polymers Ltd. Director Neptune Properties Ltd. Director United Rotospin Ltd. Director

Neptune Land Development Ltd. Managing Director United Land Port Teknaf Ltd. Managing Director Novo Healthcare And Pharma Ltd. Director Hafez Zamiruddin Fisheries Ltd. Director Gulshan Properties Ltd. Director

Mr. Moinuddin Hasan Rashid United Enterprises & Co. Ltd. Director United International University Member, Board of

Governors Malancha Holdings Ltd. Director Khulna Power Company Ltd. Director United Makkah Madina Travel & Associate Co. Ltd.

Director

United Land Port Teknaf Ltd. Director Family relationship between the directors and officers:

Name of the

Director/officer Relationship

Mrs. Anjuman Aziz Khan Wife of Muhammed Aziz Khan, Chairman Mr. Md. Latif Khan Brother of Muhammed Aziz Khan, Chairman Mr. Md. Farid Khan Brother of Muhammed Aziz Khan, Chairman Ms. Ayesha Aziz Khan Daughter of Muhammed Aziz Khan, Chairman Ms. Adeeba Aziz Khan Daughter of Muhammed Aziz Khan, Chairman Mr. Jafer Ummeed Khan Brother of Muhammed Aziz Khan, Chairman Mr. Akhter Mahmud Rana Brother of Mr. Hasan Mahmood Raja, Managing

Director Mr. Moinuddin Hasan Rashid

Son of Mr. Hasan Mahmood Raja, Managing Director

Mr. Md. Abdur Rahim, Project Director

Uncle of Mr. Hasan Mahmood Raja, Managing Director

Ownership The ownership structure of KPCL is as follows:

Summit Industrial and Mercantile Corporation (Pvt.) Ltd. 49.9832% United Enterprises & Co. Ltd. 49.9832% Others 0.0336%

Principal Product or Service of the Company: KPCL is engaged in business of generation of electricity and sells the same in bulk to BPDB through its national transmission grid and BPDB distributes the energy in the south-western region of Bangladesh. Ownership Pattern KPCL is now fully owned by the local entrepreneur group, namely – Summit Industrial and Mercantile Corporation (Pvt.) Ltd. and United Enterprises & Co. Ltd.

However, the Khulna Power Project was originally developed by a consortium led by Wärtsilä Corporation (“Wärtsilä”) with which BPDB signed a Power Purchase Agreement (“PPA”). Wärtsilä is a leading manufacturer of medium speed diesel engines and had successfully developed similar power projects at several locations worldwide. Coastal Power Company, a wholly owned subsidiary of The Coastal Corporation (“Coastal”), joined the consortium in August 1998. Thereafter, Coastal and El Paso Energy Corporation merged in January 2001 to form El Paso Corporation (“El Paso”). El Paso is one of the world’s largest and most diversified natural gas exploration and pipeline companies with an enterprise value in excess of $50 billion. As the major equity holder in KPCL with 73.9% interest, El Paso was responsible for the management of the Plant up to April, 2008. The local Directors are Summit Industrial and Mercantile Corporation (Pvt.) Ltd. (“Summit”) and United Enterprises & Co. Ltd. (“United”). Summit is an investment group with significant holdings in liquid fuel storage terminals. It is also an investor in six Rural Electrification Board (“BPDB”) small power projects, gas pipeline construction on a build-transfer basis, liquid fuel shipping, and real estate construction. United has ownership in Bangladesh’s largest private liquid product bulk storage terminal, real estates, and one of the largest Hospitals and a private University. It has implemented several BPDB small power projects, and has worked very closely with Summit. Summit and United have contributed a combined 20% of the Project’s equity. The sponsors have invested total equity capital of US$ 44 million, with 73.9% ownership by El Paso Energy; 10% by Summit Industrial and Mercantile Corporation (Pvt.) Ltd.; 10% by United Enterprises & Co. Ltd.; and 6.1% by Wärtsilä. But changes were made in the Ownership Structure as El Paso Corporation, as part of its global repositioning strategy, offered its stake of 73.9% in KPCL for sale. Reportedly CDC Globeleq has principally agreed to purchase El Paso's interests in Asia on a portfolio basis (Bangladesh, Indonesia, Pakistan, Philippines). However, for sale of shares in the company per terms of the shareholders' agreement allows existing shareholders first right of refusal and therefore local shareholders – Summit Industrial & Mercantile Corporation (Pvt.) Ltd. and United Enterprises & Co. Ltd. have expressed interest to purchase El Paso's 73.9% stake in KPCL, at the offered price of CDC Globeleq. Consequently, Summit and United jointly acquired El Paso shareholding and later Wärtsilä’s share was also acquired by Summit and United.

Performance at a Glance:

BDT in million

Particulars 31.12.04 31.12.05 31.12.06 31.12.07 31.12.08 30.06.09 (6 Months Ended)

Operating Revenue 2774.54 4243.76 6311.05 5698.2 8160.42 2993.70 Growth 52.95% 48.71% -9.71% 43.21% N/A Operating Expense 2157.36 3714.26 5762.52 5154.66 7664.82 2611.79 Growth 72.17% 55.15% -10.55% 48.70% N/A Gross Profit 617.18 529.50 548.53 543.54 495.60 381.91 Growth -14.21% 3.59% -0.91% -8.82% N/A Other Income

1.32

4.43

5.04

9.83

3.50

91.48

Growth 234.97% 13.76% 95.14% -64.38% N/A Financial Charges 185.08 195.60 200.69 156.99 177.91 7.13 Growth 5.69% 2.60% -21.78% 13.33% N/A Net Profit for theyear

341.81 240.23 256.18 309.17 272.52 437.51

Growth -29.72% 6.64% 20.68% -11.85% N/A Retained Earnings 602.84 682.46 912.73 1221.91 294.43 409.92

Growth

-

13.21%

33.74%

33.87%

-75.90%

N/A

EPS (As reported bythe company) ForClass A Shareconsidering facevalue of TK. 1,000per share

151.58

102.06

110.47

141.27

87.62

175.90

Growth

-32.67%

8.24%

27.88%

-38.68%

N/A

EPS (Restatedconsidering paid upshares as on 19-07-2009 and facevalue of TK 10 pershare)

1.51

1.02

1.10

1.41

0.87

1.75

Growth - -32.45% 7.84% 28.18% -38.30% N/A

BDT in million

Particulars 31.12.04 31.12.05 31.12.06 31.12.07 31.12.08 30.06.09

(6 Months Ended)

Shareholders Equity 2688.78 2768.40 2998.67 3307.84 3480.37 3595.85 Ordinary Shares 20,85,930 20,85,930 20,85,930 20,85,930 20,85,930 20,85,930 Ordinary Shares ason 19.07.2009 208,593,000Total Assets 5134.64 6036.03 6730.60 6216.38 5222.19 4760.44

ROE 12.71% 8.68% 8.54% 9.35% 11.45% 17.53% ROA 6.66% 3.98% 3.81% 4.97% 5.22% 9.19%

Net Profit Margin 12.32% 5.66% 4.06% 5.43% 3.34% 14.61% Gross Profit Margin 22.24% 12.48% 8.69% 9.54% 6.07% 12.76% Asset Utilization 54.04% 70.31% 93.77% 91.66% 156.26% 62.89% Equity Multiplier 1.91 2.18 2.24 1.88 1.50 1.32 Total Debt to TotalAsset 32.42% 25.39% 18.49% 14.85% 1.63% 0.22% Total Debt to TotalCapital 38.24% 35.63% 29.33% 21.82% 2.39% 0.29% Interest Expense 185.08 195.60 200.69 156.99 177.91 7.13 EBIT 526.89 435.83 456.87 466.15 450.43 444.64 Time InterestEarned Ratio 2.85 2.23 2.28 2.97 2.53 62.36 Current Ratio 1.35 1.13 1.15 1.30 1.06 1.18

Quick Ratio

0.95

0.90

1.00

0.82

0.60

0.99

Net Asset Value 4353.63 4300.69 4243.07 4231.07 3565.47 3606.39 Net Asset Value PerShare

20.87

20.62

20.34

20.28

17.09

17.22

Debt Equity Ratio 0.93 0.88 0.75 0.59 0.05 N/A

TANGIBLE ASSETS PER SHARE As on June 30, 2009, the Net Tangible Asset Value per share stands at Tk. 497.27. The calculation of net assets value per share is given below:

As at 30 Jun 2009

2008

Particulars

Taka in million Taka in million Assets Property, plant and equipment, net 3,398.42 3,463.28 Total non-current assets 3,398.42 3,463.28 Inventories 221.00 762.73 Accounts receivable 1,036.18 885.78 Other receivables 8.01 8.01 Advances, deposits and prepayments 89.38 1.49 Cash and cash equivalents 7.45 100.90 Total current assets 1,362.02 1,758.91 Accounts payable 620.44 1,314.03 Working capital loan

293.70 284.00 Term loan - current maturity portion

- 30.88 Dividends payable

208.59 -

Preference stock dividends payable 14.18

-

Accrued expenses and others 31.49 13.47

Payable for interest and other financial charges - 14.34 Total current liabilities

1,168.41 1,656.72 Net current asset

193.61 102.19 Net assets employed

3,592.03 3,565.47 No. of Shares 208,593,000 208,593,000

Tangible Asset Value per Share 17.22 17.09

DESCRIPTION OF THE PROPERTY (1) Location of the power plant and other property and condition of such property: Corporate office of the company is situated at Summit Centre (5th Floor), 18 Karwan Bazar C/A, Dhaka-1215 and the power plant consists of 19 (Nineteen) 6.5 MW generating sets that are installed on Two Power Barges are situated at Goalpara, Khalishpur, Khulna. Such property is in good operating condition. (2) Ownership of property: Other than land, which is a leased property, the ownership of all the assets as per audited accounts for the year ended 30 June 2009, described below are in the name of the Company.

Particulars Amount in mn Taka

Power plant 3,396.95 Vehicles 0.75 Building and construction 0.33 Furniture and fixtures 0.06 Office equipment 0.33 Office renovation 0.000033 Total Written Down Value (6-month period ended 30 Jun'09) 3,398.42

All the machineries imported were in brand new condition. (3) Lien on property: 1. The company itself owns the entire fixed assets except the lease land. 2. The Plant & machinery and other assets of the company are mortgaged against the working capital loan to the following banks:

a) BRAC Bank Limited b) Citibank NA c) Pubali Bank Limited d) Shahjalal Islami Bank Limited e) Standard Bank Limited

The leasehold land is approximately 4.7 Acres of land having border on the north by Bhoirab River, on the east Goalpara Power Grid Station of Bangladesh Power Development Board (BPDB), on the west petroleum terminal of Padma Oil Co. The existing power plants are situated on the leasehold land. Details of leasehold lands are as follows:

Plant Address: Goalpara, Khalishpur, Khulna Owner of the land: Padma Oil Co. Ltd. Lessor: BPDB Rent payable: Taka 15.84 per square feet. Changes in Rent: Rent payment can be adjusted by 20% in each five years of the

contract

Changes in the assets used to pay off any liability: Cash disbursement of Tk. 13.89 mn was made during the accounting period ended 30th June 2009 to reimburse portion of the term loan. Estimated future capital expenditure: The management of KPCL is planning the next expansion program, when the current contract will be expired, for additional 100 MW with the Government of Bangladesh. But there is no plan capital expenditure in near future other than stated under caption ‘material commitment for capital expenditure.’ However, in the draft information document, page no: 25 under the head of ‘material commitment for capital expenditure.’ The company as reported as follows: KPCL doesn’t have any commitment made for future capital expenditure. Lease Details: The company is obligated under non-cancelable lease for use of land leased out by BPDB that are renewable on a periodic basis at the option of both lessor and lessee. During the period, rental expenses under non-cancelable operating leases aggregated Tk. 1.68 mn (Jan-Jun 2008: Tk. 1.86 mn). The future minimum lease payments in respect of operating leases as at 30 June 2009 are as follows:

Particulars 30-Jun-09 31-Dec-08 31-Dec-07

Amount due: Taka Taka Taka

Not later than one year 3.24 3.24 3.24 Later than one year but not later than five years 13.94 13.30 12.97 Later than five years 1.95 5.84 7.78

OWNERSHIP OF COMPANY’S SECURITIES: Ownership List of shareholders who owns 5% or more than 5% share of the Company:

Name of the Shareholder Entity Numbers of Share

%

1. Summit Industrial & Mercantile Corporation (Pvt.) Ltd.

10,42,612 49.9832%

2. United Enterprise & Company Limited 10,42,612 49.9832%

The shareholding position of ordinary shares (As at 30 Jun 2009) Name of shareholders

Class A Shares

Class B Shares

Total Shares

Face Value

Total value

% Of Shareholding

(No.) (No.) (No.) (Taka) (Taka) 49.9832% 1,042,612 3 1,042,615 1,000 1,042,615,000

Summit Industrial & Mercantile Corporation (Pvt.) Ltd. (Incorporated in Bangladesh)

49.9832% 1,042,612 3 1,042,615 1,000 1,042,615,000 United Enterprises & Company Ltd. (incorporated in Bangladesh)

Muhammed Aziz Khan 0.0024% 50 - 50 1,000 50,000 Anjuman Aziz Khan 0.0024% 50 - 50 1,000 50,000 Latif Khan 0.0024% 50 - 50 1,000 50,000 Muhammad Farid Khan 0.0024% 50 - 50 1,000 50,000 Jafer Ummeed Khan 0.0024% 50 - 50 1,000 50,000 Ayesha Aziz Khan 0.0024% 50 - 50 1,000 50,000 Adeeba Aziz Khan 0.0024% 50 - 50 1,000 50,000 Hasan Mahmood Raja 0.0024% 50 - 50 1,000 50,000 Ahmed Ismail Hossain 0.0024% 50 - 50 1,000 50,000 K.M. Ahsan Shamim 0.0024% 50 - 50 1,000 50,000 Akhter Mahmud Rana 0.0024% 50 - 50 1,000 50,000 Faridur Rahman Khan 0.0024% 50 - 50 1,000 50,000 Abul Kalam Azad 0.0024% 50 - 50 1,000 50,000 Moinuddin Hasan Rashid 0.0024% 50 - 50 1,000 50,000

On 12 June 2009, the entire shares (Class A and Class B) of Wartsila Development & Financial Services (Asia) Ltd. have been transferred equally to Summit Industrial & Mercantile Corporation (Pvt.) Ltd. (Summit) and United Enterprises & Company Ltd. (United). As a result, the shareholding position of Summit and United was increased to 50.00 percent from 46.95 percent each. Further on 22 June 2009, Summit and United each have transferred 350 shares in favor of above 14 individuals at fifty numbers of Class-A shares each.

Details of Preference Shares

The company issued 1,100,000 redeemable cumulative class 'A' preference shares to the above shareholders on 14 May 2008. These shares, under ordinary circumstances, are redeemable in five annual equal installments of 220,000 shares starting from 14 May 2010, the second anniversary of the issue date.

As at 30 Jun 2009 2008 Name of shareholders

Number of

Shares Face value

Taka Total value Taka mn

Total value Taka mn

The City Bank Limited 600,000 1,000 600.00 600.00 Pubali Bank Limited 200,000 1,000 200.00 200.00 One Bank Limited 200,000 1,000 200.00 200.00 Trust Bank Limited 100,000 1,000 100.00 100.00 1,100,000 1,100.00 1,100.00 RISK FACTORS AND MANAGEMENT PERCEPTION ABOUT RISK: As with all investments, investors should be aware that there are some risks associated with an investment in the Company. The investors should carefully consider the following risks in addition to the information contained in the prospectus for evaluating the offer and taking decision whether to invest in shares of the company.

a) Interest Rate Risk: Interest/financial charges are paid against any kind of borrowed fund/ preference shares. Instability in money market and increased requirement for fund may put pressure on interest rate structure. Rising of interest rate increases the cost of borrowed fund and consequently it may impact on the profitability. Management Perception: Currently, KPCL has working capital debt obligation from several banks and preference shares, which are comprised with fixed financial charges. But the Company has solid revenue source and is highly profitable. The rate for the financial charges are fixed so, KPCL doesn’t have such risk.

b) Exchange Rate Risk: KPCL imports mostly fuel against payment of foreign currency. Unfavorable volatility or currency fluctuation may affect the profitability of the company. Management Perception: KPCL is fully aware of the risk related to currency fluctuation but practically doesn’t possess any foreign exchange risk as 99% of the Other Monthly Tariff (OMT)is convertible and fuel is being imported through L/C and the exchange rate Sonali Bank Ltd. is acceptable to BPDB under pass through payment process. Moreover, KPCL executes favorable and competitive foreign exchange rate from its bankers against its L/C payments.

c) Industry Risk: The supply of electricity and alternative energy is not adequate than the demand of it. For that reason organizations engaged in generating electricity can’t provide all required amount of electricity. Power companies mainly supply electricity to national power distributors to supply electricity. Management Perception: KPCL supplies electricity to BPDB in the south-western region of Bangladesh and it’s a dedicated power plant with a guaranteed payment from

BPDB and GoB under the PPA. So, possibilities of entering new power companies wouldn’t create any industry risk for the company.

d) Market and technology related Risk: Technology is related to generation, transmission, distribution, quantity measuring and maintaining of required electricity generation. Management Perception: The Company is operated by the plant manufacturer, Wärtsilä, the leading power plant manufacturer and plant operator in the world. Wärtsilä is technologically advanced enough to keep KPCL plant out of such risk.

e) Potential or existing Government regulation: The business activities of KPCL is fully controlled by policies, rules and regulation framed by government, that is policies related to electricity price fixation, demand & supply and distribution is fully under the control of Government. So, government policies in this regard may impact business operation of KPCL. Management Perception: The Power Purchase Agreement with BPDB safeguards KPCL from any changes in government regulation. The PPA agreement is valid for 15 years till 2013 and can be extended upon the consent of both parties. Moreover, in case of PPA termination, KPCL will get compensation under the agreement from BPDB or GoB. Additionally, the huge shortage of power in the country minimizes the chances of terminating the PPA agreement that mitigates related risks.

f) Potential changes in the global or national policies, natural calamities etc: The performance of the company may be affected due to unavoidable circumstances in Bangladesh, as such political turmoil, war, terrorism, political unrest in the country may adversely affect the economy in general. Moreover, Natural disasters like Cyclone, Tide, and Earthquake may hamper normal performance of power generation. Management Perception: The risk due to changes in global or national policies is beyond control for any company. Yet the company is well prepared for adoption of policies and preventive measures as and when required to reduce the risk. The routine & proper maintenance of the distribution network undertaken by BPDB reduces major disruption due to natural calamities. But severe natural calamities, which sometimes are unpredictable and unforeseen, have the potential to disrupt normal operations of KPCL. But with prudent rehabilitation schemes and the very effective and quick repair and maintenance lessened the damages caused by such disasters. Political unrest leading to strikes, hortals etc. certainly plays negative impact in any business. But electricity service being considered a daily necessity & in consideration of its use by all irrespective of their political thoughts is always kept out of obstructions. Furthermore, all such above risks are covered under the insurance agreement with CODAN Marine (a subsidiary of RSA Group) to compensate the damages due to such uncertainties in extreme cases. Thus, the risk due to natural calamities & political unrest is minimized.

g) Operational Risk:

Risk associated with limited tenure of the present Power Purchase Agreement: The tenure of the present PPA between the Company and BPDB is limited to 15 (fifteen) years from the date of commercial operation i.e. till 13th October 2013. Management Perception: On the backdrop of development need for the economy, power generation is one of the priority sectors of the government. With the existing deficit in power generation capacity, the government is expected to continue with the same policy level support for the sector. Dispute with any one operator may lead to adverse repercussions throughout the industry. As such, no major dispute with the government is envisaged. There is a provision in the PPA for enhancement of the project life. BPDB and KPCL have been considering to expand the capacity of the Berge Mounted Power Plant utilizing the area of its leasehold property, KPCL wants to install additional 7 generation units with the capacity of 15 MW each to generate total 100 MW. The strategy is to generate and produce more electricity by using fewer big engines with higher fuel efficiency.

Risk associated with single party exposure: The BPDB is the single buyer who purchases total electricity generated by the Company. The Company’s ability to service its both existing and future financial obligations rest on the BPDB’s ability to meet the tariff payments under the PPA. Management Perception: KPCL is out of the single party risk exposure as it is guaranteed by BPDB for the payment in case the plant runs lower than 50%. Moreover, L/C issued by BPDB for two months’ minimum guaranteed payment. Therefore, the Implementation Agreement signed by the Government through Ministry of Power, Energy and Mineral Resources is considered to be Government guarantee to protect the Company from single party risk exposure.

Risk associated with tariff of electricity: The BPDB is the single buyer who purchases total electricity generated by the Company. In these circumstances usually it is the buyer who may determine the tariff value of the electricity generated by the Company. Management Perception: In this case no risk is associated as BPDB and the Company have pre-determined and contracted the terms and condition regarding the tariff of electricity, expressed under two slabs – Other Monthly Tariff (OMT) and Fuel Tariff (FT) where OMT is based on delivered MWh and FT is pass through. Tariff for each year is adjusted and indexed from time to time in accordance with the PPA and the said Reference Tariff is used to calculate the Tariff in Effect for any Billing Month during the Term of the Agreement.

Risk associated with supply of raw materials: The main raw material for generating electricity is Heavy Fuel Oil (HFO). Any interruption of supplies of the fuel to the power plants will hamper the generation of electricity, the only product of the Company.

Management Perception: Kuo Oil Pte Ltd. Singapore has been supplying any Fuel Oil (HFO) to the Company through United Summit Coastal Oil Limited and the risk of price fluctuation in the global oil market is automatically done by the very FT structure which is based on fuel cost as a pass through item. Moreover, KPCL can source HFO from other sources of Kuo Oil is unable to supply.

Risk associated with supply of spare parts: The power plants are dependent on timely supply of spare parts for smooth operation purpose. Any disruption in supply flow of spares parts will put an adverse impact on power generation. Management Perception: Under the Operations & Maintenance Contract with Wartsila, the Company has signed a Spare Parts Support Agreement (SPSA). Wärtsilä also maintains sufficient spares parts inventory for smooth operation of KPCL plants. In addition, KPCL maintains safety spare parts stock of US$ 2 million.

Risk associated with payment: There is an impending risk in the case of delayed payment from BPDB. In case of any dispute with BPDB or failure to comply with certain rules and regulations, BPDB may stop making payments to KPCL resulting into non-payment to its lenders. Management Perception: KPCL is getting the payment regularly from BPDB. Sometimes, there are delays in payment but that is mainly due to administrative reasons. Till date, no payment has been defaulted. As per the PPA with BPDB, there is a penalty clause and BPDB needs to ensure minimum guaranteed payment supported by Letter of Credit. . Additionally, GoB through the Implementation Agreement provides sovereign guarantee with regard to payments, hence possibly mitigating risk of any non-payments.

Risk associated with systems failure and sabotage: System failure may take place resulting into damages for KPCL. Moreover, internal conflict among the workers and engineers may also disrupt operation. Management Perception: There is an agreement with the O & M Contractor and equipment supplier to provide maintenance and equipment support. Additionally, any equipment and mechanical support will be provided for in case the plant needs to be converted from a fuel based to a gas based plant. In addition, the company has prudent insurance coverage with CODAN Marine, which covers all risks package including Machinery Breakdown, Business Interruption, Third Party Liability, Sabotage and Terrorism.

h) Force Majeure: Force Majeure events are circumstances in which a delay in the performance of any obligation under the PPA is beyond the reasonable control, and occurs without the faults or negligence, of the parties concerned.

Management Perception: If the Company is affected by a Force Majeure event after commencement of commercial operation, the BPDB will only pay capacity components and energy components to the Company, to the extent that the unit is available. However, financial loss due to unavailability of the plant after a Force Majeure event will be mitigated by the Company’s insurance policy. If BPDB is affected by a Force Majeure event after commercial operation, it will pay the Company its debt servicing costs less insurance proceeds and / or any available capacity component and energy component received by the company during the Force Majeure period. In case of Political Force Majeure event or change in law, the BPDB will pay the Company, to the extent that the unit is available and the Government of Bangladesh will pay required amount to cover the capacity component up to 50%.

i) Risk associated with environmental pollution: KPCL plant operation may cause air and water pollution, which may affect the ecological balance and living condition and health of the people around the plant. Management Perception: The Operations and Maintenance (O&M) contractor of KPCL plant, Wärtsilä Bangladesh Ltd, Khulna Plant (WBD-KP) is responsible for environmental management of the project. Plant operation is certified by Bureau Veritas (BV) on: • Quality Management System (QMS) with ISO 9001 - 2008 • Environmental Management System (EMS) with ISO 9001 - 2004 • Occupational Health and Safety Administration System (OHSAS) 18001 - 2007 The EMS Manual covers all the elements that are required to be monitored for compliance of ISO 14001 and local Department of Environmental Guidelines. Under the EMS, ambient air quality by passive sampling method continuously, basin water quality and sanitary discharge tested on monthly basis and ambient noise level is measured on monthly basis, and is monitored for compliance. Quarterly reports, compiling all the test and measurement results are submitted to Department of Environment (DOE). Exhaust gas emission is monitored by stack testing annually, and elaborate reports are submitted to DOE every year. For each and every fuel oil delivery and handling, containment boom is used to minimize the risk of accidental spillage and pollution. At regular intervals, independent auditors or Bureau Veritas carry out surveillance audit to assess the compliance with the EMS of ISO 14001-2007 but so far no non-conformity noted. Similarly, DOE officials inspect regularly and monitor environmental performance of the plant and till date no non-conformity reported. Overall, plant operation does not pose any hazard to the environment of the plant area and its surroundings.