Information Document for

Direct Listing in DSE & CSE of

Khulna Power Company Ltd. Corporate Office: Summit Centre (5th Floor),

18 Karwan Bazar C/A, Dhaka-1215, Bangladesh Phone: [+8802] 9132437-8; 8125142; 8125433;

Fax: [+8802] 9125682; Website: www.khulnapower.com

Offloading of 5,21,48,250 Ordinary Shares of Tk 10.00 each

Listing Date: 15th March 2010 DSE & 18th March 2010 CSE

Indicative Price for Book Building Purpose Tk.162.00

Eligible institutional investors’ bidding on April 04, 05, 06, 2010

Manager to the Issue

Amin Court, 4th Floor (Suite # 404), 31 Bir Uttam Shahid Ashfaqueus Samad Road, Motijheel C/A, Dhaka-1000

Phone: +8802 9559602, +8802 9567726 Fax: +8802 9558330 Web-site: www.aaawebbd.com, e-mail: info@aaawebbd.com

DATE OF THE INFORMATION DOCUMENT

18th March, 2010

Credit Rating Report by Credit Rating Information and Services Limited (CRISL)

Long Term Short Term

Entity Rating AA ST-1

Outlook Stable Date of Rating 16 September, 2009

“CONSENT OF THE EXCHANGES HAS BEEN OBTAINED TO THE ISSUE/OFFER OF THESE SECURITIES UNDER THE DHAKA STOCK EXCHANGE & CHITTAGONG STOCK EXCHANGE (DIRECT LISTING) REGULATIONS, 2006. IT MUST BE DISTINCTLY UNDERSTOOD THAT IN GIVING THIS CONSENT THE EXCHANGES DO NOT TAKE ANY RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF THE COMPANY, ANY OF ITS PROJECTS OR THE ISSUE PRICE OF ITS SHARE OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE FOR OPINION EXPRESSED WITH REGARD TO THEM. SUCH RESPONSIBILITY LIES WITH THE ISSUER, ITS DIRECTORS, CHIEF EXECUTIVE OFFICER/ CHIEF FINANCIAL OFFICER, ISSUE MANGER AND/OR AUDITOR. “THE MONEY (PROCEEDS) AGAINST SALE OF SHARES THROUGH THIS INFORMATION DOCUMENT WILL BELONG TO THE SPONSORS/SHAREHOLDERS CONCERNED. THE COMPANY WILL NOT GET THIS MONEY.”

“If you have any queries about this document, you may consult issuer, issue managers.”

Availability of Information Document

Information Document of the company may be available at the following address Company Contact Person Contact Number Khulna Power Company Ltd. Corporate Office: Summit Centre (5th Floor), 18 Karwan Bazar C/A, Dhaka-1215, Bangladesh

M. Aminur Rahman

Financial Controller & Company Secretary

9132437-8 8125142

Manager to the Issue Contact Person Contact Number AAA Consultants & Financial Advisers Ltd. Amin Court, 4th Floor (Suite # 404), 31 Bir Uttam Shahid Ashfaqueus Samad Road (Previous 62-63) Motijheel C/A, Dhaka-1000

Khwaja Arif Ahmed Managing Director & CEO

9559602 9567726

Stock Exchanges Available at Contact Number Dhaka Stock Exchange Ltd. 9/F Motijheel C/A Dhaka –1000 Chittagong Stock Exchange Ltd., CSE Building, 1080 Sheikh Mujib Road, Chittagong.

DSE Library CSE Library

9564601-7 031-714632-3 031-720871-3

Information document is also available on the website www.khulnapower.com, www.aaawebbd.com, www.dsebd.com, www.csebd.com, www.secbd.org and public reference room of the Securities and Exchange Commission (SEC) for reading and study.

Definition and Abbreviations

AAA AAA Consultants and Financial Advisers Ltd. Allotment Allotment of shares BB Bangladesh Bank BO A/C Beneficiary Owner’s Account BPC Bangladesh Petroleum Corporation BPDB Bangladesh Power Development Board Certificate Share certificate Commission Securities and Exchange Commission Companies Act Companies Act, 1994 (Act No. XVIII of 1994) CSE Chittagong Stock Exchange DESA Dhaka Electric Supply Authority DESCO Dhaka Electric Supply Company Ltd. DSE Dhaka Stock Exchange Limited Exchanges Stock Exchanges FC Account Foreign Currency Account FSA Fuel Supply Agreement FT Fuel Tariff GOB Government of Bangladesh IFC International Finance Corporation IPP Independent Power Producer Issuer Khulna Power Company Ltd. KPCL Khulna Power Company Ltd. MEMR Ministry of Power, Energy and Mineral Resources MW Megawatt NAV Net Asset Value NBFI Non-Banking Financial Institution NBR National Board of Revenue NRB Non Resident Bangladeshi O&M Operation and Maintenance PBSs Palli Bidyut Samities PGCB Power Grid Company of Bangladesh PPA Power Purchase Agreement REB Rural Electrification Board

Registered Office Summit Centre (5th Floor), 18 Karwan Bazar C/A, Dhaka-1215, Bangladesh

RJSCF Registrar of Joint Stock Companies & Firms SC Share Certificate SEC Securities and Exchange Commission Securities Shares of KPCL T&D Transmission & Distribution Tk Taka

Table of contents

Sl. Item Page No. A. DISPOSAL OF SHARES 1 Details of offloading shares by the existing shareholders as per regulation of DSE &

CSE regulation 1

Procedures to be followed for determining price under book building method 2 Indicative price for book building purpose 2 B. RISK FACTORS AND MANAGEMENT PERCEPTION ABOUT RISK 6 C. DESCRIPTION OF THE BUSINESS 10 Information about the company 10 Background of the past shareholder 14 Background of Present Shareholders 15 Distribution procedure of products or services 23 Competitive Condition of the Business 23 Sources and availability of raw materials and the names of the principal suppliers 25 Sources of power, gas and water 25 Name of the customer who purchase 10% and more of the company’s products 25 Description of contract with suppliers and customer 25 Description of any material patents, trademarks, licenses or royalty agreements 26 Number of total and full time employees 26 Production capacity and current utilization 27 D. DESCRIPTION OF THE PROPERTY 27 Location of the power plant and other property and condition of such property 27 Ownership of property 27 Lien on property 27 Expiration date of Leasehold Property 27 E. PLAN OF OPERATION AND DISCUSSION OF FINANCIAL CONDITION 28 Internal and External Sources of cash 28 Commitment for capital expenditure 28 Material change from period to period as per audited accounts 28 Seasonal aspect 28 Known trends, events or uncertainties 28 Changes in the assets used to pay off any liability 29 Loan taken from the holding/subsidiary company or loans given to those companies 29 Future contractual liabilities 29 Estimated future capital expenditure 29 VAT, income tax, customs duty or other tax liability 29 Sources from which VAT, income tax, customs duty or other liabilities are to be paid 29 Lease commitment 29 Lease Details 30 Personnel related schemes to make provision in future years 30 Break down of issue expenses 30 Revaluation of Asset 30 Last five years’ transactions between the issuer company and its subsidiary/holding

company 30

Auditors certificate on allotment of shares to shareholders including promoters and sponsor shareholders for any consideration otherwise than for cash

30

Material information having impact on the affair of the company 31 F. DIRECTORS AND OFFICERS 31 Name, Age and Position of all Directors 31 Date of first becoming Director and date of expiry of current term 31 Involvement of Directors with Listed Company in terms of Dividend & Category 32 Involvement of Directors with another Company 32 Family relationship between the directors and officers 35 Short biography of the directors and officers 36 Ownership List of shareholders who owns 5% or more than 5% share of the Company 38 Name and qualifications of the Senior Officers 38 G. INVOLVEMENT OF THE DIRECTORS AND OFFICERS IN CERTAIN LEGAL PROCEEDINGS 39 H. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH RELATED PARTIES 39 I. EXECUTIVE COMPENSATION 40 J. OPTION GRANTED TO OFFICER, DIRECTORS AND EMPLOYEES 40 K. TRANSACTION WITH PROMOTERS BENEFIT FROM THE COMPANY 40 L. TANGIBLE ASSETS PER SHARE 41 M. OWNERSHIP OF COMPANY’S SECURITIES 42 Ownership List of shareholders who owns 5% or more than 5% share of the Company 42 The shareholding position of ordinary shares 42 N. DESCRIPTION OF SECURITIES OUTSTANDING OR BEING OFFERED 43 Dividend, voting and pre-emption rights of the shares outstanding or being offered 43 Conversion and liquidation rights of any preferred stock outstanding or being offered 43 Limitations on the Payment of dividends to common or preferred stockholders 43

Other material rights of common or preferred stockholders 44 O. DEBT SECURITIES 44 Terms and conditions of debt securities that the company may have issued or to be

issued 44

Principal amount, maturity date, interest rate and other features of all debt securities

44

All other material provisions giving or limiting the rights of the holders of debt 44 Trustees designated by the indenture for outstanding debt or for debt being offered 44 Preference Share 44 Corporate Directory 45 CREDIT RATING REPORT 46 AUDIT REPORT & FINANCIAL STATEMENT 61 Financial Projection 87 Auditors' report under section 135(1) and Para 24(1) of Part II of Schedule III of the

Companies Act 1994 89

Ratio Analyses 91 Additional Disclosure by the Management 93

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A. DISPOSAL OF SHARES:

1. Details of offloading shares by the Existing Shareholders as per Regulation 5 of Dhaka & Chittagong Stock Exchange (Direct Listing) Regulations, 2006 as amended The existing shareholders of the company shall offload 5,21,48,250 ordinary shares of Tk.10.00 per share worth Tk. 52,14,82,500 (Fifty Two crore Fourteen lac Eighty Two thousand and Five hundred) with a minimum market lot of 100 (Hundred) shares following the Regulation 5 of Stock Exchange (Direct Listing) Regulations,2006 as amended, the Depository Act,1999 and regulations issued there under:

i. As resolved in the Board of Directors of KPCL and also as per resolution taken in the EGM of KPCL, 25% or the minimum required by the regulation of the proposed offer (i.e. 5,21,48,250 shares) to be sold to the general public/institutions at Market Price.

ii. The information Document, as vetted by DSE/CSE, shall be published in at least two widely circulated national dailies (One in English and one in Bengali) minimum 7 (Seven) days before commencement of trade upon listing by DSE/CSE along with an electronic copy for posting in the web page of DSE/CSE.

iii. The company shall simultaneously submit the vetted Information Document with all exhibits to SEC, to the Stock Exchange(s) where it tends to list its securities.

iv. The existing shareholders of the company shall sell their shares through brokers of the exchanges upon listing.

v. No existing shareholders of the company shall sell more then 50% of his existing shareholdings until the company holds the annual general meeting after completion of one full accounting year of the company upon listing with the exchanges.

vi. The conditions stated clauses 4 and 5 are subject to the provision that the existing shareholders shall offer for sell at least 25% (twenty five percent) of the shareholdings in the Company within 30 (thirty )trading days from the date of commencing the normal trading, i.e., after the price of the listed share is discovered and fixed following the book building method as prescribed by SEC through Securities and Exchange Commission (Public Issue) Rules, 2006, to the extent those are applicable or relevant in these respect.

vii. A. Allocation/Distribution: 10% (ten percent) of the said 25% shareholdings shall be allocated/distributed to the eligible institutional bidder following the procedures prescribed for determining price under the book building method, balance quantity shall be available for general investors through normal trading system of the stock exchanges. B. Lock-in: There shall be lock-in of 15 (fifteen) trading days from the first trading day on the security issued to the eligible institutional investors through book building method.

C. Others: (i) The existing shareholders (i.e. sponsors/directors) shall be restricted from buying the company’s share until completed disposal of the targeted 25% shareholdings. (ii) The selling broker of the existing shareholders shall disclose through the stock exchanges the local number of shares sold everybody along with the cumulative quantity sold and the quantity of unsold shares until completion of sale of the said targeted 25% shareholdings. (iii) Normal trade for general investors begin two days after transfer of the shares allocated to the eligible institutional bidders is completed.

viii. SEC decision shall be final on certain matter. Notwithstanding anything contained in these Regulations, in the event of any confusion or difference of opinion on any matter whatsoever, the decision of the SEC shall be final and binding on all concerned.

The following declaration shall be made by the company in the Information Document, namely:- “Declaration about Listing of Shares with the stock exchanges: Applications have been made to the Dhaka and Chittagong Stock Exchanges for permission of the shares of the Company for dealing in the said Stock Exchanges and for the quotation of the stock exchanges. After fulfillment of all requirements by the Company, the Exchanges shall list the Company’s shares within three weeks from the date of Publication of the Information Document, as mentioned in regulation 4, under intimation to the Commission, provided there is no contrary opinion of the Commission in this respect. In case of failure to fulfill the requirements by the Company, the Exchanges shall reject the application for listing showing reasons thereof, under intimation to the Securities and Exchange Commission within 60 (sixty) days from the date of application.”

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2. Procedures to be followed for determining price under book building method

i) The indicative price which has been determined by the issuer in association with issue manager and eligible institutional investors shall be the basis for formal price building with an upward and downward band of 20% (twenty percent) of indicative price within which eligible institutional investors shall bid for the allocated amount of security;

ii) Eligible institutional investors bidding shall commence after getting consent from the commission for this purpose;

iii) If institutional quota is not cleared at 20% (twenty percent) below indicative price, the issue will be considered cancelled unless the floor price is further lowered within the face value of security;

Provided that, the issuer’s chance to lower the price shall not be more than once;

iv) No institutional investors shall be allowed to quote for more than 10 %( ten percent) of the total security offered for sale through book building method, subject to maximum of 5 (five) bids;

v) Institutional bidding period will be 3 to 5 (three to five) working days which may be changed with the approval of the commission;

vi) The bidding will be handled through the uniform and integrated automated system of the stock exchanges;

vii) The volume and value of bid at different prices will be displayed on the monitor of the said system without identifying the bidder;

viii) The institutional bidders will be allotted security on pro-rata basis at the weighted average price of the bids (within the cut off price) that would be clear the total number of securities being issued to them;

ix) Institutional bidders shall deposit their bid with 20% (twenty percent) of the amount of bid in advance to the designated bank account and the rest amount to settle the dues against security to be issued to them shall be deposited within 2 (two) working days prior to the date of opening normal trade for general investors;

x) In case of failure to deposit remaining amount that is required to be paid by institutional bidders for settlement of the security to be issued in their favor, 50% (fifty percent) of bid money deposited by them shall be forfeited by the commission. The securities earmarked for the bidder who defaulted in making payment shall be added to the investor quota.

3. Indicative Price for Book Building Purpose

Based on Indicative Price Offers received from seven Institutional Investors from amongst four

groups of institutional investors referred in rule 8.B.(16)(4)(c) of the Securities And Exchange

Commission (Public Issue) Rules, 2006; the Indicative Price for Book Building Purpose is fixed, in

consultation with the issue Manager and price offer from the eligible institutional investors through

proper disclosure, presentation, document, etc. at Tk 162.00 only as follows:-

SI No Offered by Category Indicative Price

1 Standard Bank Ltd Financial Institution 165

2 Continental Insurance Ltd Insurance company 167

3 Swadesh Investment Management Ltd Merchant Banker 160

4 Bangladesh Finance & Investment Company Ltd

Non Banking Financial Institution 155

5 SAR Securities Ltd. Stock-Dealer (DSE) 160

6 B & B Enterprise Ltd Stock-Dealer (DSE) 165

7 Royal Capital Limited Stock-Dealer (CSE) 165

Average 162

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The Indicative Price for Book Building Purpose is justified on the basis of the following qualitative and quantitative factors:-

A. Earnings Based Value per share (EBVPS) based on financial statement for the year ended

31 December 2009

A.1 Earnings per share (EPS) 2.79

A.2 Average Market P/E of the sector 30

A.3 Earnings Based Value Per Share (A.1x A.2) 83.7

B. Earnings Based Value per share (EBVPS) based on projected financial statement for the year ended 31 December 2010 to 2014

B.1 Earnings per share (EPS) 6.62

B.2 Average Market P/E of the sector 30

B.3 Earnings Based Value Per Share (B.1x B.2) 198.6

C. Net Asset Value Per Share(NAVPS) based on financial statements for the year ended 31 December 2009

C.1 Net Asset Value 3,865,314,106

C.2 Number of Shares 208,593,000

C.3 Net Asset Value Per Share (NAVPS) (C.1/C.2) 18.53

D. Market Value Of similar share under Power industry:

Company Name Face Value (BDT)

Six Month Avg. Price (BDT)

Dhaka Electricity Supply Company Ltd

10* 166.08*

Summit Power Limited 10* 129.46*

Average 147.77 * In equivalent face value These companies’ stock prices are greater than their issue prices and face value. The strongest reasons are the earning potential of the companies. Most of the companies are operating in their full capacity and they are consistent in their operating performance and market dominance.

Qualitative factors: Rationales for fixing indicative price of KPCL

A) CRISL has assigned “AA” (pronounced as double A ) rating in the Long Term and “ST-1” rating in the Short Term to Khulna Power Company Ltd. based on financials and other relevant quantitative and qualitative information. The above ratings have been done on the basis of its good fundamentals such as sound equity based capital structure, sound debt repayment background, high quality plant, satisfactory profitability, government guarantee against power purchase, insignificant market risk on demand, government supportive policies for power sector etc. Entities rated in this category are adjudged to be of high quality, offer higher safety and have high credit quality. This level of rating indicates a corporate entity with sound credit profile and without significant problems. Risk factors are modest and may vary slightly from time to time because of economic conditions. The short term rating indicates highest certainly of timely payment. Short-term liquidity including internal fund generation is very strong and access to alternative sources of fund is outstanding. Safety is almost risk free like Government short-term obligations.

B) Bangladesh Power Development Board (BPDB), off-taker of KPCL, acknowledges KPCL as the best available and the most reliable power plant for its excellent track record in operation. It has been successfully supplying reliable power to the national grid since 1998 without any interruption for a single day. KPCL plant has also been recognized by the third party inspectors, surveyors and specialists as the best maintained fuel oil operated power plant. The plant availability has always been near to 100%.

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C) KPCL never compromises with the quality of operation, maintenance, safety of plant and personnel and in that consideration, engaged Wartsila, Finland, a world renowned equipment manufacture (also the manufacturer of KPCL plant), for the operation and maintenance of KPCL plant. KPCL plant operation has been certified by Bureau Veritas (BV) on :

• Quality Management System (QMS) with ISO 9001 – 2008 • Environmental Management System (EMS) with ISO 14001 – 2007 • Occupational Health and Safety Administration System (OHSAS) 18001 – 2007

D) KPCL plant engines are having the dual fired capability i.e it can be converted into natural gas whenever gas will be available at the south-eastern region. Conversion into natural gas will enable the company to earn more revenue as compared to running on furnace oil, since the gas tariff structure as fixed by BPDB is more attractive than furnace oil based tariff structure.

E) The strategic location of the KPCL plant at the south-eastern region is an added advantage for KPCL. There are only few power plants in that region and as such KPCL is required to meet major portion of the demand of that region. Therefore, the utilization of the entire capacity of KPCL plant through out the year is almost certain.

F) The useful life of KPCL plant is 30 years. Therefore, no further capital investment will be required for the existing plant to carry out another extended term.

G) BPDB is the only buyer of KPCL and thus the revenues are 100% realizable. Unlike DESCO or DESA, KPCL has no system loss or no bad or doubtful debt.

H) In the context of Bangladesh economy, the demand for power or the demand of power sector is thriving and insatiable. At present, the demand and supply gap is 1,700 MW. In consideration of current generation capacity, also together with the future planning for generation of additional capacity, Bangladesh will not be able to meet the increasing demand for power. As a result, the power sector will continue to rule as top most demanding and dominating sector in the economy and no other sectors enjoys such a high demand profile. Therefore, KPCL’s revenue earnings and its further growth and future potential is highly certain beyond any doubt.

I) The proposed expansion of KPCL plant will enhance the KPCL earnings almost three times higher than the existing one. There will be no further fixed operating expenditure except the variables for the additional unit as the same will be run by the same management and production team. No further land will be required and the engines are likely to be more efficient for improved technology over the years.

J) KPCL’s long eleven years of experience in running liquid fuel power plant and proven record of operation will help KPCL management to run the expansion unit more efficiently and diligently and to achieve more optimization and economy of operation which will contribute to the enhancement of KPCL’s earning.

Extension for another term of the project and Expansion of the capacity for additional 100 MW (+/- 10 MW): Rationale: i) The Article 2.3 of PPA has a clear provision that the project is renewable for a further period, subject to agreement in writing by the parties at the latest twelve months prior to the expiry. ii) The KPCL plant is most reliable and efficient plant in the BPDB grid, available for 365 days of the year and with its 19 generating units, it is the most flexible and capable to meet BPDB’s ever varying load demand. iii) For dwindling natural gas production in the country, the natural gas based power plants are in deep

crisis. Natural gas is being used in 85% of total generation and due to short supply, a few of the existing plants running on gas may face shut down in the near future. Taking the above into consideration, the Govt. has already adopted a policy to use liquid fuel for generation of electricity. Accordingly, the future power plants will be built based on liquid fuel operation. Therefore, the extension of the term of KPCL plant is the imperative for the BPDB to meet the shortage of power.

iv) KPCL plants runs on Furnace Oil, the least cost liquid fuel, shall be most viable commercially. v) The existing shortage in generation capacity of the country shall continue to exist much beyond the

year 2013, when the tenure of the current PPA expires. Even in the year 2013 many of the BPDB old plants shall retire and many will face shut down or capacity reduction owing to gas shortage

Therefore, the extension of current PPA with BPDB shall take place as a natural consequence. Currently maximum generation capacity of all public and private power plants together is about 4,300 MW but country’s peak demand is about 6,000 MW. There is a demand supply gap of 1,700 MW and it will be widen further as a result of the general increase of demand. Considering of the increasing demand of power and the

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govt.’s future planning for addition of new generation, yet the demand supply gap will be increasing like 2,648 MW in 2011, 3,132 MW in 2012, 3,259 MW in 2013, 3,799 MW in 2014 and 4,362 MW in 2015. Most interestingly, in 1998 when KPCL plant was connected to the national grid, the demand supply gap was about 1,000 MW and over the last 11 years it has gone up to 1,700 MW. In order to minimize the shortage of power, initiatives are being taken by the Govt. to welcome private sectors to set up more power plants.

KPCL is currently in negotiation with BPDB for its expansion for additional capacity of 100 MW (+/-10 MW). In view of the above mentioned existing shortage, further worsening in future due to gradual increase of demand of the power and the short supply of natural gas, the Govt. has decided to offer the expansion of the capacity of existing power plants which are running on liquid fuel. KPCL plant is among the two plants that are running on liquid fuel and thus proposed for expansion which is in process. Therefore, for the reasons stated above the Govt. of Bangladesh is strongly considering the expansion of KPCL plant capacity by another 100 MW (+/- 10 MW). Energy sector companies are strong player with huge operating profit and its shareholders have taken the benefit of direct listing from the gain of offloading of shares. Superior asset management and earning potential, strong fundamental position, greater liquidity and technological soundness make these companies better player in the stock market. KPCL is a peer company of these companies which also has a sound financial background and operational efficiency. So, it is optimistic to expect that KPCL will perform better than its Competitors and Peer companies. Considering the average value and the fact that the company is renowned “Electricity generating company” having well known client’s base and brand image, so the indicative price is just and fair.

4. The company has opened an Escrow account with BRAC Bank Limited “Khulna Power EII Escrow

Account” No. 1501100976943002 for collecting bid money from the eligible institutional bidders

under Book Building Method.

To The Secretary Dhaka Stock Exchange Limited Dhaka

To The board of directors Chittagong Stock Exchange Limited Chittagong

Dear Sir, UNDERTAKING We undertake, unconditionally, to abide by the Listing Regulations of the Dhaka/Chittagong Stock Exchange Limited which presently are, or hereinafter may be in force. We further undertake: That our shares and securities shall be quoted on the Ready Quotation List and /or the Cleared List at the discretion of the Exchange. That the Exchange shall not be bound by our request to remove the shares or securities from the ready Quotation List and /or the Cleared List. That the Exchange shall have the right, at any time to suspend or remove the said shares or securities for any reason which the Exchange considers sufficient in public interest. That such provisions in the Articles of Association of our company or in any declaration or basis relating to any security as are or otherwise not deemed by the Exchange to be in conformity with the Listing Regulations of the Exchange shall, upon being called upon by the Exchange, be amended to supersede the Articles of Association of our company or the declaration or basis relating to any security; and That our company and /or the security may be de-listed by the Exchange in the event of non-compliance and breach of the Regulations and/or of this undertaking after giving an opportunity of being heard to us. Yours faithfully, Sd/- Managing Director

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B. 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 charge 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.

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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.

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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 Heavy 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 if 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.

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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 14001-2007 • 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.

j) Non-Operating history There is no history of non-operation in the case of KPCL. Management Perception: To overcome these uncertainties, the Company has its own extra Engine and fuel backup, efficient management and continuous monitoring systems, which reduce the non-operating risk.

k) Risk of “Operation and Maintenance Agreement” by “Wartsila” There is a risk of on non-continuation of “Operation and Maintenance Agreement” (“O&M Agreement) by “Wartsila” Management Perception: In case of discontinuation of the O&M agreement with Wartsila, KPCL shall take over the O&M under own management since Summit and United group have been operating & maintaining their own power plants over 300 MW capacity by themselves. Moreover, the existing personnel of the Wartsila can be retained too by KPCL if required.

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C. DESCRIPTION OF THE BUSINESS: 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 Khulna Power ApS, Summit Industrial & Mercantile Corporation (Pvt.) Ltd. (Bangladesh), United Enterprises & Co Ltd. (Bangladesh) and Wärtsilä Development and Financial Services (Asia) Ltd. 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 the first IPP 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.

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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 power a tariff of BDT 8.06/kWh during the January – December 2009 period, whereas it received a tariff of BDT 10.51/kWh during the January – December 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 110 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.

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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%

Company At A Glance

Company Name : Khulna Power Company Ltd. (KPCL)

Registered Address : Summit Centre (5th Floor), 18 Karwan Bazar, Dhaka-1215

Plant Address : Goalpara, Khalishpur, Khulna

Paid Up Capital : Tk. 2,085,930,000.00 (Ordinary Shares)

Tk. 1,100,000,000.00 (Preference Shares)

Sponsors : Summit Industrial and Mercantile Corporation (Pvt.) Ltd.

United Enterprises & Co. Ltd.

Unique Client : Bangladesh Power Development Board

EPC Contractor : Wärtsilä NSD OY, Finland

Number of Employees : KPCL has 10 and plant has 113 engaged by Wärtsilä O&M operator

Total electric output : 110 MW

Electrical efficiency : 43.5 %

Engine type : 19 x Wärtsilä 18V32LN

Year of Starting Operation : 13th October 1998

Annual General Meeting held in last 5 years:

Year Date of AGM held Declared dividend

2004 (7th) 3 May 2005 7% Cash

2005(8th) 11 September 2006 Nil

2006(9th) 24 July 2007 Nil

2007(10th) 21 June 2008 57.53% Cash

2008(11th) 23 June 2009 10% Cash

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(1) 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. (2) The relative contribution to sales and income of each product or service that accounts for more than 10% of the company’s total revenues: Electricity is the only product of KPCL. So, contribution of more than 10% by any other product to the total revenue of the company doesn’t arise. (3) Name of associates, the subsidiary/related holding company and their core areas of business: Khulna Power Company Ltd. (KPCL) has no associates, the subsidiary/related holding company however there are common directorship in the following related companies: Sponsors 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 $50 billion. As the major equity holder in KPCL with 73.9% interest, El Paso was responsible for the management of the Plant up to April, 2008. The local Shareholders are Summit Industrial and Mercantile Corporation (Pvt.) Ltd. (“Summit”) and United Enterprises & Co. Ltd. (“United”). Summit is an investment group with significant holdings in liquid fuel storage terminals. It is also an investor in six Rural Electrification Board (“BPDB”) small power projects, gas pipeline construction on a build-transfer basis, liquid fuel shipping, and real estate construction. United has ownership in Bangladesh’s largest private liquid product bulk storage terminal, real estates, and one of the largest Hospitals and a private University. It has implemented several BPDB small power projects, and has worked very closely with Summit. Summit and United have contributed a combined 20% of the Project’s equity. The sponsors have invested total equity capital of US$ 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.

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Background of Past Shareholders EL PASO El Paso, North America’s leading provider of natural gas services was a 73.9% shareholder in KPCL. The company has core businesses in production, gathering, processing, and transmission of natural gas, as well as liquefied natural gas transport and receiving, petroleum logistics, power generation, and merchant energy services. It is rich in assets and is fully integrated across in natural gas value chain and is committed to developing new supplies and technologies to deliver energy to communities around the world. El Paso Energy International pursues a low risk, power-oriented investment strategy, as a project developer. This strategy has helped the company build diversified project portfolios supported by fixed return contracts in countries around the world. These portfolios present significant opportunities to build robust businesses in selected markets where the right combination of economic, regulatory and industry conditions exist. By focusing on regional business growth, El Paso can export the broader skill set of the entire company to produce significant growth. WÄRTSILÄ Wärtsilä Corporation is the leading global ship power and power plant supplier. Wärtsilä enhances the business of its customers by providing them with complete lifecycle power solutions. It is a major provider of solutions for decentralized power generation and of supporting services. Most of its IPP deliveries were directed to Asia, North America and all other continents. Wärtsilä plans to contribute to solving the global needs of sea transportation and power generation by developing equipment and services that convert fuels into power efficiently at the lowest possible environmental impact. It has its own worldwide service network in 80 countries. Wärtsilä takes complete care of customers’ ship machinery and related equipment at every lifecycle stage. It plans to expand the business by providing innovative, reliable and valuable service, such as non-O&M service in key ports, scheduled and condition-based maintenance, as well as operations and maintenance contracts.

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Background of Present Shareholders

Summit Industrial & Mercantile Corporation (PVT.) Limited – SUMMIT GROUP Summit Group is one of the reputed local conglomerates of the country having interests in power, EPC contracting, tank terminal, shipping, properties, petroleum, inland container depot, trading and so on. The group sponsored the first independent 110 MW barge-mounted power plant KPCL in 1998, three 11 MW power plants for BPDB, the country's first and biggest private sector inland container depot in Chittagong. They have also pioneered locally the first granite and marble cutting, polishing and finishing plant. The group is recognized as a major infrastructure-industry company of Bangladesh employing over 1,000 people. Brief overview on Summit Group sister concerns are given in the following: Summit Industrial & Mercantile Corporation (Pvt.) Limited

Summit Industrial & Mercantile Corporation (Pvt.) Limited (SIMCL) is a holding company established in 1985 sponsoring fourteen different companies, ranging from shipping to power. SIMCL is one of the largest companies in Bangladesh with a significant interest in infrastructural development. Out of fourteen different companies, two of its holdings, Summit Power Limited (DSE: SUMITPOWER) and Summit Alliance Port limited (DSE: SAPORTL) are publicly listed. Of these publicly listed companies Summit Power Limited (SPL) accounts for supplying a total of 215 MWs of electricity in Bangladesh. It has power plants located in various parts of Bangladesh mainly in the suburban industrial areas where there is the greatest need for electricity. SPL has grown over 600 % in the past 10 years resulting in increased efficiency and economies of scale.

Brief history of the growth and development of SIMCL

• SIMCL was incorporated as a private limited company in Bangladesh on 7th December 1985.

• In 1988, the company in addition to the import business started the export of Molasses from Bangladesh.

• The year 1989 marked SIMCL's first foray into infrastructure development with the establishment of Summit United Tanks Terminal (SUTT), which established SIMCL as the first owner in Bangladesh of a liquid storage tank terminal.

• In 1991 SIMCL bought Van Omaren Tanks Terminal becoming the largest private terminal owner and operator in Bangladesh. Subsequently the two terminals were sold off.

• In 1992, the SIMCL started to export Urea fertilizer becoming the largest fertilizer exporter in Bangladesh. That same year SIMCL purchased BTT, the oldest liquid Tanks Terminal depot in Chittagong Port area, renaming it to SUTTL. After the purchase the storage capacity of SUTT expanded from 17200 MT to 65100 MT. SUTT further increased after the acquisition of VOTTL, a private sector tank terminal, in Chittagong port.

• In 1997 the company took another leap in infrastructure development by establishing the first private sector electricity generation plant of 114 MW, which operated on furnace oil. Khulna Power Company (KPCL) continues to flourish till date and is planning on expanding and also going public.

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• The year 1999 marked one of the highest rates of growth in the company’s history through the formation of various companies in partnership with other major companies and conglomerates both domestic and international. In 1999 SIMCL partnered the United Group and Wartsila USA to form KPCL, the country’s first 110 MW Barge Mounted power Generation plant. That year also led to the formation of USPCL, an LPG plant in Mongla, in association with the United Group. Finally, the year was rounded to a close, in terms of energy development through the formation of USCOL, an energy oil company, in conjunction with EL Paso USA and the United Group. The year 1999 also earmarks the establishment and development of USSL, a shipping company, created with joint partnership between Summit and United Group. In its year of conception it bought two Ocean going tanker vessels and became the first ISO 9002 certified shipping company in Bangladesh. Summit continued its extraordinary growth through the formation of Summit Pipeco Limited in partnership with the Alliance Group. Summit Pipeco teamed up with Daquing a company based out of China to execute the EPC of 54 Km Ashuganj- Hobiganj gas pipe line construction work in Bangladesh

• In 2000 summit power limited (SPL) was established to set up ‘distributed power’ in Bangladesh. Presently SPL has seven power plants providing electricity to 600,000 homes, generating 215 MWs of electricity with natural gas as its fuel.

• In 2004, the company formed SAPL to expand its capacity and operations in the container terminal field. SAPL is also traded and publicly listed in the Dhaka Stock Exchange and Chittagong Stock Exchange. OCL and SAPL together deals with 15% of the country’s import cargo and 30% of the export cargos. The two companies are both located in Chittagong port and helps facilitate port services, they over 50 acres of freehold land and operates a streamlined modern container handling and empty storage facility with a capacity of 4000 tones.

• In 2006, the Summit acquired a Dhaka Stock Exchange membership (Membership # 146) in the name of Cosmopolitan Traders (Pvt.) Limited a sister company of SIMCL and substantial share of the following companies:

i) National Housing Finance & Investments Limited. ii) IPDC of Bangladesh Ltd. iii) Bangladesh Commerce Bank Limited

• In 2009, the company set up SCL (Summit Communications Limited) to break into the telecommunication sector to provide much needed revitalization to the Bangladesh’s telecommunications. Improvement in the telecommunications sector is a move towards ingratiating Bangladesh into the larger global community. This project is yet another inference to the revolutionary nature of SIMCL investment portfolio.

SIMCL’s financial position at the end of the accounting year as of 31st December 2009 was in a sound and stable position having a total of Taka 593.70 crores in total assets with a net worth of Taka 560.32 crores. The total turnover for the year was Taka 198 crores with a net profit of Taka178.29 crores after tax.

Ocean Containers Ltd. Ocean Containers Limited (OCL) is a pioneer in the inland container depot and freight stations and is the largest privately owned land container port in Bangladesh. It is located at Patenga Industrial Area of Chittagong on the international airport road, which is only 6 km from the country’s largest seaport, Chittagong Port. OCL owns 15 acres of custom bonded free hold land. Currently, OCL can stuff and de-stuff 50,000 containers annually. It also has an empty storage facility for 6,000 TEUs. OCL is a custom bonded warehouse. With the logistic support of its surface transport subsidiary in Ocean Transport

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Company, it can deliver containers anywhere in Bangladesh. The company currently operates a fleet of 24 prime movers with 40 feet trailers. Government customs officers and OCL are working round the clock to keep our commitment. Our fully computerized system allows us to keep track of all containers. OCL is an ISO 9001: 2000 Quality Management Certified Company. It is the first company in Bangladesh to have the ISO certification for Inland Container Depot (ICD) and container freight station (CFS) operators. OCL clienteles include Maersk-Sealand, Yang Ming Line, Happag-Lloyd, Kuhene & Nagel, Danzas, Zim Line etc. OCL is in discussion with APL-NOL to have long term contract for consolidating their export bound cargoes from Bangladesh. OCL already has similar arrangement with Maersk-Sealand. OCL currently caters to the 30% of the garment’s export bound cargoes. By the year 2004 OCL aims to consolidate 50% export bound cargoes of Bangladesh. Summit Power Limited Summit Power Limited (SPL), a concern of Summit Group is the first Bangladeshi Independent Power Producer (IPP) in Bangladesh and until now the only local company in private electricity generation and supply business providing power to national grid. SPL was incorporated in Bangladesh on March 30, 1997 as a Private Limited Company. On June 7, 2004 the Company was converted to Public Limited Company under the Companies Act 1994. SPL’s shares are quoted on both DSE and CSE. SPL is the first company signing PPA with BPDB to build small size power project in private sector with the objective of providing electricity to PBS through national Grid. SPL has so far successfully established seven power plants and is supplying total 215 MW of electricity to the national grid. SPL’s power plants comprises as follows: i) Ashulia plant - 44.75 MW ii) Chandina plant - 24.50 MW iii) Madhabdi plant- 35.30 MW iv) Rupganj plant - 33 .00 MW v) Jangalia plant- 33.00 MW vi) Maona plant - 33.00 MW vii) Ullapara plant - 11.00 MW Considering the immense opportunities, the company is striving to establish more power plants around the country. The company is also planning to explore energy markets in Sri Lanka and Vietnam. Cosmopolitan Traders (Pvt.) Ltd (CTL) Cosmopolitan Traders (Pvt.) Ltd (CTL) is a holding company involved in port related businesses such as container depot, liquid storage terminal, gas terminal, shipping and other businesses. Summit Shipping Ltd. (SSL) Summit Shipping Limited (SSL), a private limited company was incorporated in 2nd June 1998 to operate in transportation of liquid products. Cosmopolitan Traders (Pvt.) Ltd., a sister concern of Summit Group, is the major shareholder of the shipping company. Subsequent to its incorporation, SSL executed a 15-year ‘Transportation Agreement’ with United Summit Coastal Oil Limited (USCOL). Presently SSL operates two tankers with a load capacity of 1,800 MT and 1,200 MT respectively. Expansion plans of the company include procurement of ocean going tankers for transportation of furnace oil, edible oil and LPG from international market to Bangladesh. SSL has also implemented ISO 9002 Quality Management System (QMS) in 2001. This was the first ISO 9002 certified shipping company in Bangladesh.

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United Summit Coastal Oil Ltd. (USCOL) United Summit Coastal Oil Ltd. (USCOL), a joint venture between Summit, United and El Paso International, USA, is the first private sector energy oil management company of Bangladesh. This company was formed with the goal of managing the furnace oil requirements of the country’s emerging private sector power generation companies. Leveraging on the expertise of a major integrated oil company El Paso International USA, USCOL actively participates in sourcing, trading and supplying energy oil in Bangladesh. The principal client of USCOL is Khulna Power Company Ltd., which requires furnace oil to fire its generators. USCOL also actively markets its expertise to other barge mounted power plants operational in Bangladesh, to other power producers who require oil-based fuel for power generation. Summit Alliance Port Ltd. Located on both sides of the Beach road which is 7 km away from the multipurpose berths of the Chittagong port, Summit Alliance Port is currently spread over an area of 17 acres. The port has a 40,000 sft warehouse capable of handling CFS stuffing upto 1,000 TEUs monthly and ICD with handling capacity of about 4,500 TEUs for storage of empty containers at any time. SUMCYNET SUMCYNET is an innovative Web Design and Software Development company. The company is composed of team of talented, experienced professionals, inspired by life, to generate the best quality work. The excellence of work supported by the company is reflected in the client's satisfaction. With extended experience and comprehensive knowledge, Sumcynet believes to have a full understanding of its client's requirements and how to attend to them in the best way possible within their specific time frame. The customers are presented with top of the range, user-friendly, striking and interactive updated website. The focus is to make sure that the client’s business is SEEN! The web designs/pages are 100% originals and are designed to the highest standards. The company ensures that clients receive personalized care round the clock. Everything at Sumcynet Web Design is done in-house. The company strives to create professional website for businesses at affordable price. UNITED ENTERPRISES & CO. LTD – UNITED GROUP OF BANGLADESH United Group has grown into one of the leading business houses in Bangladesh since its inception in 1978. United Group focuses in providing value added services and fostering business including provision of total solutions to an increasingly developing economy of Bangladesh. United Group’s fundamental strength is its commitment and enthusiasm to provide an excellent service for customers. Since the beginning of the last decade the objectives of the group has been to participate and take up investment opportunities in selected key infrastructure sectors and enables it to meet the challenges of the new century. From its inception the group’s focus has been to invest in key infrastructure areas. The key sectors where the group is currently engaged are power generation, civil & hydro engineering, real estate developments, land port services on a build, own and operate basis, international university, multi specialty hospital, shared banking ATM network, textile mills, polymer industries, heavy construction equipments division, passenger lift & escalators, turnkey solutions etc. The key sector in which it is engaged includes:

Manufacturing Energy& Power generation Broadcasting and communications Port & Maritime transportation Textile mills Real Estate and Constriction Healthcare and Hospital Education

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United Enterprises & Company Limited United Enterprises & Co. Ltd. was established in mid-July 1978. The company expanded its areas of business covering power generation, sub-stations, broadcasting and telecommunications, maritime transportation and freights and the turnkey solutions and system management. United Enterprises participated in various nation-building tasks of the GOB. NOVO Healthcare & Pharma Ltd. NOVO Healthcare & Pharma Ltd. started its journey in 2004 and has since gone on to become one of the most trusted brands by doctors across the various fields of medical practice. Keeping in line with the norm at United Group, NOVO is also a pioneering company among the other key players in the field of pharmaceutics. With its cutting edge technology, NOVO has been successfully manufacturing bulk drugs (RTF Pellets) since its inception. As a matter of fact, it is the first company in Bangladesh which has been approved by the Drugs Authority (DA) for producing such bulk pellets. Through rigorous research and development and thorough dedication, they are currently manufacturing very specialized pellets of PPIs, Hematinics, etc. As a matter of fact, a significant quantity of this is presently being used by a large number of local pharmaceutical companies on a daily basis. This alone is a testament to how the company has heralded a new era in the Bangladesh Pharmaceutical sector with its ever-evolving portfolio of powerful and precision-tuned pharmaceutical products that help people to live healthier lives. NOVO's concern for quality is reflected in every aspect of its products – from raw materials to packaging materials. Utilizing quality ingredients in our manufacturing processes, fully equipped quality control laboratories and state of the art production plants, the firm has been organized with modern sophisticated technology that is continuously upgraded and standardized to meet the highest level of international standards. In fact we are one of the few companies in Bangladesh who have received the World Health Organization (WHO) certification for Current Good Manufacturing Practices from the Drug Directorate. In the analytical and the micro biological laboratories; young, energetic and skilled professionals are working with a great sense of responsibility to ensure quality of all the products that leave through the factory gates. Along with various commonly acceptable dosage forms like tablets, capsules, liquid, cream & ointment (LCO) as well as Powder for Suspension (PFS), a wide range of life saving antibiotics and other pharmaceutics are predominant in NOVO's product line. United Hospital Ltd United Hospital Ltd was born out of a vision to provide a complete and one-stop healthcare solution to the people of Bangladesh. Opening its doors in August 2006 and situated besides the picturesque Gulshan Lake, this hospital is one of the largest private sector healthcare facilities in Bangladesh. With a capacity to house over 450 patients and established across a total covered area of over 400,000 sft, the hospital has 11 state of the art operation theatres to cater to the needs of our varied patient base. Departments of cardiology, gynaecology, orthopaedic and paediatrics of United Hospital are staffed by the most esteemed doctors in their respective fields. As an example, a glimpse at our cardiology department would reveal that till date we have conducted over 2300 open heart surgeries and over 8300 angiograms and angioplasty operations. That’s over 12 heart related surgeries per day alone since our inception. With its technology and expertise, and with the support of very friendly staff, United Hospital strives each day to be the number one healthcare provider, not only within Bangladesh but within the Asia-Pacific region. Malancha Holdings Ltd In January 2007 Malancha Holdings Ltd. was born out of the necessity for uninterrupted, quality power supply to the industries housed within the Export Processing Zones (EPZ) of Bangladesh. Currently operating a 35 megawatt unit in Dhaka EPZ and a 44 megawatt unit in Chittagong EPZ, this company allows its clients to concentrate only on their core business rather than worrying

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about their energy requirements. The total project cost of the plants stand at Tk. 3750 million and is powered by the latest Wartsila gas engines with the ability to produce 8.73 megawatts of electricity each. High voltage 33/11 KV substations comprising of two 16/25 MVA, 11/33 KV power transformers along with required length of 11 KV distribution lines have been built by MHL under each of the two project sites. Thus MHL has constructed multidisciplinary infrastructures like power generation, high voltage transmissions and distribution and high/low pressure gas pipelines for the project. In effect, this makes us the only true independent power generation and distribution company in all senses of the term. It is a model that we plan to replicate across all the EPZs of the country. On top of this unique achievement, MHL has been regularly providing its surplus energy to the Rural Electrification Board (REB) of Bangladesh, thus lighting up thousands of homes across the nation. We can only hope that one day our approach to power generation will make our country a shining beacon within the Asian region. Comilla Spinning Mills Ltd. In a country where the textiles industry is one of the major contributors to the GDP and indeed one of the largest earners of foreign exchange, Comilla Spinning Mills Ltd. has managed to make its mark as a maker of high quality cotton, polyester and mixed yarns. Established in 1996, the factory is nestled in the heart of Burichong, Comilla, spread over 13 acres of land, with 1100 full-time dedicated workers managing and operating the plant around the clock. With 18,000 spindles initially, it was projected to go under a progressive expansion program and methodical development through scientific research, design and creative plan of operation. As it stands now, the plant has almost 50,000 functioning spindles being complimented by other high-end European machineries producing roughly 14 tons of yarn a day. A fun fact – that is almost enough high quality yarn to cover over a 1000 kilometres a day. However, we have no plans of stopping now. In the near future, we hope to increase this capacity to almost 70,000 spindles. United International University Proper education solidifies the backbone of a nation – the youth who are destined to lead the country into the future. In 2003, United Group ventured into this noble professional sector by uniting together some of the finest academic minds in the nation under the banner of United International University. With an excellent library, well equipped laboratories, proper classrooms and student recreational facilities, it is an ideal place to excel in learning. It was surprising that even after a decade of operations; similar educational institutions were yet to achieve the same. UIU believes that only by providing the right environment could the desired results it achieved. Having such a campus was thus an absolute necessity. Even now the faculty is engaged in designing new disciplines that are relevant for the Bangladesh economic context. They would of course include Accounting, Textile Engineering, Pharmacology and Nursing departments, to name a few. With plans of opening a new major campus to ever-growing student base and faculty, steadily but surely it plans on becoming the largest private university in the country within the next few years. Neptune Land Development Ltd. Neptune Land Development Ltd. began its commercial operation as a premium real estate company in 2003 with United City being its flagship project. Imagine a scenic landscape where all the beauty that nature has to provide resides in perfect harmony with the excellence of Man’s creativity in the field of architecture. Imagine wide open fields echoing with children’s laughter, a lake beside which to sit and while an evening away, and the absolute tranquility of suburbia. It will be the most beautiful setting within one of the largest metropolitan cities in the world. Located a stone’s throw distance away from the US Embassy in Baridhara, it can simply be described as a piece of heaven in Dhaka, where families can start their lives anew, secure in their knowledge that they reside in one of the finest of localities in the capital. With over 300 acres currently under development in United City and 650 plots already handed over to a most excellent clientele, the main goal of NLDL is to become the premier and most trusted

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developer of real estate projects in the nation. To back up the claim, it only sells land that is absolutely undisputed and owned by the company. This project has been developed according to full compliance with RAJUK guidelines, thus becoming one of the only such real estate ventures to be fully approved by this government body. United Property Solutions Ltd. Over the years United Group has profitably ventured into various segments of the real estate industry. It is currently involved in the construction and development of residential plots and houses as well as commercial properties, which include some of the best known buildings of the city today. Notable examples would includes, the United Hospital, United House and the United International University buildings. While these projects have been completed under several different company banners, the Group has decided to go by its namesake and bring all these different projects under one roof. Thus, United Property Solutions Ltd. was born. Providing total real-estate involvement from designing to construction and finally to management, this company is dedicated to be a comprehensive one-stop solution for people interested to invest in us, thus further simplifying things for them. Hafez Zamirudding Fisheries Ltd. In early 2009, United Group literally began treading new waters with Hafez Zamiruddin Fisheries Limited and their fleet of fishing trawlers. With ample capacity upwards of 140 tons, these vessels have been assembled locally in their entirety, not only saving valuable foreign currency for the country but boosting the blossoming ship building industry. The maiden voyage of the ships saw them venturing into the ever grand Bay of Bengal, known for her abundant wealth of marine life. With nets and gears designed for white fishing, as opposed to shrimp fishing, they can remain out at sea for a month at a time returning only with their holds filled to the brim with some of the best fish that the Bay has to offer. And why not – we plan to take this company to export markets where such products are much sought after and buyers are quite often willing to pay a premium for quality. United Makkah Madina Travel & Assistance Co. Ltd. United Makkah Madina Travel & Assistance Co. Ltd. embarked upon its mission to be a facilitator and guide for the hajjis during this holy duty. Recognized as one of the few registered travel agencies authorized to deal with all Hajj and Umrah matters, this company has been organizing such trips for nearly a decade now. By being fair and honest in its dealings and a strong adherence to the Quran and Sunnah it have, by the Grace of the Almighty, become a market leader in this profession. A testament of this lies in the fact that almost all of its dedicated clients have chosen on referrals they get from pilgrims who have honored the company in the past by choosing to travel with the company. United Polymers Ltd. Plastic is one of the core materials needed for many companies - from soda manufacturers to pharmaceutical companies but there was a great lacking in quality plastic botling and other plastic materials Thus United Polymers Ltd. was born as a value-based manufacturing unit focused on innovating, manufacturing, and marketing of polyethylene (PET) products, as well as comprehensive liquefied material handling systems for the consumer and industrial bottles. As a pioneer in this sector, we introduced this product to many businesses since our inception, who just happen to be our dedicated customers even to this day. With effort and our culture of innovation, we have developed a full set of PET bottle products of high quality, which has been lauded especially by the many pharmaceutical industries today.

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United Land Port Teknaf Ltd. United Land Port Teknaf Ltd is situated on 27 acres of land on the banks of the Naaf River at the southernmost point of Bangladesh; this is a port of transit for goods between our country and Myanmar. Winning a tender in 2006 from Bangladesh Land Port Authority has enabled to control operations and management of the port while also signing Concession Agreement and Land Lease Agreement with the same. Since then it has undergone both infrastructural and civil development of the area, including earth filling, boundary wall construction, making pontoons, warehouses, approach roads, a passenger jetty, cargo jetty and a rest house among other things. Through significant ongoing investments, ULPTL plans to become a fully comprehensive port unit, providing a one-stop solution for exporters, importers and the government alike.

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(4) Distribution procedure of products or services: KPCL purchases Heavy Fuel Oil from Kuo Oil Pte Ltd. Singapore and generates electricity as its sole product and then sells to BPDB in bulk for electricity transmission through the national grid to south-western region of Bangladesh. (5) Competitive Condition of the Business: As power sector is a capital-intensive industry, huge investment will be required for generation capacity addition. Public sector is not in a position to secure this huge investment for power generation. currently, at about 170 kWh per capita of energy consumption, Bangladesh ranks among the lowest countries in the world in terms of electricity consumption per capita. Its distribution networks currently serve only an estimated 43% of the total population of more than 150 million. The severe shortage of electricity supply is due in part to BPDB’s inadequate generation capacity, weak transmission and distribution systems, and operational difficulties at its existing power plants. In addition to the overall demand-supply imbalance, the power sector in Bangladesh is also affected by a regional imbalance 85% of the country’s generating capacity is located in the eastern zone, where natural gas and associated infrastructure is available. The western zone, where the Plant is located, has mostly smaller and less efficient power plants running on liquid fuel. The western zone peak demand is about 1100 MW while its regional generating capacity is only about 600 MW.

According to the Power Cell, the Bangladesh Power Development Board generated 3400 MW of the country’s 5245 MW of total commercial electricity, or about 64% of the total installed capacity. Over the past several years although the demand of power and gas grew in geometric progression, yet the power sector did not grow as per requirement and gas sector failed to explore its resources and developed its reserve. Since natural gas dominates the power sector in Bangladesh, 95% of electricity comes from conventional thermal power (primarily natural gas) and the remaining 5% through hydroelectric power. In January 2006, Bangladesh’s first coal-fired power plant began commercial production at the 250-MW Barapukuria facility in Parbotipur. The installed generation capacity was about 5269 MW (as on June 2007) from a meager 88 MW in 1960. Electricity generation grew at about 7% p. a. during last fifteen (15) years compared with average annual GDP growth rate of about 5.5%. Notwithstanding the progress made to date, Bangladesh's per capita electricity generation of 165 kWh p.a. is still among the lowest in the world. About 43% of the population has access to electricity, which is also low compared to many developing countries. This implies that there is scope for significant growth in power sector. Given the huge investment requirement for power development in the country, Bangladesh would be looking forward to various sources of finance. The Government has already opened the power sector for private investment and "The Private Sector Power Generation Policy" has been formulated in 1996. The table bellow depicts power sector at a glance.

Generation Installed Capacity (a) BPDB 3,872 MW (b) IPP & Mixed Sector Total 1,397 MW Total 5,269 MW Maximum Demand Served Total 3,785 MW Net Energy Generation 23,267 MkWh

Transmission Transmission Line 230 kV 1,467 Ckt km 132 kV 5,578 Ckt km Total 7,044 Ckt km Capacity of Grid S/S 230/132 kV 5,175 MVA 132/33 kV 7,219 MVA

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Distribution

Distribution Line (33 kV, 11 kV & 0.4 kV)

2,71,142 km

Total no. of Consumers 10.42 Million Total no. of Agricultural Consumers 2 Lac 26 Thousand Total no. of Village Electrified 50,360 Access to Electricity 43% Per Capita Generation 165 kWh System Loss (T&D) 19.30%

Source: www.powercell.gov.bd (visited September 01, 2009)

Currently, the GOB has no plans to have additional interconnection systems between the east and west regions since it prefer to transport gas to the western region in order to build gas-fired plants rather than transferring electricity. Natural gas availability in the western region is also likely to spur further socio-economic developments in the region.

Bangladesh Power Development Board: BPDB is responsible for generation and distribution of electricity. Its distribution jurisdiction covers mainly urban areas except Metropolitan City of Dhaka. There are a number of Independent Power Producers (IPP) who generate and sell power to BPDB. BPDB's retail sale through own distribution accounts for about 32% of total retail sales. KPCL is the leading

supplier of electricity of BPDB. Power Grid Company of Bangladesh: PGCB, established under the Company's Act, 1994 is a subsidiary of BPDB. PGCB is responsible for operation of the grid network of 230kV and 132kV system. It is fully responsible for high voltage transmission as well as distribution. Dhaka Power Distribution Company (formerly Dhaka Electric Supply Authority): DPDC (formerly DESA) is responsible for distribution of electricity in a part metropolitan Dhaka and a few adjacent areas. It purchases power from BPDB at 132 kV. DPDC's retail sale accounts for about 21% of total sales. Dhaka Electric Supply Company Limited: DESCO, established under Companies' Act of 1994 is responsible for distribution of electricity in Mirpur and Gulshan area of the Metropolitan City of Dhaka. DESCO's retail sale accounts for 9% of total national sales. Rural Electrification Board: REB is responsible for distribution of electricity in rural areas through a system of co-operatives known as Palli Biddyut Samities. It mainly purchases power from BPDB and DESA at 33 kV; it also purchases from IPPs to a small extent. BPDB's retail sale accounts for about 38% of total retail national sales. Sixty seven (67) PBS's are operating at present in rural areas. Ashuganj Power Company: Ashuganj Power Company is a generation subsidiary of BPDB created in 2002. The installed generation capacity of APC is 728 MW comprising steam, combined cycle and gas turbine generating units. The gross energy generation is about 25% of total energy generation in public sector. West Zone Power Distribution Company: WZPDC is a distribution subsidiary of BPDB. WDPDC was created under Companies act 1994 to handle distributions in the South West part of the country. EA & CEI: The office of the Electrical Advisor and Chief Electrical Inspector has been established under section 36 of the Electricity Act 1910. EA & CEI office performs the functions as specified in the Electricity Act, Electricity Rule, Cinematograph Act to control and ensure safety of lives and properties in electricity sector.

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(6) Sources and availability of raw materials and the names of the principal suppliers: The Khulna plant consists of two Wärtsilä floating baseload plants named Tiger I and Tiger III designed for continuous operation and intended for electricity production. Wärtsilä is also providing operational and maintenance services for the Khulna plant during the duration of BPDB's power purchase agreement. The contract includes all aspects of operations and maintenance, which fixed the long-term operations and maintenance costs for BPDB, and absorbed a good portion of the operating risk as well enabling BPDB to concentrate on other aspects of their power business. The plant has 110 MW Heavy Fuel Oil fired Diesel engines with Dual fuel capability plant at goalpara, Khalishpur, Khulna Wärtsilä provides 19 18V32LN Diesel Engines each of 6.5 MW capacities are installed on two power Berges. The Barges are permanently moored in manmade lagoon specially created for the purpose and continuously generates electricity to the National Grid. The project has been in operation since October 1998, with heavy fuel oil as the primary fuel. It will use natural gas as it becomes available in the future. The Company is now the only IPP in private sector Company which is operated by heavy fuel oil. KPCL was entered into a 15 years Fuel Supply Agreement with United Summit Coastal Oil Limited for sourcing, procurement and delivery of Heavy Fuel Oil (HFO) to the plant. KPCL’s annual requirement of HFO is about 180000 Metric Ton at 80% dispatch. HFO is being procured from Kuo Oil PTE Limited, Singapore, one of the major oil suppliers in Asia and transported to Chittagong in 17000 MT parcels. The HFO is stored at Chittagong and transported to Khulna by Tanker Barges. (7) Sources of power, gas and water: Water: The Company uses close circuit cooling system for its generators and the cooling water requirement is very minimal which is supplied from bore well through demineralization plant. Power: The power requirement is met from company’s own generation; however any disruption is met through supply from BPDB and is required for auxiliary use only. (8) Name of the customer who purchase 10% and more of the company’s products: Power generated by KPCL is sold in bulk to Bangladesh Power Development Board (BPDB) pursuant to the term of 15 years Power Purchase Agreement. BPDB has obligated to purchase the entire electrical output generated by the Plant pursuant to a 15-year PPA. The revenues are based on a two-part tariff structure, and are designed to cover fixed and variable costs including debt service, operations and maintenance expenses, fuel costs and a return to investors. BPDB has committed to a minimum take or pay requirement at 50%dispatch factor on a monthly basis. BPDB’s payment obligations are supported by a letter of credit for two months minimum revenues. BPDB’s payment obligations are also guaranteed by the Government of Bangladesh pursuant to an Implementation Agreement Revenues are based on a two-part tariff structure - a Fuel Tariff (FT) Component, on a pass-through basis, and Other monthly Tariff (OMT) Component to cover all other fixed and variable costs, adjusted for foreign exchange variations. (9) Description of contract with suppliers and customer:

Implementation Agreement

The IA between KPCL and the GoB states that all the company’s transaction related to the project that require foreign exchange, including debt servicing and repatriation of earnings, will be initiated through bank accounts in Bangladesh, however, any payments in foreign exchange to foreign parties may be paid directly through bank accounts of KPCL located outside Bangladesh. The company shall make available to the GoB the statements and accounts reflecting all such payments. The GoB ensures that the Bangladesh Bank gives KPCL and its contractors, consents for operating FCY bank accounts inside Bangladesh (including, without limitation, the payment of all FCY received under the Financing Agreements or otherwise by the Company into such accounts and

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withdrawals there from). The GoB shall ensure that the Bangladesh Bank gives the Company permission to maintain bank accounts outside Bangladesh, and transfer any funds from its accounts in Bangladesh to its accounts maintained outside Bangladesh as are necessary to implement and carry out the project. GoB through the IA provides sovereign guarantee with regard to payments, hence possibly mitigating risk of any non-payments.

Power Purchase Agreement (“PPA”) with BPDB BPDB has agreed to purchase the entire electrical output generated by the Plant pursuant to a 15-year PPA. The revenues are based on a two-part tariff structure, and are designed to cover fixed and variable costs including debt service, operations and maintenance expenses, fuel costs and a return to investors. The PPA commits BPDB to a minimum take-or-pay requirement of 50% dispatch factor on a monthly basis. BPDB’s obligations under the PPA are guaranteed by the GOB pursuant to an Implementation Agreement (“IA”).

Term - 15 years, from commercial operations BPDB commitment to a minimum purchase equivalent to 50% plant factor on a monthly basis Two-part tariff structure

o Fuel Tariff (“FT”), with full cost pass through; o Other Monthly Tariff (“OMT), 99% of which is US$ indexed;

Allows KPCL to source its own fuel supply Tariff invoices payable within 45 days of the delivery of invoice Payment Security back-up in the form of Letter of Credit covering two months of Minimum

Tariff Payments (and a Govt. of Bangladesh Guarantee) The Minimum Tariff Payment obligations continue through political Force Majeure Events Compensation Amount on Termination to cover 65% of the NPV of the Minimum Tariff Payment for the remaining term of the PPA, plus consequent termination payment

liability to KPCL in respect of the O&M Agreement and the Fuel Supply Agreement, plus taxes. O&M Agreement with Wärtsilä, Finland

Term - 15 years Operator guarantees an 85% availability rate. The Operator will pay the Company a

penalty of US$ 15,000 for each percentage below the 85% availability rate to a maximum of 13%.

The Company may terminate the O&M contract for convenience and without cause upon 90 days of notice and six months fixed O&M fees

Fuel Supply Agreement with United Summit Coastal Oil Limited

The FSA is co-terminus with the PPA and can also be terminated upon conversion of Plant to natural gas based Plant.

Fuel price based on MOPS indexation and other costs as per the PPA provisions.

(10) Description of any material patents, trademarks, licenses or royalty agreements: The company has not entered into any such agreement. (11) Number of total and full time employees: Number of full time employees KPCL Head Office is 10 people as on 31 December 2009 and in its power plant has 113 employees of Wärtsilä Bangladesh Ltd., O&M Contractor, thus the total number of employees of KPCL is 123.

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(12) Production capacity and current utilization:

Currently, the power barge Tiger I and Tiger III consist of 19 Wärtsilä diesel engines capable of producing 114MW of electricity. Each barge is 91.5 meter long and 24 meter wide. The floating tigers generate electricity for supply to the national grid. KPCL’s total installed gross generation capacity is 123.5 MW (19 Engine x 6.5 MW), and current net generation capacity is 114 MW. But KPCL has total licensed capacity of 110 MW. In 2009, its average monthly utilized capacity is 87.21% which is 12% more than that of 2008. The operator of KPCL Wärtsilä Bangladesh Ltd. has earned the unique distinction of receiving both ISO 9002 for quality management system (QMS), ISO 14001 certification for excellence in environment management system and OHSAS 18001 for occupational health and safety standard. D. 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 31 Dec, 2009, described below are in the name of the Company.

Particulars Amount in Taka

Power plant 3,303,599,925.00 Vehicles 3,038,494.00 Building and construction 188,150.00 Furniture and fixtures 47,400.00 Office equipment 259,330.00 Office renovation 33.00 Total Written Down Value 3,307,133,332.00

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

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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

(4) Expiration date of Leasehold Property The term of indenture is 17 years, from January 1, 1998 to January 1, 2015 E.PLAN OF OPERATION AND DISCUSSION OF FINANCIAL CONDITION: (1) Internal and External Sources of cash:

Sources of Cash DEC 31, 2009 DEC 31, 2008 Internal Ordinary shares 2,085,930,000.00 2,085,930,000.00 Redeemable cumulative class 'A' preference shares

1,100,000,000.00 1,100,000,000.00

Retained earnings 668,492,911.00 294,437,827.00 Total 3,854,422,911.00 3,480,367,827.00

External Term Loan - net of current portion - 74,892,180.00

(2) Commitment for capital expenditure: KPCL doesn’t have any commitment made for future capital expenditure as of 31 December 2009 except of an Alternator for which procurement order was being initiated amounting to Euro 287,745 but no shipment is being made. (3) Material change from period to period as per audited accounts:

Particulars 2009 Taka

2008 Taka

2007 Taka

2006 Taka

2005 Taka

Operating revenues 6,393,267,345 8,160,423,118 5,698,208,430 6,311,059,931 4,243,767,556 Operating expenses (5,718,431,301) (7,664,817,721) (5,154,663,159) (5,762,523,349) (3,714,256,610) General and administrative expenses

(64,078,271) (61,504,226) (101,434,974) (92,377,904) (94,587,722)

Other income 91,481,290 3,500,496 9,828,156 5,036,401 4,427,264 Exchange gain/(loss) 2,174,414 8,784,292 5,427,197 (7,593,746) (5,897,306) Finance income 9,155,909 4,048,472 8,797,510 3,282,064 2,386,713 Financial charges (17,483,802) (177,911,217) (156,986,251) (200,693,799) (195,604,754) Net profit for the year 696,085,584 272,523,214 309,176,909 256,189,598 240,235,141

The material changes from period to period have been occurred due the change in Tariff in Effect and change of power generation. (4) Seasonal aspect: In general, there is no seasonal impact on the business because of serious dearth of electricity in all seasons. But in previous years winter season results lower demand for electricity than summer. (5) Known trends, events or uncertainties: Force majeure such as political unrest, hartal and natural calamities are generally known events that may affect the company business.

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(6) Changes in the assets used to pay off any liability: Cash disbursement of Tk. 13,894,196 was made during the accounting period ended 31 Dec, 2009 to reimburse portion of the term loan. (7) Loan taken from the holding/subsidiary company or loans given to those companies: KPCL did neither take any loan from nor give loan to any company for the last five years. (8) Future contractual liabilities: The company has no future contractual liabilities that may have impact on the company’s financial fundamentals. (9) Estimated future capital expenditure: The management of KPCL is currently in negotiation with BPDP for expansion of its existing plant for an additional capacity of 110 MW which is expected to be in operation by the end of year 2010. Other then above, there is no plan for capital expenditure in near future under caption ‘material commitment for capital expenditure’ (10) VAT, income tax, customs duty or other tax liability: a) VAT VAT is not applicable for the company for sale of electricity. b) Income tax As per the Statutory Regulatory Order (SRO) 1999, SRO No. 114/99, the company is exempted from income tax for a period of 15 years from the date of commercial operation. c) Custom duty or other liability The Company is exempted to import plant and machinery during construction and all other spare parts up to 10% of the plant & machinery cost without payment of customs duties. Duties and taxes are payable for other supplies as per provision of the Private Sector Power Generation Policy of Bangladesh. (11) Sources from which VAT, income tax, customs duty or other tax liabilities are to be paid: The payments of duties and taxes on spare part import, if payable, are to be made in the ordinary course of business. (12) Lease commitment: The company has signed lease agreement with BPDB for land usage for 17 years starting January 1, 1998, and the lease commitment as above is being liquidated through repayment of monthly lease rental. (13) 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.3,355,293 The future minimum lease payments in respect of operating leases as at 31 Dec 2009 are as follows:

31 Dec-09 31-Dec-08 31-Dec-07

Amount due: Taka Taka Taka

Not later than one year 3,242,955 3,242,955 3,242,955 Later than one year but not later than five years 14,268,998 13,620,407 12,971,820 Later than five years - 3,891,545 7,783,090

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(14) Personnel related schemes to make provision in future years: The Company has training schemes for human resource development and the following retirement benefits for its employees: 1. Provident Fund The Company operates a recognized Contributory Provident Fund for its permanent employees. The fund is administered by a Board of Trustees and is funded by 10% contributions equally from the employees and the company. The fund is managed separately from the company’s assets. 2. Gratuity The Company also maintains non-funded Gratuity Scheme for confirmed employees of the company. (15) Break down of issue expenses The breakdown of issue expenses related to direct listing is as under:

Sl. Particulars Basis of calculation Amount 1 Issue Management fee At actual 1,200,000.00 2 Underwriting Commission At actual NIL 3 Application fees DSE & CSE At actual 20,000.00 4 Listing Fees DSE & CSE At actual 4,000,000.00 5 Annual Listing fees DSE & CSE At actual 200,000.00 6 CDBL Fees At actual 608,500.00 7 Registrar to the Issue Fees At actual 500,000.00 8 Printing and publication Estimated or At actual 2,000,000.00

(16) Revaluation of Asset: KPCL didn’t revalue its assets. (17) Last five years’ transactions between the issuer company and its subsidiary/holding company: No transactions have been made between the parties. (18) Auditors' certificate on allotment of shares to shareholders including promoters or sponsor shareholders for any consideration otherwise than for cash We certify that as per the share register and other relevant records maintained by Khulna Power Company Ltd., no shares have been allotted to promoters or sponsor shareholders for any consideration otherwise than for cash. Sd/- Rahman Rahman Huq

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(19) Material information having impact on the affair of the company:

DECLARATION REGARDING SUPPRESSION OF MATERIAL INFORMATION

This is to declare that to the best of our knowledge and belief no information, facts, circumstance,

that are disclosable has not been suppressed that can change the terms and conditions under which

the offer has been made to the public.

Sd/- Md. Hasan Mahmood Raja Managing Director F. DIRECTORS AND OFFICERS Name, Age and Position of all Directors:

Name of The Directors Position Age

Mr. Muhammed Aziz Khan Chairman 55

Mr. Hasan Mahmood Raja Managing Director 52

Mr. Muhammad Farid Khan Director 49

Mrs. Anjuman Aziz Khan Director 54

Mr. Latif Khan Director 51

Ms. Ayesha Aziz Khan Director 28 Ms. Adeeba Aziz Khan Director 26 Mr. Jafer Ummeed Khan Director 53

Mr. Ahmed Ismail Hossain Director 53

Mr. Khandaker Moinul Ahsan Shamim Director 52

Mr. Akhter Mahmud Rana Director 49

Mr. Faridur Rahman Khan Director 54

Mr. Abul Kalam Azad Director 54

Mr. Moinuddin Hasan Rashid Director 27

Date of first becoming Director and date of expiry of current term: Name of The Directors Date of First becoming directors Date of Expiry of Current

Terms Mr. Muhammed Aziz Khan 20-10-1997 Continuing

Mr. Muhammad Farid Khan 19-07-2009 Continuing Mrs. Anjuman Aziz Khan 19-07-2009 Continuing Mr. Latif Khan 29-04-2008 Continuing Ms. Ayesha Aziz Khan 29-04-2008 Continuing Mr. Jafer Ummeed Khan 19-07-2009 Continuing Ms. Adeeba Aziz Khan 19-07-2009 Continuing Mr. Hasan Mahmood Raja 20-10-1997 Continuing Mr. Ahmed Ismail Hossain 29-04-2008 Continuing Mr. Khandaker Moinul Ahsan Shamim

29-04-2008 Continuing

Mr. Akhter Mahmud Rana 19-07-2009 Continuing Mr. Faridur Rahman Khan 19-07-2009 Continuing Mr. Abul Kalam Azad 19-07-2009 Continuing Mr. Moinuddin Hasan Rashid 19-07-2009 Continuing

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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 Summit Alliance Port

Ocean Containers Limited

Chairman Chairman Chairman

A A N

Mr. Muhammad Farid Khan Summit Power Limited Director A Mrs. Anjuman Aziz Khan Summit Power Limited

Summit Alliance Port Limited Ocean Containers Limited

Director Director Director

A A N

Mr. Latif Khan Summit Power Limited Summit Alliance Port Limited

Ocean Containers Limited

Vice Chairman Director Director

A A N

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

Ocean Containers Limited

Director Director Director

A A N

Ms. Adeeba Aziz Khan Summit Alliance Port Limited Ocean Containers Limited

Director Director

A N

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 Cosmopolitan Traders (pvt) Ltd. Chairman Summit Equities Limited Chairman Khulna Power Company Ltd. Chairman Ocean Container 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 Summit communication Ltd Chairman Mr. Muhammad Farid Khan Summit Corporations Director Summit Industrial & Mercantile Corporation Pvt. Ltd. Director Cosmopolitan Traders (Pvt.) Ltd. Director Ocean Container Ltd. Director Summit Shipping Ltd. Director Summit Power Limited 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

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Mrs. Anjuman Aziz Khan Summit Power Limited Managing Director Cosmopolitan Traders (Pvt.) Ltd. Director Summit Equities Limited Managing 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. Latif Khan Summit Industrial & Mercantile Corporation Pvt. Ltd. Director Cosmopolitan Traders (Pvt.) Ltd. Managing Director Summit Shipping 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 Vice Chairman 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 Director Summit Industrial & Mercantile Corporation Pvt. Ltd. Director Cosmopolitan Traders (pvt) Ltd. Director Summit Shipping Ltd. Director Khulna Power Company Ltd. Director Summit Power Limited Director Ocean Container 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 Director Summit communication Ltd Director Summit Holdings Ltd Director Cosmopolitan traders (pvt) Ltd Director Summit Shipping Ltd Managing Director

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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

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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. 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

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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

Short biography of the directors and officers: Mr. Muhammed Aziz Khan, Chairman Mr. Muhammed Aziz Khan, a renowned and pioneering leading business personality in power sector of Bangladesh. After graduation Mr. Khan did his MBA in 1980 from the Institute of Business Administration (IBA), University of Dhaka. Mr. Khan has established himself as a dynamic and pro-active entrepreneur who has built Summit Group-recognized as the largest infrastructure Industrial organization of Bangladesh. He is also the Chairman of Khulna Power Co. Ltd., country's first Independent Power Producer (IPP). Mr. Khan has helped to formulate the Private Sector Power Generation Policy of Bangladesh. He has 36 years of business experience, setting up country's first Inland Container Depot (ICD)-"Ocean Container Ltd", First Tanks Terminal- "Summit United Tanks Terminal", now known as "South Eastern Tanks Terminal". Mr. Khan was the Founder President of Bangladesh Energy Companies Association (BECA), which is formed to represent and to promote the interests of private sector business organizations engaged in the energy sector. Mr. Khan has set up "Siraj Khaleda Trust"- a social wing of Summit Group, which is setting up 200 beds for medical services on charitable basis in Dhaka Cantonment. He enthusiastically takes part & contributes to social activities such as to help to acid burn and drug victims to mention a few amongst host of other activities. Mr. Muhammad Farid Khan, Director Mr. Md. Farid Khan was born in 1960. Mr. Khan is a business graduate from Dhaka University. He is involved in business since 1980. He started his business career with trading in plastic compound, fertilizer and other commodities. He was an integral part of the team that pioneered export of molasses and fertilizer from Bangladesh. Mr. Farid Khan has proved to be an entrepreneur with special skills in the development of new projects. He was solely instrumental in setting up Liquefied Petroleum Gas (LPG) project and Tanks Terminal in Mongla. Mrs. Anjuman Aziz Khan, Director Mrs. Anjuman Aziz Khan, wife of Mr. Muhammed Aziz Khan has 22 years of business experience in Summit. Mrs. Khan is a member of Siraj Khaleda Trust- a social wing of Summit Group, which is setting up 200 beds for medical services on charitable basis in Dhaka Cantonment. She enthusiastically takes part & contributes to social activities such as "Assistance of Blind Children" and "women's entrepreneurship development". Mr. Latif Khan, Director Mr. Latif Khan was born on 28 December 1958 in Dhaka. He pursued BA in Public Administration at Dhaka University, and subsequently left for higher studies to the U.S. in 1981. There, he worked for over 15 years in the financial sector. He was a stockbroker and a financial analyst at Prudential Insurance of America where he received numerous sales achievement awards. He also worked as a Financial Officer at Wells Fargo Bank in California. He returned to Bangladesh in 1997 and thereof joined Summit Group as the Managing Director of Summit Shipping Limited. Mr. Khan has established himself as a sound and dynamic businessman of the country. Ms. Ayesha Aziz Khan, Director Born in 1981, Ms. Ayesha Aziz Khan has completed her graduation in Economics and Business from the University College of London in 2002 and Masters in Business Administration from Columbia

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University, New York, USA. Presently, Ms. Khan is also holding the position of Director in several companies of Summit Group. Ms. Adeeba Aziz Khan, Director Ms. Adeeba Aziz Khann was born on June 14, 1983. She has successfully completed her Bar Vocational Cource fro Inns of Court School of Law, UK on 2005. From July 2006 she worked with Dr. Kamal Hossain & Associates, Bangladesh as Pupil, after that she involved herself with Drew & Nepier LLC, Singapore as an International Lawyer. Ms. Khan is holding the position of Director in Several Companies. Mr. Jafer Ummeed Khan, Director Mr. Jafer Ummeed Khan was born on 10th May 1957. After completeing his studies in the United Kingdom, he joined Summit Group in 1987. He spearheaded the development and expansion of Summit Group, particularly of Summit Industrial and Mercantile Corporation (Pvt.) Limited and later on Summit Power Limited. Because of his contribution in the power sector, Mr. Jafer Ummeed Khan was also unanimously elected as the Vice President of Bangladesh Energy Companies Association, which post Mr. Khan is holding till date. Mr. Hasan Mahmood Raja, Managing Director Born in 1957, Mr. Hasan Mahmood Raja has completed Bachelor of Commerce. He was associated with different companies of United Group since 1978. He is the Chairman and Managing Director of United Enterprises & Co. Ltd., Malancha Holding Limited and Khulna Power Company Limited and many more as well as the Chairman, Board of Governors (BoG) of United International University. He has extensively traveled in USA, UK, Australia, Canada, Finland, Switzerland, Germany, Malaysia, Singapore, China, India, and so on. He is also a member of Dhaka Club and Savar Golf Club. Mr. Ahmed Ismail Hossain, Director Born in 1956, Mr. Ahmed Ismail Hossain has completed BSS and MSS, International Relations, University of Dhaka. He is the Vice Chairman of United Hospital and Managing Director of Comilla Spinning Mills Limited, United Rotospin Ltd. And Novo Healthcare and Pharma Ltd. He is also a Member, Board of Governors (BoG) of United International University. He has extensively traveled in USA, UK, Australia, South Korea, Canada, Finland, Spain, Italy, Switzerland, Germany, Malaysia, UAE, Singapore, China, India, and so on. He is also a member of Dhaka Club and Savar Golf Club. Mr. Khandaker Moinul Ahsan Shamim, Director Born in 1957, Mr. Khandaker Moinul Ahsan Shamim has completed Bachelor of Commerce. He is the Managing Director of Hafez Zamiruddin Fisheries Ltd. and Director of United Enterprises Ltd., United Polymer Ltd., Neptune Commercial Ltd., United Hospital Limited etc. He is also a Member, Board of Governors (BoG) of United International University. He has extensively traveled in USA, UK, Australia, Netherlands, Canada, Finland, Spain, Italy, Switzerland, Germany, Japan, South Korea, Malaysia, UAE, Singapore, China, India, and so on. He is also a member of Dhaka Club and Savar Golf Club. Mr. Akhter Mahmud Rana, Director Born in 1960, Mr. Akhter Mahmud Rana has completed ‘A’ Level. Director of United Enterprises Ltd., United Polymer Ltd., Neptune Commercial Ltd., Hafez Zamiruddin Fisheries Ltd., Gulshan Properties Ltd., United Hospital Limited. He is also a Member, Board of Governors (BoG) of United International University. He has extensively traveled in USA, UK, Australia, Canada, Saudi Arabia, Hong Kong, Germany, Malaysia, India, Singapore, China, Thailand and so on. He is a member Savar Golf Club.

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Mr. Faridur Rahman Khan, Director Born in 1955, Mr. Faridur Rahman Khan has completed Bachelor of Science. He is the Managing Director of United Hospital and Managing Director of Neptune Properties Ltd. He is also Director of United Polymer Ltd., Malancha Holding Ltd., United Land Port Teknaf Ltd., Neptune Commercial Ltd., Hafez Zamiruddin Fisheries Ltd., Gulshan Properties Ltd. He is also a Member, Board of Governors (BoG) of United International University. He has extensively traveled in Australia, Finland, Netherlands, Soudi Arabia, Germany, Malaysia, India, Singapore, Pakistan, Thailand and so on. Mr. Abul Kalam Azad, Director Born in 1955, Mr. Abul Kalam Azad has completed Bachelor of Science. He is the Managing Director of Neptune Land Development Ltd. and United Land Port Teknaf Ltd. he is also director of United Polymer Ltd., United Hospital, Malancha Holding Ltd., United Land Port Teknaf Ltd., Neptune Commercial Ltd., Hafez Zamiruddin Fisheries Ltd., Gulshan Properties Ltd. He is also a Member, Board of Governors (BoG) of United International University. He has extensively traveled in USA, UK, UAE, Franch, Canada, Australia, Japan, Soudi Arabia, Malaysia, India, Singapore, Pakistan, Thailand and so on. Mr. Moinuddin Hasan Rashid, Director Born in 1982, Mr. Moinuddin Hasan Rashid has completed B. Sc. Engineer (Electrical & Electronics, London, UK. He is Director of United Enterprises Ltd. Polymer Ltd., United Hospital, Malancha Holding Ltd., United Land Port Teknaf Ltd., Neptune Commercial Ltd., Hafez Zamiruddin Fisheries Ltd., Gulshan Properties Ltd. He is also a Member, Board of Governors (BoG) of United International University. He has extensively traveled in USA, UK, UAE, France, Canada, Australia, Japan, Saudi Arabia, Malaysia, India, Singapore, Pakistan, Thailand and so on. Ownership List of shareholders who owns 5% or more than 5% share of the Company: Name of the Shareholder Entity Number of Share % 1. Summit Industrial & Mercantile Corporation (Pvt.) Ltd. 104,261,500 49.9832% 2. United Enterprises and Company Limited 104,261,500 49.9832% CIB status: Neither the company nor any of its sponsors or directors or associates is defaulter with any bank in terms of the CIB Report of the Bangladesh Bank. Name and qualifications of the Senior Officers: Sl. Name Educational

Qualifications Experience Designation

1 Md. Abdur Rahim B. Sc in Marine Engineering 34 years Project Director

2 M. Aminur Rahman FCA; M. Com 22 years Financial Controller & Company Secretary

Mr. Md. Abdur Rahim, Project Director Mr. Md. Abdur Rahim was born on 01 January 1947. He obtained B. Sc in Marine Engineering from the Merchant Marine University College of Rijeka, Yugoslavia in 1968. He worked on board various vessels of DDG “Hansa” Lines of West Germany upto 1975. Afterwards, he worked in Bangladesh Steel & Engineering Corporation in various capacities from 1976 to 1993 starting as Deputy Chief Engineer. He was the General Manager of Khulna Shipyard Ltd from 1982 to 1987 and the Managing Director of Dockyard & Engineering Works Ltd. Narayangonj from 1987 to 1993. He served on deputation as Technical Director in Bangladesh Shipping Corporation and Bangladesh Inland Water Transport Corporation from 1993 to 1997. Thereafter, then he joined in Khulna Power Company Ltd. in 1997 as a Project Director and he was actively involved in formation of the company and was pivotal to timely implementation of the project.

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Mr. Md. Aminur Rahman, FCA, Financial Controller & Company Secretary

Mr. Md. Aminur Rahman was born on 01 January 1959. He is a Chartered Accountant, qualified from the Institute of Chartered Accountants of Bangladesh (ICAB). He also obtained his Master degree with honors in Accounting from Dhaka University. He is having more than 22 years of service experience in the field of accounts, finance and company secretarial matters in various multinational companies like Rhone Poulenc, Duncan Brothers Ltd and Oxfam, including more than 10 years of service in Khulna Power Company Ltd. as Financial Controller & Company Secretary. He has attended in various training courses and seminars in home and abroad. G. INVOLVEMENT OF THE DIRECTORS AND OFFICERS IN CERTAIN LEGAL PROCEEDINGS No officer or director of the Company was involved in any of the following types of legal proceedings in the last ten years: 1. Any bankruptcy petition filed by or against any company of which any officer or director or nominee of the Company filing the Information Document was a director, officer or partner at the time of the bankruptcy; 2. Any conviction of an officer, director or nominee in the criminal proceedings or any criminal proceedings pending against him; 3. Any order, judgement or decree of any Court of competent jurisdiction against officer, director or nominee permanently or temporarily enjoying, barring, suspending or otherwise limiting the involvement of any officer or director or nominee in any type of business, securities or banking activities. 4. Any order of the Securities and Exchange Commission or other regulatory authority or foreign financial regulatory authority suspending or otherwise limiting the involvement of any officer or director or nominees in any type of business, securities or banking activities. H. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH RELATED PARTIES The Company has no proposed transaction nor had any transaction during the last 2(two) years with following related parties - a. Any director or executive officer of the Company b. Any nominee for director or officer, and c. Any person owning 5% or more of the outstanding share capital of the company d. Any member of the immediate family (including spouse, parents, children, brothers, sisters and in-laws) of any of the above persons e. Any transaction or arrangement entered into by the company or its subsidiary for a person who is currently a director or in any way connected with a director of either the issuer company or any of its subsidiaries or sister concerns, or who was a director or connected in any way with a director at any time during the last three years prior to the publication of the Information Document - except related party disclosures. Loan status: The Company did not take or give any loan from any Director or any person connected with any Director nor did any Director or any person connected with any Director.

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I. EXECUTIVE COMPENSATION Remuneration paid to top executives during January to December 2009 is given below, which includes only two personnel paid by KPCL:

Sl. Name Designation Total Compensation (Jan - Dec 2009)

1 Md. Abdur Rahim Project Director 5,030,703.00 2 M. Aminur Rahman Financial Controller & Company Secretary 4,455,960.00

N.B. Plant Operation and maintenance has been outsourced from Wartsila under Operation & Maintenance Agreement. Wartsila has employed 113 employees and their remuneration is paid by Wartsila from the O&M Fees received from KPCL. The Fee includes a fixed fee per month ranging from US$ 162,167 to US$ 201,583 depending on the plant load factor.

The company did not pay any amount to any director as the company has no policy regarding this. There is no contract with any director or officer for the payment of future compensation.

Aggregate amount of 2009 Taka

2008 Taka

Salary and allowances 13,226,172

17,822,640

Pay increase intention Except annual increment and allowances, there is no plan for substantial pay increase to its officers and directors.

J. OPTION GRANTED TO OFFICER, DIRECTORS AND EMPLOYEES The company did not grant any option for issue of shares to any officer, director and other employees of the company or to any other person outside the country. K. TRANSACTION WITH PROMOTERS BENEFIT FROM THE COMPANY Promoters did not receive anything of value directly or indirectly from the company in the last five years.

Promoters’ asset To Company No assets were acquired or are to be acquired from any of the promoters.

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L. TANGIBLE ASSETS PER SHARE As on December 31, 2009, the Net Tangible Asset Value per share stands at Tk. 18.53 The calculation of net assets value per share is given below: 2009

Taka 2008 Taka

Assets Property, plant and equipment, net 3,307,133,332 3,463,283,276 Total non-current assets 3,307,133,332 3,463,283,276 Inventories 981,640,270 762,728,652 Accounts receivable 387,940,605 885,777,668 Other receivables 12,497,004 8,008,915 Advances, deposits and prepayments 1,548,516 1,493,673 Cash and cash equivalents 701,135,588 100,899,376 Total current assets 2,084,761,983 1,758,908,284 Accounts payable 1,486,104,691 1,314,033,048 Working capital loan - 284,000,000 Term loan - current maturity portion - 30,883,364 Dividends payable - - Preference stock dividends payable - - Accrued expenses and others 40,476,518 13,470,889 Payable for interest and other financial charges

- 14,335,472

Total current liabilities 1,526,581,209 1,656,722,773 Net current asset 558,180,774 102,185,511 Net assets employed 3,865,314,106 3,565,468,787 No. of Shares 208,593,000 208,593,000 Tangible Asset Value per Share 18.53

17.09

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M. 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 Number of Share % 1. Summit Industrial & Mercantile Corporation (Pvt.) Ltd. 104,261,500 49.9832%

2. United Enterprises & Company Limited 104,261,500 49.9832%

The Shareholding Position of ordinary shares by the Owner of the Company

Name of shareholders % Of Shareholdings

Total Shares (No)

Face Value (Taka)

Total value (Taka)

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

49.98% 104,261,500 10 1,042,615,000

United Enterprises & Company Ltd. (incorporated in Bangladesh) 49.98% 104,261,500 10 1,042,615,000

Muhammed Aziz Khan 0.0024% 5,000 10 50,000 Anjuman Aziz Khan 0.0024% 5,000 10 50,000 Latif Khan 0.0024% 5,000 10 50,000 Muhammad Farid Khan 0.0024% 5,000 10 50,000 Jafer Ummeed Khan 0.0024% 5,000 10 50,000 Ayesha Aziz Khan 0.0024% 5,000 10 50,000 Adeeba Aziz Khan 0.0024% 5,000 10 50,000 Hasan Mahmood Raja 0.0024% 5,000 10 50,000 Ahmed Ismail Hossain 0.0024% 5,000 10 50,000 K.M. Ahsan Shamim 0.0024% 5,000 10 50,000 Akhter Mahmud Rana 0.0024% 5,000 10 50,000 Faridur Rahman Khan 0.0024% 5,000 10 50,000 Abul Kalam Azad 0.0024% 5,000 10 50,000 Moinuddin Hasan Rashid 0.0024% 5,000 10 50,000

Total 100% 208,593,000 2,085,930,000

As resolved in the Board of Directors meeting of KPCL and also as per resolution taken in the EGM of KPCL, 25% of the existing paid-up capital (i.e. 5,21,48,250 shares) to be sold to the general public/institutions at Market Price. The existing shareholders shall offer for sell 25% (twenty five percent) of the shareholdings in the Company within 30 (thirty) trading days from the date of commencing the normal trading, i.e., after the price of the listed share is discovered and fixed following the book building method as prescribed by SEC through Securities and Exchange Commission (Public Issue) Rules, 2006, to the extent those are applicable or relevant in these respect.

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N. DESCRIPTION OF SECURITIES OUTSTANDING OR BEING OFFERED Dividend, voting and pre-emption rights of the shares outstanding or being offered: The share capital of the company is divided into ordinary shares carrying equal rights to vote and

receive dividend in terms of the relevant provisions of the Companies Act, 1994 and the Articles of Association of the company.

Shareholders shall have the usual voting right in person or by proxy in connection with, among others, selection of Directors & Auditors and other usual agenda of General Meeting – Ordinary or

Extra Ordinary. On a show of hand every shareholder present and every duly authorized

representative of a shareholder present at a General Meeting shall have one vote and on a poll every shareholder present in person or by proxy shall have one vote for every share held by

him/her.

In case of any additional issue of shares for raising further capital the existing shareholders shall be

entitled to Right Issue of shares of in terms of the guidelines issued by the SEC from time to time. Conversion and liquidation rights of any preferred stock outstanding or being offered: If the company at any time issues convertible preference shares or Debenture or Bond with the consent of SEC, such holders of securities shall be entitled to convert such securities into ordinary

shares if it is so determined by the company. Subject to the provisions of the Companies Act, 1994, Articles of Association of the Company and

other relevant Rules in force, the shares, if any, of the company are freely transferable, the company shall not charge any fee for registering transfer of shares. No transfer shall be made to

firms, minors or persons of unsound mental health.

Limitations on the Payment of dividends to common or preferred stockholders: a) The profit of the company, subject to any special right relating thereto created or authorized to be created by the Memorandum of Association subject to the provision of the Articles of

Association, shall be divisible among the members in proportion to the capital paid up on the shares

held by them respectively.

b) No longer dividend shall be declared than is recommended by the Directors, but the Company in

its General Meeting may declare a smaller dividend. The declaration of Directors as to the amount of net profit of the company shall be conclusive.

c) No dividend shall be payable except out of profits of the company or any other undistributed profits. Dividends shall not carry interest as against the Company.

d) The Directors may, from time to time, pay the members such interim dividend as in their

judgments the financial position of the company may justify. e) A transfer of shares shall not pass the right to any dividend declared thereon before the

registration of transfer.

Other material rights of common or preferred stockholders: The Shareholder shall have the right to receive all periodical reports and statements, audited as

well as un-audited, published by the company from time to time. The Directors shall present the

financial statements as required under the Law and International Accounting Standards. Financial Statements will be prepared in accordance with International Accounting Standards, consistently

applied throughout the subsequent periods and present with the objective of providing maximum

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disclosure as per law and International Accounting Standard to the shareholders regarding the

Financial and operational position of the company. In case of any declaration of stock dividend by issue of bonus shares, all shareholders shall be

entitled to it in proportion to their shareholdings on the date of book closure for the purpose. The shareholders’ holding not less than 10% of the issued/fully paid up capital of the company shall

have the right to requisition Extra-ordinary General Meeting of the Company as provided under Section 84 of the Companies Act, 1994.

O. DEBT SECURITIES: Terms and conditions of debt securities that the company may have issued or to be issued: The company does not have any plan to issue Bond or any other debt securities. Principal amount, maturity date, interest rate and other features of all debt securities: Not applicable for KPCL due to the reasons stated above.

All other material provisions giving or limiting the rights of the holders of debt: Not applicable for KPCL due to the reasons stated above.

Trustees designated by the indenture for outstanding debt or for debt being offered: Not applicable for KPCL due to the reasons stated above.

Preference Share 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.

31 Dec 2009 31 Dec 2009 31 Dec 2008 Name of shareholders Number of

shares Face value

Taka Total value

Taka Total value

Taka

The City Bank Limited 600,000 1,000 600,000,000 600,000,000 Pubali Bank Limited 200,000 1,000 200,000,000 200,000,000 One Bank Limited 200,000 1,000 200,000,000 200,000,000 Trust Bank Limited 100,000 1,000 100,000,000 100,000,000

1,100,000 1,100,000,000 1,100,000,000

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Corporate directory Head Office Summit Centre (5th Floor) 18, Karwan Bazar C/A, Dhaka 1215 Phone: [+8802] 9132437-8; 8125142; 8126665 Fax-[+8802] 9125682 Power Plants Goalpara, Khalishpur Khulna Auditors Rahman Rahman Huq Chartered Accountants 9 Mohakhali C/A, Dhaka Phone: [+8802] 9886450-2 Fax-[+8802] 9886449 E-mail-rrh@citechco.net Legal Adviser Dr. Kamal Hossain & Associates, Chamber Building, 122-124 Motijheel C/A, Dhaka-1000 Principal Banker Citibank NA. 23, Motijheel C/A, Dhaka-1000, Bangladesh. Manager to the issue AAA Consultants & Financial Advisers Ltd. Amin Court, 4th Floor (Suite # 404) 31 Bir Uttam Shahid Ashfaqueus Samad Road (Previous 62-63) Motijheel C/A, Dhaka-1000 Phone: +8802 9559602, +8802 9567726 Fax: +8802 9558330

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

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Address: CRISL Nakshi Homes (4th Floor), 6/1A, Segunbagicha, Dhaka-1000 Tel: 7173700-1 Fax: 88-02-9565783 Email: crisl@bdonline.com Analysts: Akram H Siblee siblee@crislbd.org Suman K Kundu suman@crislbd.org Entity Rating: Long Term: AA Short Term: ST-1 Outlook: Stable Rating based on financials of 1H 2009 KHULNA POWER COMPANY LTD. PRINCIPAL ACTIVITY Electricity Generation INCORPORATED ON 15 October, 1997 BOARD CHAIRPERSON Mr. Muhammed Aziz Khan MANAGING DIRECTOR Mr. Hasan Mahmood Raja EQUITY Tk. 2,495.86 million

REPORT: RR/287/09

This is a credit rating report as per the provisions of the Credit Rating Companies Rules 1996. The Long Term and Short Term Ratings of the company are valid for one year and six months respectively. After the above periods, these rating will not carry any validity unless the company goes for rating surveillance.

Long Term Short Term

Entity Rating AA ST-1

Outlook Stable Date of Rating 16 September, 2009

1.0 RATIONALE CRISL has assigned “AA” (pronounced as double A ) rating in the Long Term and “ST-1” rating in the Short Term to Khulna Power Company Ltd. (hereinafter referred “KPCL”) based on financials and other relevant quantitative and qualitative information. The above ratings have been done on the basis of its good fundamentals such as sound equity based capital structure, sound debt repayment background, high quality plant, satisfactory profitability, government guarantee against power purchase, insignificant market risk on demand, government supportive policies for power sector etc. However, the ratings are constrained to some extent by full dependency on O&M operator’s performance, low return compared to high capital intensiveness, dependency on imported raw materials, tariff rate fixed by government etc. Entities rated in this category are adjudged to be of high quality, offer higher safety and have high credit quality. This level of rating indicates a corporate entity with sound credit profile and without significant problems. Risk factors are modest and may vary slightly from time to time because of economic conditions. The short term rating indicates highest certainly of timely payment. Short-term liquidity including internal fund generation is very strong and access to alternative sources of fund is outstanding. Safety is almost risk free like Government short-term obligations. KPCL has been operating with comfortable financial profile including good profitability and sustained stability in revenue. Structured Power Purchase Agreement (PPA) with Bangladesh Power Development Board (BPDB) ensures payment for at least 50% deemed generation. Moreover, pass-through nature of its fuel costs under the tariff guidelines resulting a low fuel price risk for KPCL. Chronic power deficits in the country, growing demand for power in the economy and KPCL’s long term power purchase agreement with government depicts low off-take risk for the producer. KPCL has consistently achieved better operational performance over the years i.e. plant factor 89.27% in 1H of 2009, 74.05% in 2008, 74.66% in 2007 and 79.44% in 2006. In view of better operating efficiency the revenue of the company reached to Tk. 2,993.70 million in 1H of FY2009 (6 months operation), which was Tk. 8,160.42 million in FY2008 and Tk. 5,698.21 million in FY2007. With the favour of stable oil prices in the international market and low financial expenses, net profit reached to Tk. 437.32 million in 1H of FY2009 against Tk. 272.52 million in FY2008 and Tk. 309.18 million in FY2007. The sound equity base (74% contribution in total capital employed) with low financial leverage made its capital structure stronger. KPCL is yet to develop core competency and is presently fully depends on O&M operator’s performance. However, ‘Summit’ and ‘United’ (shareholders of KPCL) has good exposures to run different power plants having more than 200 MW capacity under own management. High fuel prices put pressure on profitability as the company can realize about 90% of the fuel cost from BPDB. CRISL also viewed the company with “Stable” outlook and believes that KPCL will be able to maintain its good fundamentals in FY2009 also.

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

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110 MW Independent Power Producer 99.97% shares owned by Summit and United group

2.0 CORPORATE PROFILE 2.1 The Genesis Khulna Power Company Ltd. (KPCL) is an Independent Power Producer (IPP) established in 1997 under the Government initiatives for private power projects. By considering that gas burning large land based power project requires relatively long preparation and construction period, this barge-mounted power plant was set up to alleviate the severe power crisis as a faster track solution on short term basis. Through a public bidding process the consortium of Wartsila NSD Power Development (Asia) Ltd., Summit Industrial & Mercantile Corporation (Pvt.) Ltd. and United Enterprises & Co. Ltd. was awarded to establish this power plant in Khulna. Two principal evaluation criteria of government were: early commissioning i.e. within 10 months of executing the Power Purchase Agreement (PPA) and the Implementation Agreement (IA) and dual fuel capability. Liquid fuel fired with capacity of 110 Megawatts (MW), KPCL is selling electricity to Bangladesh Power Development Board (BPDB) under PPA between the company and BPDB. The plant started supply of electricity to the national grid from 13 October, 1998. Initially the company was started as private limited company and later in FY2009 converted into public limited company. The corporate office is located at Summit Centre, 5th Floor, 18 Karwan Bazar C/A, Dhaka-1215. The company has planned to go public through direct listing during 2009. 2.2 Ownership Structure At present Summit Industrial & Mercantile Corporation (Pvt.) Ltd. (Summit) and United Enterprises & Co. Ltd. (United) equally own 99.9664% of 2,085,930 ‘Class A & B’ ordinary shares. Rest 0.0336% i.e. 700 ordinary shares were transferred in favor of 14 individuals at 50 numbers of ‘Class-A’ shares each. Out of these shares, Summit and United each hold 3 ‘Class-B’ ordinary shares, which get different treatment in respect of dividend payment compared to ‘Class-A’ shares. However, the existing shareholders of the company on 19 July, 2009, in an Extraordinary General Meeting (EGM) passed and resolved that the existing category of Ordinary ‘Class A’ and ‘Class B’ shares shall be reclassified as ordinary shares. At the inception, El Paso Khulna Power ApS (incorporated in Denmark) were holding 73.90%, Wartsila Development & Financial Services (Asia) Ltd. (incorporated in Cayman Island) 6.10%, Summit and United 10% each. Later in FY2008, EL Paso and in June, 2009 Wartsila sold their holdings equally to Summit and United. El Paso determined share transfer package through a competitive bid and Summit and United as existing shareholder got the first priority to take the package. Other than ordinary shares, KPCL has issued 1,100,000 preference shares of Tk. 1000 each on May 2008 to four private commercial banks. These preference shares are cumulative and redeemable in five annual installments of 220,000 shares starting from 14 May 2010, the second anniversary of the issue date. 3.0 SHAREHOLDERS’ GROUP PROFILE 3.1 Summit Group Summit Group is one of the leading investment and industrial business houses in Bangladesh. With the inception of a small thermo-plastic moulding compound trading company “Sanguine Traders” in 1972, Mr. Muhammed Aziz Khan started his business career in a specialized business sector. Under his direct leadership Summit Group has become a top tier business establishment within a short period of time and now owns more than 10 companies. Out of the above companies, only Summit Power Limited and Summit Alliance Port Ltd. are publicly listed with both the bourses of the country. The major sectors of the Group investment cover power generation, tanks terminal, shipping, real estate, construction, civil & hydro engineering, container depots, trading etc. The sponsors of Summit Group are targeting the niche sectors of the country and abroad. This has led to the establishment of a barge mounted power plant in Bangladesh namely Khulna Power Company Ltd., Liquefied Petroleum Gas (LPG) plant in gas starved area at Mongla, Bagerhat, Container Freight Station in Chittagong etc. The Group is keen to invest in power sector, which has been opened to private investment in Bangladesh. At the end of 2008, the asset base of the group stood at Tk. 21,571.87 million against Tk. 5,720.43 million outside liabilities. Share capital of the group stood at Tk. 5,807.26 million and net profit during the last period reached to Tk. 2,949.53 million.

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

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Plant located at near Khulna city Guaranteed payment for 50% of deemed generation

3.2 United Group The United Group is a known name in the business arena of the country. The Group started its business career in 1978; with its Flagship company United Enterprises and Co. Ltd. During the last almost three decades of operation, the Group has expanded its business in various sectors of the national economy such as Power Generation, Broadcasting and Communication, Civil and Hydro Engineering, Real Estate Development, Land port Services, Hospital and health care, Textiles, Polymer industries, Education etc. Over the years, the Group has completed several large and unique projects that testify its strength and capability in project management. Such projects include the 110 MW barge mounted power plant in Khulna; 60 km Coastal Embankment Rehabilitation Project financed by the World Bank; three 11 MW power plants in Ashulia, Narshingdi and Comilla; 450 bed State -Of-The-Art hospital; Runway Overlay Project at Zia International Airport; E-cash ATM Card Networking System; land port management services at Teknaf (ongoing) and others. At end of 2008, the asset base of the group stood at Tk. 16,395.35 million against Tk. 10,482.16 million liabilities. Net worth of the group stood at Tk. 5,913.18 million and net profit for the last period reached to Tk. 343.58 million. 4.0 PROJECT/PLANT DETAILS 4.1 Plant Location & Production Facilities The plant is located near the city of Khulna. The riverbank project site provides easy access to fuel shipments by river and is located next to an existing electrical substation and transmission line. The plant consists of two barge-mounted facilities housing of a total 19 Wartsila diesel engine generators of 6.5 MW capacities. Generators are featured with low NOx and dual fuel capability. 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. The plant’s shore side auxiliary facilities include two Heavy Furnace Oil (HFO) storage tanks (7,500 cubic meters each) and pumps to transfer heavy fuel oil to a buffer tank on either barge. 4.2 Main Features of PPA Considering the BPDB as the single buyer, the Power Purchase Agreement between BPDB and KPCL plays a very important role. The PPA inter alia includes the following important provisions:

a) The term of the contract is for 15 years from the date of commercial operations; b) BPDB is committed to a minimum guaranteed payment equivalent to 50% plant

factor on a monthly basis; c) Two part monthly tariff structure: Fuel Tariff (FT); with full cost pass through and

Other Monthly Tariff (OMT), 99% of which is US$ indexed; d) Allows KPCL to source its own fuel supply; e) Tariff invoices payable within 45 days of the delivery of invoices; f) Payment security back-up in the form of Letter of Credit covering two months

minimum tariff payments; g) The minimum tariff payment obligations continue through political and Force Majeure

Events; h) Compensation amount on termination to cover 65% of the NPV of the minimum tariff

payment for the remaining term of the PPA, plus consequent termination payment liability to KPCL in respect of the O&M agreement and Fuel Supply Agreement, plus taxes;

i) KPCL is required to pay liquidated damages for lower output capacity and short supply of energy;

j) BPDB would pay liquidity damages to KPCL in the event of failure by the GOB to meet any of; its obligations provided under the Implementation Agreement (IA).

4.3 Tariff Structure The PPA contains a two-part tariff: fuel tariff (“FT”) and other monthly tariff (“OMT”). The FT reflects the pass-through nature of fuel expenses to the extent that the plant operates at the specified heat rate. Under the tariff structure, the fuel cost is calculated in terms of volume rather than energy content (i.e. $/liter versus $/BTU), since HFO is sold by volume or mass.

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

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Two part tariff i.e. Fuel Tariff & Other Monthly Tariff 14- Member Board

OMTs were quoted for 15 years at 50%, 60%, 70%, and 80% plant factors, and together with FT, account for the payment to the Company for electricity produced on a per Kwh basis. At plant factors above 80%, the OMT used will be the same as that quoted for an 80% plant factor. 5.0 INDUSTRY OVERVIEW The Ministry of Power, Energy, and Mineral Resources (MEMR) monitors the overall power sector of the country through the Power Division and Power Cell. Generation and distribution activities have been opened to foreign and private sector, although both the sectors remain dominated by state-owned entities. Given the poor state-run electricity infrastructure, the government issued the "Private Sector Power Generation Policy of Bangladesh" in 1996 and began to invited proposals from Independent Power Producers (IPPs) in the private sector in order to ease the country’s electricity supply shortage. In response, several IPPs were set up after 1996. The Private Sector Power Generation Policy of 1996 (Amended a few clause in September 11, 2001) offers attractive incentive packages to IPPs including exemption from income tax for 15 years. However, the private power producers are still in hesitation due to the tariff policy regarding gas supply and power sale etc. Recent move of the Government to increase the tariff rate of gas supply is a major concern to the private power producers. Side by side with the large IPP projects, the Government also adopted a policy of "Small Power Generation Policy," which encourages development of small local generation projects of up to 10-MW in capacity in underserved areas. The country has an active rural electrification program, which is supported by the ADB’s Power Sector Development Program (PSDP) initiated in 2003. Since natural gas dominates our power sector in Bangladesh, 95% of electricity comes from conventional thermal power (primarily natural gas) and the remaining 5 percent through hydroelectric power. In January 2006, Bangladesh’s first coal-fired power plant began commercial production at the 250-MW Barapukuria facility in Parbotipur. According to Power Cell, the Bangladesh Power Development Board (BPDB) generated 3400 MW of the country’s 5245 MW of total commercial electricity, or about 64% percent of the total installed capacity. Over the last several years although the demand of power and gas grew in geometric progression, yet the power sector did not grow as per requirement and gas sector failed to explore its resources and developed its reserve. In the last one and half year’s natural gas production, transmission and supply situation has deteriorated. PDB viewed that, for gas supply shortage alone, it failed to generate about 850MW and for maintenance and overhauling of plants another 323 MW power could not be generated. Per capita Electricity in Bangladesh is one of the lowest in the world, at about 169.69 kilowatt-hours (kwh) in 2006. At present only 42.09% percent of the population has access to electricity, primarily in the more developed eastern zone of the country. Since much of the country is disconnected from the national electricity grid, noncommercial sources of energy such as biomass are estimated to represent more than half of Bangladesh’s energy consumption. 6.0 CORPORATE GOVERNANCE 6.1 Board of Directors The Board of KPCL consists of fourteen directors. Mr. Muhammed Aziz Khan, nominated from Summit, is the Chairman of the company. Mr. Aziz Khan is a renowned and pioneer business personality in private power sector of Bangladesh. After completion of MBA from Institute of Business Administration of Dhaka University in 1980, he sponsored the Summit Group. He is also the chairman of Summit Power Limited; the first company in the private sector to go public. Mr. Hasan Mahmood Raja nominated from United acts as Managing Director of the company. The Board members have sound exposures in the operation and technical aspect of the business, since they are involved in diversified business for a long.

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

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Small management team Operation outsourced form Wartsilla Plant is adequately protected

The Board formulated strategic objectives and policies for the company, provides leadership in implementing those objectives as well as supervises management of the company’s affairs. Under the supervision of the Board, Managing Director looks after the overall operational activities as per the delegation of power and in accordance with the Memorandum and Articles of Association. 6.2 Corporate Management and Human Resources As the core operation of KPCL is completely outsourced from ‘Operation & Maintenance operator’ i.e. Wartsila, the supplier of the engines, the corporate management team and human resource size of the company is very small. The corporate management team is headed by Mr. Hasan Mahmood Raja, the Managing Director of the company. Mr. Raja was the leading sponsor of the United Group. He is also Chairman and Managing Director of United. Managing Director is aided by Mr. Md. Abdur Rahim, the Project Director and Mr. Md. Aminur Rahman FCA, Financial Controller and Company Secretary. Mr. Abdur Rahim, a marine engineer having about 40 years experiences in steel, shipping, dockyard and power sector. Mr. Aminur Rahman, a professional accountant having 22 year of service experience in the field of accounts, finance and company secretarial matters in multinational companies. Total human resource stood at 10, who are mainly for support services. The company formulated structured ‘Employment Policy’ stating the benefits and privileges entitled by the employees. 6.3 Business Strategy As mentioned earlier, KPCL an independent power producer operates under a 15-year PPA with BPDB. A guarantee agreement between the company and Ministry of Energy and Mineral Resources (MEMR) also ensures the company regarding the payment obligations of the BPDB in the event of a breach, default or non-performance of BPDB under the PPA. Operation & Maintenance is totally outsourced from Wartsilla, the engine supplier and previous shareholder of the company. Fuel is independently sourced from Singapore by KPCL and cost of fuel passed through to the BPDB. Though the tenure of existing PPA expires on 2013, under the present electricity situation it is highly probable that government will extend the agreement for the next tenure. After the expiry O&M agreement in 2013, KPCL thinks to take over the O&M under own management. The existing personnel of the operator can be retained by KPCL. Moreover, Summit and United group have been operating different power plants having about 200 MW capacity under own management. 7.0 RISK MANAGEMENT 7.1 Plant Protection and Risk Mitigation Wartsila, the plant Operator has taken adequate protection measures to protect the plant. It has established 42 fire hydrant points covering the key areas, 28 CO2 flooding fixed installation for T1 & T3 (for control room, switchgear room and HFO separator room). There are also about 200 hand-held fire extinguishers which include foam, powder and CO2 types. The Khulna power plant has been identified as a Key Point Installation (KPI) by the government of Bangladesh. Hence services of the Bangladesh Rifles, Army and private security can be utilized. The Operator also established an Emergency Response Plan, which address all types of emergency that may arise in the plant. KPCL is currently insured all risks packages including machinery breakdown, increased cost of replacement payable, business interruption, marine and non marine liabilities, sabotage and terrorism. 7.2 Operating and Maintenance Risk KPCL has signed a 15-year O&M agreement with Wartsila, a leading supplier of flexible power plants worldwide. The operator is responsible for the activities necessary to operate the plant except fuel purchase. It will determine the needed spare parts and supplies and will provide all services necessary to obtain the parts and supplies. It will also employ and be responsible for all operating personnel. The O&M costs include a fixed fee usually of US$ 144,000 per month prorated for partial months; however, it may extend to US$ 179,000 for any month in certain circumstances. The operator shall invoice at variable cost of US$ 5.05 per MWh during

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

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Low Maintenance Risk No counter party risk due to huge power shortage Minimum Foreign Exchange Risk Exposes fuel price escalation risk Low supplies risk Better Operational Performance

the months when capacity factor is below 30% or above 60% and US$ 4.6 per MWh when capacity factor is between 30% and 60%. Variable cost will be subject to annual adjustment in certain circumstances. KPCL is responsible for unplanned maintenance in excess of US$100,000 per event and extraordinary expenses for additional work. The operator guarantees an annual availability rate for the plant at 85%. For each percentage below up to a maximum of 13% the operator will pay KPCL US$15,000 and vice versa. 7.3 Counter Party Risk Bangladesh Power Development Board (BPDB) is the only purchaser of electricity from the KPCL. According to the agreement BPDB will pay all the net electricity output delivered to the grid system from the plant with commitment to a minimum purchase equivalent to 50% plant factor on a monthly basis. As additional, payment security is backed by Letter of Credit covering two months of minimum tariff payments (and a Government of Bangladesh Guarantee). Tariff invoice is payable within 45 days of the delivery of invoice. In last 12 months, the company received payment on an average 10 days ahead of due date. There has been no dispute with BPDB regarding meter readings or invoice amounts. At present KPCL does not seem counter party risk, because the country faces huge power shortage. 7.4 Foreign Exchange Risk KPCL faces minimum foreign exchange risk. Presently there is no foreign currency denominated loan amount. The company receives revenue almost fully in US dollars. The PPA provides exchange rate protection with the pass-through fuel cost and 99% of OMT (Other Monthly Tariff) indexed to the exchange rate as applicable on the date of credit equivalent US dollars in the company’s account. 7.5 Fuel Price Escalation Risk The pass through of the fuel cost under the PPA is limited to the fuel cost if the plant was running at the heat rate as specified in the PPA. As the plant may not be running at that specified rate due to variation in fuel quality, the extra fuel cost will not be passed through and there is a risk that earnings will be affected by extra cost especially in the period of higher fuel prices in the international market However, the OMT portion of the tariff generates sufficient revenues till present period to absorb the price escalation risk. 7.6 Supplies Risk KPCL has formal Fuel Supply Agreement (FSA) with United Summit Coastal Oil Ltd. (USCOL), a sister concern of Summit and United for only inland carrier. KPCL imports fuel on its own account i,e. full responsibility bestowed on KPCL. KUO Oil (Singapore) PTE LTD, a foreign company, commercially agreed to render the offshore services (such as procurement, freight, FOB cost differential risk, inspection, supervision of loading). USCOL acts only onshore (Bangladesh) in connection with the portion of services of unloading, storage, transportation and delivery to the discharge port. KPCL faces low supply risk as it can import fuel from any commercially viable supplier and MOPS (Mean of Platts Singapore) indexed fuel costs pass through to BPDB. 8.0 BUSINESS PERFORMANCE

* 6 Months operation (January – June) KPCL has dispatched 693,544 MWh of energy to national grid during FY2008 against 718,985 MWh of energy in FY2007 whereas licensed capacity was 963,600 MWh in both of the periods.

Indicators *1H 2009 2008 2007 2006

Licensed Capacity (MWh) [110] 477,840 963,600 963,600 963,600

Energy Generation (MWh) 416,707 705,384 730,987 776,653

Net Energy Output (MWh) 410,301 693,544 718,985 764,222

Plant Factor (%) 89.27 74.05 74.66 79.44

Economic Efficiency (TK/MWh) 6,267.70 10,866.16 7,051.65 7,419.68

Operational Efficiency (%) 87.21 73.20 75.86 80.60

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

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Sound profitable company

During first half of FY2009, net energy dispatched was 410,301 MWh against 477,840 MWh of installed capacity. The plant factor stood at 89.27% in 1H of FY2009 and 74.05% in FY2008 against 74.66% in FY2007. In terms of Economic Efficiency (production cost to energy output) the company has improved its performance over last period. Cost per MWh of Tk. 6,267.70 in 1H of FY2009 was lower than Tk. 10,866.16 in FY2008 and Tk. 7,051.65 in FY2007. Volatility of oil price in international market was the prime reason of volatility in ratio of economic efficiency over the periods. Operational Efficiency (energy output to potential output at 100% capacity) also improved in 1H of FY2009 at 87.21% from 73.20% in FY2008 and 75.86% in FY2007. 9.0 FINANCIAL PERFORMANCE 9.1 Profitability

* First Half growth of FY2009 has been annualized KPCL is a highly profitable company and the profitability indicators were stable over the last few years. The company enjoys exemption from tax on income for 15 years from the date of its commercial operation. Net profit stood at Tk. 437.51 million during 1H of FY2009 against Tk. 272.52 million in FY2008 and Tk. 309.18 million in FY2007. The profitability is highly influenced by the fuel tariff, which is volatile in the international market. According to PPA, PDB reimburses the fuel cost as per specified quantity of fuel per MW electricity generated. However, due to different configuration of engines than specified in PPA, the burn rate of fuel per MW is higher. Consequently KPCL can realize about 90% of fuel cost from BPDB and rest 10% put pressure on profitability, which were more acute during 2008 (Tk. 44,644 per MT) and 2007 (Tk. 26,996 per MT) when fuel price was sky high than 1H of FY2009 (Tk. 23,733 per MT). Other than influence of fuel price, net profit of 1H, FY2009 substantially increased from irregular income from EL Paso’s (a previous equity partner) term loan waiver (Tk. 91.48 million) and reduced financial expenses. While analyzing profitability, Return on Average Asset (ROAA) has substantially increased to 17.52% (annualized) at end of 1H of FY2009 from 4.76% at YE2008 and 4.78% at YE2007. By nature power generation industry is very capital intensive; moreover, significant trade debtors and huge raw materials inventory induced to reduce the return on assets. Due to fall in net profit by 11.80% and 4.25% increase in equity reduced Return on Average Equity (ROAE) to 9.58% at YE2008 from 9.81% at YE2007. Though total amount of capital employed decreased, the Return on Average Capital Employed (ROACE) declined further to 6.99% at YE2008 from 7.30% at YE2007. However, at end of 1H of FY2009, both annualized ROAE and ROACE increased substantially to 35.87% and 25.16% respectively. The Earning Per Share (EPS) of Tk. 1000 stood at Tk. 352 (annualized) at end of 1H of FY2009 against Tk. 88 at YE2008.

Indicators *1H 09 2008 2007 2006 2005

Return on Average Assets (ROAA)% 17.52 4.76 4.78 4.01 4.30

Return on Average Equity (ROAE)% 35.87 9.58 9.81 8.88 8.80

Return on Average Capital Employed % 24.44 6.99 7.30 6.00 5.55

Gross Profit Margin% 12.76 6.07 9.54 8.69 12.48

Operating Profit Margin% 11.70 5.32 7.76 7.23 10.25

Net Profit Margin% 14.61 3.34 5.43 4.06 5.66

Earning Per Share(Tk.1000) 352 88 141 110 102

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

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Improved cost efficiency Equity based company

9.2 Cost Efficiency

* First Half growth of FY2009 has been annualized The cost efficiency (cost of goods sold to sales revenue) was improved in 1H of FY2009 though the ratio was very high in the last several years. It stood at 87.24% in 1H2009 against 93.93% in FY2008 and 90.46% in FY2007. As mentioned earlier, high oil prices and freight charges in international market caused to high cost to revenue ratio. KPCL imports furnace oil from Singapore. C&F of fuel is calculated as the five day (immediately and after 2 days of date of bill of lading) rolling average of MOPS (Mean of Platts Singapore). Contribution of raw materials cost to cost of goods sold increased 90.56% in FY2008 from 85.26% in FY2007; however, it was 84.86% in 1H of FY2009. It revealed that the price of heavy furnace oil decrease by 46.84% in 1H of FY2009 than FY2008, however, it was 65.37% higher in FY2008 than FY2007. Finance cost to revenue decreased to 0.21% in 1H of FY2009 against 2.13% in FY2008 and 2.60% in FY2007. Early payment of IFC term loan and preference share’s dividend, which charged against retained earnings induced to improve the finance cost to revenue ratio in 1H of FY2009. Administrative expense to revenue ratio stood at 1.05% in 1H of FY2009 against 0.75% in FY2008 and 1.78% in FY2007. 10.0 CAPITAL STRUCTURE AND LEVERAGE

* First Half growth of FY2009 has been annualized KPCL is a sound equity based company with good contribution from long term loan in the capital structure. At end of 1H of FY2009, the capital structure revealed that almost 74% of the net capital employed Tk. 3386.39 million was financed by equity i.e. Tk. 2,495.85 million. The equity pie is composed of 83.58% paid up capital and 16.42% retained earnings. The cumulative preference shares are redeemable in five annual installments starting from 14 May, 2010 at the second anniversary of the date of issue. By considering its nature, these preference shares are long term liability. The internal capital generation was good and stood at 17.62% at end of 1H of FY2009 against 11.45% at YE2008. Other than Tk.113.44 million preference dividend, Tk. 208.59 million and Tk. 1200 million paid for FY2008 and FY2007 respectively as cash dividend. Against the above equity structure, outside liabilities stood at Tk. 2,264.58 million representing the leverage ratio 0.91 times as on 30 June 2009 against 1.19 times at YE2008. The leverage ratio consists 0.36 as long term gearing and 0.56 as short term gearing. Net asset value per TK. 1000 share increased to Tk. 1196.52 at end of 1H of FY2009 against Tk. 1141.15 at YE2008. 11.0 LIQUIDITY AND FUND FLOW ANALYSIS

* First Half growth of FY2009 has been annualized

Indicators *1H 09 2008 2007 2006 2005 Cost to Revenue Ratio (%) 87.24 93.93 90.46 91.31 87.52 Administrative Exp to Revenue Ratio % 1.05 0.75 1.78 1.46 2.23 Finance Cost to Revenue Ratio % 0.21 2.13 2.60 3.13 4.55

Indicators *1H 09 2008 2007 2006 2005 Leverage Ratio (X) 0.92 1.19 0.88 1.24 1.18 Internal Capital Generation (%) 17.52 11.45 9.35 8.54 8.68 Net Asset Value Per Share (Tk. 1000) 1196.52 1141.15 1585.79 1437.57 1327.18

Indicators *1H 09 2008 2007 2006 2005 Current Ratio (X) 0.99 1.06 1.30 1.15 1.13 Quick Ratio (X) 0.83 0.60 0.82 1.00 0.90 Cash Conversion Cycle 19 8 4 18 44

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

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Small cash conversion cycle Sound debt servicing capacity

KPCL is basically an import based (considering volume of raw materials) company requiring significant inventory (heavy furnace oil). Due to comparatively shorter receivable collection period and lengthy repayment of payables, liquidity position of the company always remains at modest level. It is reflected by its liquidity ratio which stood at 0.99 times, 1.06 times and 1.30 times at end of 1H of FY2009, FY2008 and FY2007 respectively. As per agreement, KPCL has to keep 11,000 MT furnace oil in country for on an average 30 days production. Supplier’s payment can be delayed upto 90 days as per L/C terms. The credit sales/receivables backed by PPA realizable within 45 days induced to reduce average cash conversion cycle to 20-25 days. On the over, the liquidity cycle depends on as early as realization of receivables from BPDB. Analysis of the fund flow reveals that the company generated sufficient funds internally to service its debt burden and other liabilities also. In FY2008, the company generated cash flow from operation of Tk 546.87 million (1.11 times of debt coverage) and free operating cash flow of Tk 546.45 million (1.10 times of debt coverage). 12.0 FINANCIAL FLEXIBILITY AND SOLVENCY

* First Half growth of FY2009 has been annualized Due to sound equity and legal backings, KPCL enjoys good financial flexibility to raise funds from different sources. With sound creditability, it enjoys a large credit limit from different banks (BRAC Bank, Citibank NA, Pubali Bank, Shahjalal Islami Bank and Standard Bank). Presently, KPCL enjoys funded limit of Tk. 1,109 million and non-funded limit of Tk. 2,440 million as on 30 June, 2009. However, out of the above limit, the outstanding funded bank loan liability was Tk. 293.70 (i.e. 26.48% utilization of the limit) and non funded liability was Tk. 316.87 million (i.e. 13% utilization of limit) as on 30 June, 2009. While analyzing creditworthiness of the company, it revealed that with the company has been utilizing the revolving credit limits duly. Initially the company made agreement with IFC for $51.968 million for project loan. However, due to some compliance fulfillment by KPCL, IFC delayed to disburse the loan. Consequently, the then two foreign sponsors i.e. El Paso and Wartsilla provided the amount as ‘Bridge Loan’ in the proportion of 85% and 15% respectively. Later in August, 1999 IFC disbursed $22.539 million and in October, 2002 $21.539 million. Foreign two sponsors’ loan was partially replaced by IFC loan and remaining amount of foreign sponsors’ loan treated as term loan. The above term loans were being repaid in semi-annual installments for a term of 9 years effective from 15 December 2002. The remaining balance of IFC loan of Tk. 1,120.58 million had fully re-paid earlier in FY2008 from the proceeds of redeemable cumulative preference share of TK. 1,100 million. The balance i.e. Tk. 91.98 million of El Paso loan was waived by El Paso under share transfer deal with Summit and United. Remaining balance of Wartsilla’s loan was fully repaid in March, 2009. The cash generation of the company was good to serve the interest obligation against the revolving loan. Debt service coverage ratio stood at 14.53 times in 1H of FY 2009 against 1.26 times in FY2008. In term of interest coverage ratio, the earnings against the fixed cost burden was commendable to 87.22 times in 1H of FY2009 against 3.55 times in FY2008 due to no long term loan except preference shares in FY2009. However, by considering redeemable preferred share as liability, the interest coverage ratio (including preferred dividend as fixed charge) stood at 4 times in 1H of FY2009.

Indicators *1H 09 2008 2007 2006 2005 Debt Service Coverage Ratio (X) 14.53 1.26 1.44 1.31 1.35 Interest Coverage Ratio (X) 87.22 3.55 4.54 3.38 3.33

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

Page 10 of 15

13.0 OBSERVATION SUMMARY

14.0 CONCLUSION The power sector of Bangladesh has been passing through a critical stage due to many reasons including shortage of production compared to demand. According to PBD, the demand of electricity reached to 5500 MW, whereas daily power generation stayed between 3300 MW to 3400 MW, the same was also produced in 2004-05. This wide gap between generation and demand is not solely for no new production but also lack of consistent expansion of transmission and distribution channels. Consequently, per capita electricity generation or coverage of population under electricity not achieved as per Power Sector Master Plan (PSMP). Moreover acute shortage of natural gas makes volatile the power generation. Overall, the power sector of Bangladesh falls in a disaster. KPCL as a power generation company runs successfully since its commercial operation. The profitability, solvency and efficiency of the company improved over the periods. Good exposures of the entrepreneurs in power sector and government supportive policy help to maintain company’s present stability.

END OF THE REPORT

[Information used herein is obtained from sources believed to be accurate and reliable. However, CRISL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Rating is an opinion on credit quality only and is not a recommendation to buy or sell any securities. All rights of this report are reserved by CRISL. Contents may be used by news media and researchers with due acknowledgement.]

Rating Comforts • Sound equity base • Sound debt repayment background • High quality plant • Satisfactory profitability • Government guarantee against

minimum power purchase • No market risk regarding demand • Government supportive policies

Rating Concerns: • Fully dependent on O&M

operator’s performance • Low return compared to high

capital intensiveness • Dependency mainly on imported

raw materials • Tariff rate fixed by government

Business Opportunities: • Government Incentives • Increasing demand for electricity

Business Challenges: • Volatility of oil prices in

international market • Dependency on foreign

technology

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

Page 11 of 15

15.0 CORPORATE INFORMATION

Date of Incorporation : 15 October, 1997 Commencement of Operation: 13 October, 1998

Capital History:

Board of Directors Mr. Muhammed Aziz Khan Chairman Mr. Hasan Mahmood Raja Managing Director Mr. K.M. Ahsan Shamim Director Mr. Latif Khan Director Mr. Ahmed Ismail Hossain Director Ms. Ayesha Aziz Khan Director Mrs. Anjuman Aziz Khan Director Mr. Akhter Mahmud Rana Director Mr. Muhammad Farid Khan Director Mr. Faridur Rahman Khan Director Ms. Adeeba Aziz Khan Director Mr. Abul Kalam Azad Director Mr. Jafer Ummeed Khan Director Mr. Moinuddin Hasan Rashid Director Auditor Rahman Rahman Huq

Chartered Accountants

Key Management Mr. Hasan Mahmood Raja Managing Director

Mr. Md. Abdur Rahim Project Director Mr. Md. Aminur Rahman FCA Financial Controller &

Company Secretary

Year Authorized Capital(M.Tk)

Issued, Subscribed and Paid-up Capital (M. Tk.)

Rate of Increase

Source of Paid-up Capital

2004 2085.93 2,085.93 - Cash 2005 2085.93 2,085.93 - Do 2006 2085.93 2,085.93 - Do 2007 2085.93 2,085.93 - Do 2008 3,000.00 2,085.93 Do

30 June, 2009

3,000.00 2,085.93 - Do

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

Page 12 of 15

16.0 Financials Balance Sheet (As on 31 December) (Amount in Million Taka)

Note: Above Financial statements are rearranged for analysis purpose

1H 2009 2008 2007 2006 2005

Non-Current Assets: --- ---

Property, Plant & Equipment 3,398.42 3,463.28 3,635.51 3,858.49 3,729.64

Other Non-Current Assets - - - - 342.99

Total Non-Current Assets 3,398.42 3,463.28 3,635.51 3,858.49 4,072.62

Current Assets: --- --- --- --- ---

Inventories 221.00 762.73 945.90 386.03 401.57

Trade Debtors 1,036.18 885.78 726.93 1,882.55 1,425.00

Adv. Deposits & Prepayments 89.38 1.49 88.21 147.00 46.32

Other Current Assets 8.01 8.01 48.18 27.11 15.19

Cash & Bank Balances 7.45 100.90 771.65 429.41 75.33

Total Current Assets 1,362.02 1,758.91 2,580.87 2,872.11 1,963.41

Current Liabilities: --- --- --- --- ---

Short Term Loan 293.70 284.00 - - 250.01

Long Term Loan-CP 220.00 30.88 316.65 318.71 312.94

Trade Creditors 620.44 1,314.03 1,395.33 1,981.70 1,079.77

Accrued Expenses & others 31.31 27.81 13.60 5.51 71.41

Proposed Dividend 208.59 - - - -

Other ST Liabilities - - 259.73 181.61 21.20

Total Current Liabilities 1,374.04 1,656.72 1,985.31 2,487.52 1,735.34

Net Current Assets (12.02) 102.19 595.56 384.58 228.07

Net Assets 3,386.39 3,565.47 4,231.07 4,243.07 4,300.69

Non-Current Liabilities: --- --- --- --- ---

Long Term Loan/Preference Share

880.00 1,174.89 911.56 1,236.20 1,526.77

Deferred Liabilities 10.54 10.21 11.66 8.21 5.53

Other Non-Current Liabilities - - - - -

Total Non-Current Liabilities 890.54 1,185.10 923.22 1,244.41 1,532.30

Shareholders' Equity: --- --- --- --- ---

Share Capital 2,085.93 2,085.93 2,085.93 2,085.93 2,085.93

Other Reserve - - - - 240.24

Retained Earnings 409.92 294.44 1,221.91 912.74 442.23

Total Shareholder's Equity 2,495.85 2,380.37 3,307.84 2,998.67 2,768.40

Total Equity and LT Liabilities 3,386.39 3,565.47 4,231.07 4,243.07 4,300.69

Total Assets 4,760.44 5,222.19 6,216.38 6,730.60 6,036.03

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

Page 13 of 15

B. Income Statement (for the year ended 31 December) (Amount in Million Taka)

Note: Above Financial statements are rearranged for analysis purpose

1H 2009 2008 2007 2006 2005

Sales Revenue 2,993.70 8,160.42 5,698.21 6,311.06 4,243.77

COGS Excluding Depreciation 2,517.66 7,495.62 4,941.29 5,550.89 3,506.76

Depreciation-Mfg 94.13 169.20 213.38 211.64 207.49

Cost of Good Sold 2,611.79 7,664.82 5,154.66 5,762.52 3,714.26

Gross Profit 381.91 495.61 543.55 548.54 529.51

Salary & Allowances 5.28 17.82 20.44 18.66 17.22

Depreciation-Administrative 0.81 1.71 1.79 1.35 2.23

Other Administrative Expenses 25.25 41.97 79.21 72.39 75.41

Profit from Operation 350.57 434.10 442.11 456.16 434.92

Other Income 91.48 3.5 9.83 5.04 4.43

Financial Cost 6.18 173.86 148.19 197.41 193.22

Non Operating Income 1.64 8.78 5.43 - -

Non-Operating Exp. - - - 7.59 5.90

Profit Before Tax 437.51 272.52 309.18 256.19 240.24

Income Tax - - - - -

Profit After Tax 437.51 272.52 309.18 256.19 240.24

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

Page 14 of 15

CRISL RATING SCALES AND DEFINITIONS LONG-TERM RATINGS OF CORPORATE

Note: For long-term ratings, CRISL assigns + (Positive) sign to indicate that the issue is ranked at the upper-end of its generic rating category and - (Minus) sign to indicate that the issue is ranked at the bottom end of its generic rating category. Long-term ratings without any sign denote mid-levels of each group.

RATING DEFINITION

AAA Triple A (Highest Safety)

Investment Grade Entities rated in this category are adjudged to be of best quality, offer highest safety and have highest credit quality. Risk factors are negligible and risk free, nearest to risk free Government bonds and securities. Changing economic circumstances are unlikely to have any serious impact on this category of companies.

AA+, AA, AA-

(Double A) (High Safety)

Entities rated in this category are adjudged to be of high quality, offer higher safety and have high credit quality. This level of rating indicates a corporate entity with a sound credit profile and without significant problems. Risks are modest and may vary slightly from time to time because of economic conditions.

A+, A, A- Single A

(Adequate Safety)

Entities rated in this category are adjudged to offer adequate safety for timely repayment of financial obligations. This level of rating indicates a corporate entity with an adequate credit profile. Risk factors are more variable and greater in periods of economic stress than those rated in the higher categories.

BBB+, BBB, BBB-

Triple B (Moderate

Safety)

Entities rated in this category are adjudged to offer moderate degree of safety for timely repayment of financial obligations. This level of rating indicates that a company is under-performing in some areas. Risk factors are more variable in periods of economic stress than those rated in the higher categories. These entities are however considered to have the capability to overcome the above-mentioned limitations.

BB+, BB, BB-

Double B (Inadequate

Safety)

Speculative Grade Entities rated in this category are adjudged to lack key protection factors, which results in an inadequate safety. This level of rating indicates a company as below investment grade but deemed likely to meet obligations when due. Overall quality may move up or down frequently within this category.

B+, B, B- Single B (Risky)

Entities rated in this category are adjudged to be with high risk. Timely repayment of financial obligations is impaired by serious problems which the entity is faced with. Whilst an entity rated in this category might be currently meeting obligations in time through creating external liabilities.

CCC+,CCC, CCC-

Triple C (Vulnerable)

Entities rated in this category are adjudged to be vulnerable and might fail to meet its repayments frequently or it may currently meeting obligations in time through creating external liabilities. Continuance of this would depend upon favorable economic conditions or on some degree of external support.

CC+,CC, CC- Double C

(High Vulnerable)

Entities rated in this category are adjudged to be very highly vulnerable. Entities might not have required financial flexibility to continue meeting obligations; however, continuance of timely repayment is subject to external support.

C+,C,C- (Extremely

Speculative)

Entities rated in this category are adjudged to be with extremely speculative in timely repayment of financial obligations. This level of rating indicates entities with very serious problems and unless external support is provided, they would be unable to meet financial obligations.

D (Default)

Default Grade Entities rated in this category are adjudged to be either already in default or expected to be in default.

CREDIT RATING REPORT ON

KHULNA POWER COMPANY LTD.

Page 15 of 15

SHORT-TERM RATINGS OF CORPORATE

ST-1

Highest Grade Highest certainty of timely payment. Short-term liquidity including internal fund generation is very strong and access to alternative sources of funds is outstanding. Safety is almost like risk free Government short-term obligations.

ST-2

High Grade High certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small.

ST-3

Good Grade Good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small.

ST-4

Moderate Grade Moderate liquidity and other protection factors qualify an entity to be in investment grade. Risk factors are larger and subject to more variation.

ST-5

Speculative Grade Speculative investment characteristics. Liquidity is not sufficient to ensure discharging debt obligations. Operating factors and market access may be subject to a high degree of variation.

ST-6

Default Entity is in default or is likely to default in discharging its short-term obligations. Market access for liquidity and external support is uncertain.

We also report that:

a)

b)

c)

d)

Dhaka, 20 February 2010

Rahman Rahman HuqChartered Accountants

In our opinion, the financial statements prepared in accordance with Bangladesh AccountingStandards (BAS) and Bangladesh Financial Reporting Standards (BFRS), give a true and fairview of the state of the company’s affairs as at 31 December 2009 and of the results of itsoperations and its cash flows for the year then ended and comply with the Companies Act1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations.

Auditors’ Report to the Shareholders ofKhulna Power Company Ltd.

We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Thosestandards require that we plan and perform the audit to obtain reasonable assurancewhether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

We have audited the accompanying balance sheet of Khulna Power Company Ltd. as at 31December 2009 and the related profit and loss account, statement of changes in equity andcash flow statement for the year then ended and a summary of significant accountingpolicies and other explanatory notes. The preparation of these financial statements is theresponsibility of the company’s management. Our responsibility is to express anindependent opinion on these financial statements based on our audit.

Sd/-

the expenditures incurred were for the purposes of the company's business.

we have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit and made dueverification thereof;

in our opinion, proper books of account as required by law have been kept by thecompany so far as it appeared from our examination of these books;

the company’s balance sheet and profit and loss account dealt with by this report arein agreement with the books of account; and

2009 2008Notes Taka Taka

AssetsProperty, plant and equipment (net) 4 3,307,133,332 3,463,283,276

Total non-current assets 3,307,133,332 3,463,283,276

Inventories 5 981,640,270 762,728,652 Accounts receivable 6 387,940,605 885,777,668 Other receivables 7 12,497,004 8,008,915 Advances, deposits and prepayments 8 1,548,516 1,493,673 Cash and cash equivalents 9 701,135,588 100,899,376

Total current assets 2,084,761,983 1,758,908,284

Accounts payable 10 1,486,104,691 1,314,033,048 Working capital loan 11 - 284,000,000 Term loan - current portion 12 - 30,883,364 Accrued expenses and others 13 40,476,518 13,470,889 Payable for interest and other financial charges - 14,335,472

Total current liabilities 1,526,581,209 1,656,722,773 Net current asset 558,180,774 102,185,511 Net assets employed 3,865,314,106 3,565,468,787

Shareholders' equityOrdinary shares 14 2,085,930,000 2,085,924,000 Redeemable cumulative class 'A' preference shares 14 1,100,000,000 1,100,000,000 Retained earnings 668,492,911 294,437,827

3,854,422,911 3,480,361,827

Non-current liabilitiesTerm loan - net of current portion 12 - 74,892,180 Deferred liability for gratuity and earned leave 15 10,891,195 10,208,780

Total non-current liabilities 10,891,195 85,100,960 Total equity and long term liabilities 3,865,314,106 3,565,462,787

The annexed notes 1 to 31 form an integral part of these financial statements.

Sd/- Sd/-

Managing Director Director Company Secretary

As per our report of same date.

Dhaka, 20 February 2010 Rahman Rahman Huq

Sd/-

Khulna Power Company Ltd.

Balance Sheetas at 31 December 2009

Sd/-

Notes 2009 2008Taka Taka

Operating revenues 16 6,393,267,345 8,160,423,118 Operating expenses 17 (5,718,431,301) (7,664,817,721) Gross profit 674,836,044 495,605,397

General and administrative expenses 18 (64,078,271) (61,504,226) Other income 19 91,481,290 3,500,496 Exchange gain 2,174,414 8,784,292 Result from operating activities 704,413,477 446,385,959

Finance income 9,155,909 4,048,472 Finance expenses 20 (17,483,802) (177,911,217) Net financial expenses (8,327,893) (173,862,745) Net profit for the year 696,085,584 272,523,214

Earning per share (EPS) 21 2.79 0.97

The annexed notes 1 to 31 form an integral part of these financial statements.

Sd/-

Managing Director Company Secretary

As per our report of same date.

Sd/-

Rahman Rahman HuqDhaka, 20 February 2010 Chartered Accountants

Khulna Power Company Ltd.

for the year ended 31 December 2009Profit and Loss Account

Director

Sd/-Sd/-

Redeemable cumulative

class 'A'Ordinary preference Retained

Particulars shares shares earnings TotalTaka Taka Taka Taka

Balance as at 1 January 2008 2,085,930,000 - 1,221,914,613 3,307,844,613

Issued during the year - 1,100,000,000 - 1,100,000,000

Dividend paid for the year 2007 - - (1,200,000,000) (1,200,000,000)

Net profit for the year - - 272,523,214 272,523,214

Balance as at 31 December 2008 2,085,930,000 1,100,000,000 294,437,827 3,480,367,827

Preference stock dividend paid - - (113,437,500) (113,437,500)

Dividend paid for the year 2008 - - (208,593,000) (208,593,000)

Net profit for the year - - 696,085,584 696,085,584

Balance as at 31 December 2009 2,085,930,000 1,100,000,000 668,492,911 3,854,422,911

Khulna Power Company Ltd.

Statement of Changes in Equityfor the year ended 31 December 2009

2009 2008Taka Taka

A. Cash flow from operating activities:

Collection from BPDB 6,891,104,408 8,001,571,584 Cash paid to suppliers and employees (5,897,972,092) (7,317,656,592) Cash generated from operations 993,132,316 683,914,992 Finance income received 9,155,909 4,048,472 Interest and other financial charges paid (31,783,792) (141,096,988) Net cash provided by operating activities 970,504,433 546,866,476

B. Cash flow from investing activities:

Acquisition of property, plant and equipment (34,343,525) (413,003) Sale proceeds of property, plant and equipment - 1,303,534 Dividend received from offshore overnight investment - 2,408,996 Net cash provided by investing activities (34,343,525) 3,299,527

C. Cash flow from financing activities:

Term loan (13,894,196) (2,304,588) IFC loans ('A' & 'B') - (1,118,611,237) Redeemable cumulative class 'A' preference shares - 1,100,000,000 Preference stock dividend paid (113,437,500) - Dividend paid (208,593,000) (1,200,000,000) Net cash used in financing activities (335,924,696) (1,220,915,825)

D. Net cash inflow/(outflow) for the year (A+B+C) 600,236,212 (670,749,822)

E. Opening cash and cash equivalents 100,899,376 771,649,198

F. Closing cash and cash equivalents 701,135,588 100,899,376

Khulna Power Company Ltd.

Cash Flow Statementfor the year ended 31 December 2009

1. Reporting entity

1.1 Company profile

1.2 Nature of business

2. Basis of preparation

2.1 Statement of compliance

Khulna Power Company Ltd.

Notes to the Financial Statementsas at and for the year ended 31 December 2009

Khulna Power Company Ltd. (“the company”) was incorporated in Bangladesh on 15October 1997 as a private limited company under the Companies Act 1994. The companyhas converted into public limited company on 19 July 2009 .The plant came into operationon 13 October 1998. The address of the company’s registered office is Summit Centre, 5thfloor, 18 Karwan Bazar C/A, Dhaka-1215, Bangladesh. The original authorised capital ofthe company was Tk. 2,085,930,000 divided into 2,085,930 ordinary shares of Tk. 1,000each. On 8 January 2007 the authorised capital was increased to Tk. 5,000,000,000 dividedinto 3,000,000 ordinary shares of Tk. 1,000 each and 2,000,000 preference shares of Tk.1,000 each. Out of 2,000,000 preference shares, 1,100,000 were issued and fully paid up.

Further, on 19 July 2009, at an extra ordinary general meeting (EGM), the existingshareholders of the company passed and resolved that the existing category of ordinaryclass A and class B shares shall be reclassified as ordinary shares. It was also decided thatthe face value of each ordinary shares be fixed at TK. 10 each instead of TK. 1, 000 each.

The principal activity of the company is to set up a nominally rated 110 MW liquid fuel-fired, convertible to dual fuel-fired (liquid gas), barge mounted power plant in Khulna,Bangladesh for generation of electricity, to sell generated power to any legal entity andto acquire fuel required for such power generation from home and abroad. Since inceptionthe company is supplying electricity to the national grid of Bangladesh through selling thesame to Bangladesh Power Development Board (BPDB) under Power Purchase Agreement(PPA) between the company and BPDB.

The financial statements have been prepared in accordance with Bangladesh AccountingStandards (BAS) and Bangladesh Financial Reporting Standards (BFRS), the Companies Act1994 and the Securities and Exchange Rules 1987.

2.2 Basis of measurement

2.3 Functional and presentational currency

2.4 Use of estimates and judgements

Note 4 - depreciation

Note 5 - inventory valuation

Note 13 - accrued expenses and others

Note 15 - deferred liability for gratuity and earned leave

2.5

3. Significant accounting policies

In particular, information about significant areas of estimation uncertainty and criticaljudgements in applying accounting policies that have the most significant effect on theamounts recognised in the financial statements is included in the following notes:

The accounting policies set out below have been applied consistently to all periodspresented in these financial statements.

Reporting period

The financial period of the Company covers one year from 1 January to 31 December.

The financial statements (except notes 22 and 23, where the currency mentioned as USDfor presentation purpose) are prepared in Bangladesh Taka (Taka/Tk/BDT), which is thecompany's functional currency and have been rounded off to the nearest integer.

The financial statements have been prepared on the historical cost basis. Exceptions areproperty, plant and equipment where foreign exchange gain or loss arising from foreigncurrency debts taken to finance the assets is adjusted against the value of the assets asper Companies Act 1994 .

The preparation of financial statements in conformity with BAS and BFRS requiresmanagement to make judgements, estimates and assumptions that affect the applicationof accounting policies and the reported amounts of assets, liabilities, income andexpenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions toaccounting estimates are recognised in the period in which the estimates are revised andin any future periods affected.

3.1 Property, plant and equipment

3.1.1 Recognition and measurement

3.1.2 Capitalisation of foreign exchange gain or loss

3.1.3 Subsequent costs

3.1.4 Maintenance activities

3.1.5 Depreciation

Power plant 30 years

Vehicles 4 years

Building and construction 10 years

Furniture and fixtures 5 years

Office equipment 5 years

Office renovation 5 years

Items of property, plant and equipment (PPE) are measured at cost less accumulateddepreciation and accumulated impairment losses, if any. Cost includes expenditures thatare directly attributable to the acquisition of the assets. Adjustment of power plant duringthe year is the adjustment for foreign exchange loss or gain as stated in note 3.1.2.

Foreign exchange difference arising from project debts foreign currency is adjustedagainst the value of the assets financed by such debt, in accordance with the Schedule XIPart I of the Companies Act 1994. BAS 21, The Effects of Changes in Foreign ExchangeRates , however requires that such exchange gains/losses be recognised asincome/expense in the relevant period. The difference arising from capitalisation offoreign exchange gain in accordance with the requirements of the Companies Act 1994 is,however, not considered material by management.

The cost of replacing an item of property, plant and equipment is recognised in thecarrying amount of the item if it is probable that the future economic benefits embodiedwithin the part will flow to the company and its cost can be measured reliably. Thecarrying amount of the replaced part is derecognised. The costs of the day to day servicingof property, plant and equipment are recognised in the profit or loss as incurred.

The company incurs maintenance costs for all of its major items of property, plant andequipment. Repair and maintenance costs are charged as expenses when incurred.

Depreciation on power plant has been charged considering 30 years of useful life andresidual value at 15%. Addition during the year is depreciated for full year irrespective ofdate of purchase, while no depreciation is charged in the year of disposal.

The estimated useful lives of assets are as follows:

3.1.6 Retirements and disposals

3.2 Inventories

3.3 Cash and cash equivalents

3.4 Trade receivables and bad debts

Provision for debts doubtful of recovery, if any, are made at the discretion of management.

3.5 Provisions

An asset is derecognised on disposal or when no future economic benefits are expectedfrom its use, whichever comes earlier. Gains or losses arising from the retirement ordisposal of an item of property, plant and equipment are determined by comparing theproceeds from disposal with the carrying amount of the same, and are recognised netwithin 'other income' in the profit and loss account.

Inventories are measured at cost. The fuel tariff calculation formula as per PPA betweenthe company and BPDB assures recovery of cost. The cost of inventories is based on thefirst in first out principle, and includes expenditure incurred in acquiring the inventoriesand other costs incurred in bringing them to their existing location and condition. Wheninventories are used, the carrying amount of those inventories is recognised in the periodin which the related revenue is recognised.

Cash and cash equivalents comprise cash in hand and cash at bank.

Trade receivables are recognised at cost which is the fair value of the consideration givenfor them.

A provision is recognised on the balance sheet date if, as a result of past events, thecompany has a present legal or constructive obligation that can be estimated reliably, andit is probable that an outflow of economic benefits will be required to settle theobligation.

3.6 Impairment

3.7 Revenue

3.8 Foreign currency transactions

3.9 Lease

3.10 Finance income and expenses

Foreign exchange difference arising from all foreign currency transactions, except for theproject debts, are charged or credited to profit and loss account. Foreign exchangedifference arising from project debts is adjusted against the value of the assets financedby such debt, as provided in the Schedule XI Part I of the Companies Act 1994, whichrequires all exchange differences arising from foreign currency borrowings for property,plant and equipment to be added or deducted from the value of the assets which werefinanced by such borrowings.

Lease payments under operating lease are recognised as expenses in profit and lossaccount on a straight line basis over the lease term. The lessor reserves the right to revisethe rent after each period of five years and can increase the rent by a maximum of twentypercent for five years.

Finance income comprises interest income on funds invested. Interest income isrecognised on accrual basis.

Finance expenses comprise interest expense on borrowings and other finance relatedcosts. All borrowing costs are recognised in the profit and loss account when they accrueusing the nominal interest rate stated in related loan agreements.

The carrying amounts of the assets, other than inventories, are reviewed at each reportingdate to determine whether there is any indication of impairment. If any such indicationexists, then the assets' recoverable amount is estimated. No such indication of impairmenthas been raised to date.

Revenue is recognised in the profit and loss account upon supply of electricity to BPDB,quantum of which is determined by survey of meter reading.

BAS 21, The Effect of Changes in Foreign Exchange Rates, requires balances resultingfrom transactions denominated in a foreign currency to be converted into Taka at the rateprevailing on the date of the transaction. All monetary assets and liabilities at balancesheet date, denominated in foreign currencies, are to be retranslated at the exchangerates prevailing on balance sheet date.

3.11 Borrowing cost

3.12 Provision for tax

3.13 Deferred tax

3.14 Employee benefit schemes

As there is considerable uncertainty with regard to the taxation of such companies afterthe expiry of the tax exemption period, management feels it is not possible to make areasonable estimate of deferred tax assets/liabilities at this stage.

A defined benefit plan is a post-employment benefit plan other than a definedcontribution plan. The company operates an unfunded gratuity scheme, which is a definedbenefit scheme, a provision in respect of which is made periodically covering allpermanent employees by applying period of employment to latest basic salary. Althoughno valuation was done to quantify actuarial liabilities as per Bangladesh AccountingStandard 19 Employee Benefits for the year ended 31 December 2009, such valuation foronly 9 employees is not likely to yield a result significantly different from the currentprovision.

The company maintains a provident fund for all local employees, recognised by theNational Board of Revenue, Bangladesh. This is a defined contribution scheme as perBangladesh Accounting Standard 19 Employee Benefits.

The company has also a policy of earned leave encashment. Under this policy, anemployee is allowed twenty one days earned leave for each completed twelve months ofcontinuous service with a maximum accumulation of one hundred and five days.

Borrowing costs are recognised as expenses in the period in which they are incurred unlesscapitalisation of such is allowed as an alternative under Bangladesh Accounting Standard23 Borrowing Costs .

No provision for tax has been made in the accounts as the company is entitled to taxexemption for a period of 15 years with effect from commencement of commercialproduction, vide SRO no. 114-Law/99 dated 26 May 1999 issued by Government ofBangladesh, under private sector power generation policy.

3.15 Earnings per share

3.15.1 Basic earning per share

3.16 Cash flow statement

3.17 New standards not yet adopted

(a)     BAS 32: Financial Instruments Presentation

(b)     BAS 39: Financial Instruments: Recognition and Measurement

(c)     BFRS 7: Financial Instruments: Disclosures

Basic EPS is calculated by dividing the net profit or loss for the year attributable toordinary shareholders by the number of ordinary shares outstanding during the year.

Cash flow statement has been presented under direct method.

The company presents basic earnings per share (EPS) data for ordinary shares.

Bangladesh Accounting Standards 8 “Accounting policies: Changes in Accounting estimatesand Errors” para 30 requires that an entity makes certain disclosures when it does notapply a new BAS/BFRS that has been issued but is not yet effective.

The Institute of Chartered Accountants of Bangladesh (ICAB) had made the followingstandards effective for accounting periods beginning on or after 1 January 2010.

Currently the company presents its redeemable cumulative class ‘A’ preference shares asan equity instrument and dividend paid on such preference shares has shown in Statementof Changes in Equity. However after adoption of above standards, redeemable cumulativepreference class ‘A’ shares will be treated as liability. Dividends paid under sucharrangements will be accounted for as interest and charged to Profit and Loss Account.

4. Property, plant and equipment

Carryingamount

Particulars Balance as at Addition Disposal Adjustment Balance as at Balance as at Charge Disposal Adjustment Balance as at as at1 January during during during 31 December 1 January for during during 31 December 31 December

2009 the year* the year the year** 2009 Rate 2009 the year the year the year** 2009 2009Taka Taka Taka Taka Taka % Taka Taka Taka Taka Taka Taka

Power plant 5,133,347,383 30,956,118 - (27,552,938) 5,136,750,563 3.33 1,672,340,952 188,000,895 - (27,191,209) 1,833,150,638 3,303,599,925

Vehicles 2,000,000 3,384,657 - - 5,384,657 25.00 1,000,000 1,346,163 - - 2,346,163 3,038,494

Building andconstruction 9,428,606 - - 9,428,606 10.00 8,629,939 610,517 - - 9,240,456 188,150

Furnitureand fixtures 1,073,758 - - - 1,073,758 20.00 1,007,770 18,588 - - 1,026,358 47,400

Office equipment 5,976,712 2,750 (380,000) - 5,599,462 20.00 5,564,555 155,577 - (380,000) 5,340,132 259,330

Office renovation 1,299,590 - - - 1,299,590 20.00 1,299,557 - - - 1,299,557 33

Total 2009 5,153,126,049 34,343,525 (380,000) (27,552,938) 5,159,536,636 1,689,842,773 190,131,740 - (27,571,209) 1,852,403,304 3,307,133,332

Total 2008 5,157,634,464 413,003 (3,405,030) (1,516,388) 5,153,126,049 1,522,124,292 170,984,409 (3,192,996) (72,932) 1,689,842,773 3,463,283,276

Total depreciation has been allocated in the financial statements as follows:2009 2008Taka Taka

Depreciation charged during the year 190,131,740 170,984,409 Add: Adjustments made during the year (38,329) (72,932)

190,093,411 170,911,477

Allocation of depreciationOperating expenses (power plant part after considering adjustment) 187,962,566 169,199,460 General and administrative expenses (other than power plant) 2,130,845 1,712,017

190,093,411 170,911,477

Cost Depreciation

*Addition of power plant is the cost of newly installed Alternator by replacing the old one.

**Adjustment arises from foreign exchange gain/loss during the year ended 31 December 2009 on conversion of foreign currency loans taken to finance the power plant (see note 3.1). This also includes adjustment for Alternator.

5. Inventories

Particulars Quantity Amount Quantity Amount Quantity Amount Quantity Amount(MT) (Taka) (MT) (Taka) (MT) (Taka) (MT) (Taka)

Heavy furnace oil (HFO) 26,284.21 662,741,360 173,630.59 5,143,280,116 177,353.48 4,923,655,550 22,561.32 882,365,926

Light furnace oil (LFO) 110,790 4,229,292 27,000 1,155,570 50,100 1,868,518 87,690.00 3,516,344

Spare parts for plant maintenance 95,758,000 - - 95,758,000

Total 2009 762,728,652 5,144,435,686 4,925,524,068 981,640,270

Total 2008 945,904,103 6,931,467,893 7,114,643,344 762,728,652

5.1 Spare parts inventory was acquired under a provision of the Engineering, Procurement and Construction (EPC) contract. The provision called for thecontractor to provide with safety spares on historical cost basis of USD 2,000,000 (prevailing rate was 1 USD= BDT 47.88). In addition to above safety spares,the operator maintains usual maintenance spares at their cost against variable fees paid to them.

Addition during the year Consumption during the yearBalance as at 1 January 2009 Balance as at 31 December 2009

6. Accounts receivable2009 2008Taka Taka

Other monthly tariff 108,415,448 225,528,311 Fuel tariff 279,525,157 660,249,357

387,940,605 885,777,668

7. Other receivables

BPDB (agreed charges paid to BIWTA) 12,497,004 8,008,915 12,497,004 8,008,915

8. Advances, deposits and prepayments

Advances:Car/motor cycle loan 114,375 433,542 Bank guarantee for spare parts - 840,000 Padma/Jamuna Oil for HFO supply 634,530 - Dr. Kamal Hossain & Associates 400,000 - Other advances 209,224 69,162

1,358,129 1,342,704

Deposits:Bangladesh Telephone & Telegraph Board 16,000 16,000 Grameenphone Ltd. 89,006 89,006 Others 28,500 24,500

133,506 129,506

Prepayments:General insurance premium (fire, fidelity, health, motor e 56,881 21,463

56,881 21,463 1,548,516 1,493,673

9. Cash and cash equivalents2009 2008Taka Taka

Cash in hand 99,943 183,422

Cash at bank:Current account:

Citibank, NA (Operating account # 129039 -Taka) 3,706,884 13,050,702 Citibank, NA (Operating account # 129024 -Taka) 6,081 667,821 Citibank, NA (Operating account -US Dollar) 79,727,542 85,434,867 AB Bank Ltd. - 414 Bank Asia Ltd. 825 1,900 BRAC Bank Ltd. 18,969 307,313 Pubali Bank Ltd. 27,533 75,032 Shahjalal Islami Bank Ltd. 1,014 1,029,742 Standard Bank Ltd. 45,519 46,714 Standard Chartered Bank 87,957 97,518 Prime Bank Ltd. 2,781 3,931

83,625,105 100,715,954 STD account:

BRAC Bank Ltd. 617,400,135 - Dutch Bangla Bank Ltd. 4,400 - One Bank Ltd. 441 - The City Bank Ltd. 463 - Trust bank Ltd. 5,101 -

617,410,540 - 701,035,645 100,715,954 701,135,588 100,899,376

10. Accounts payable

Kuo Oil (S) Pte Ltd. - Handling commission 114,263,650 22,106,313 Kuo Oil (S) Pte Ltd. - Fuel cost 1,100,823,552 794,770,553 USCOL - Fuel carrying and storage 130,116,675 314,419,260 Wartsila-operation and maintenance - (O&M) 140,900,814 182,736,922

1,486,104,691 1,314,033,048

11. Working capital loan2009 2008Taka Taka

BRAC Bank Ltd. - 200,000,000 Shahjalal Islami Bank Ltd. - 84,000,000

- 284,000,000

12. Term loan

Term loans:El Paso Power Khulna Holding Ltd. - 91,878,000

Wartsila Development & Financial Services (Asia) Ltd. - 13,897,544 - 105,775,544

13. Accrued expenses and others

Electricity, gas and water 75,078 85,000 Legal, audit and other professional fees 620,000 881,000 Office rent and service charges 131,075 109,240 Lease rent payable-BPDB 3,167,709 3,541,814 Telephone, fax and e-mail 88,239 80,000 Employee expenses 3,098,149 1,307,757

16,806,155 6,429,070

Wartsila - river intake dredging 140,000 150,000 Falcon Securities Ltd - plant security 215,469 216,251 Employees' provident fund 96,460 101,875 Board meeting fees - 212,500 Kuo Oil (S) Pte Ltd. - Demurrage - Fuel (13.1) 15,458,537 - Others 579,647 356,382

40,476,518 13,470,889

Term loan from El Paso Power Khulna Holding Ltd. has been waived and considered as otherincome (net of exchange differences). See note 19.1 for more details.

Collateral includes registered mortgages of vessels “TIGER I” and “TIGER II”, a registered letter ofhypothecation by way of first priority fixed charge over plant, machinery and equipment, and aregistered letter of hypothecation by way of first priority floating charge over all fixed and floatingassets of the company.

Provision for withholding tax/VAT for O & M fees, professional fees and others

13.1

14. Share capital2009 2008Taka Taka

Authorised:

3,000,000 ordinary shares of Tk 1,000 each - 3,000,000,000 300,000,000 ordinary shares of Tk 10 each 3,000,000,000 - 2,000,000 preference shares of Tk 1,000 each 2,000,000,000 2,000,000,000

5,000,000,000 5,000,000,000

Issued and paid-up:

2,085,924 ordinary Class A shares of Tk 1,000 each - 2,085,924,000 6 ordinary Class B shares of Tk 1,000 each - 6,000 208,593,000 ordinary shares of Tk 10 each 2,085,930,000 - 1,100,000 redeemable cumulative class 'A' preference shares - of Tk 1,000 each 1,100,000,000 1,100,000,000

3,185,930,000 3,185,930,000

For split off details see note 14.1.

The company issued 1,100,000 redeemable cumulative class 'A' preference shares in favour of TheCity Bank Ltd. (600,000 shares), Pubali Bank Limited (200,000 shares), One Bank Limited (200,000)shares) and Trust Bank Limited (100,000 shares) on 14 May 2008. These shares, under ordinarycircumstances, are redeemable at par value in five annual equal instalments from 14 May 2010,the second anniversary of the issue date. Annual dividend on these preference shares is payable atthe rate 8.25% (net of withholding tax).

Demurrage is claimed by Kue Oil(s) Pte Ltd. on behalf of shipping company due to unusual delay inunloading of Heavy Furnace Oil (HFO) at Chittagong Port in May 2009.

14.1 The shareholding position of ordinary shares

Face Class A Class B Total Face

Name of shareholders % of Shares value Total value % of shares shares shares value Total value

shareholding (No.) (Taka) (Taka) shareholding (No.) (No.) (No.) (Taka) (Taka)

1. Summit Industrial & Mercantile 49.9832% 104,261,500 10 1,042,615,000 46.95% 979,341 2 979,343 1,000 979,343,000

Corporation (Pvt.) Ltd.

(incorporated in Bangladesh)

2. United Enterprises & Company Ltd. 49.9832% 104,261,500 10 1,042,615,000 46.95% 979,341 2 979,343 1,000 979,343,000

(incorporated in Bangladesh)

3. Muhammed Aziz Khan 0.0024% 5,000 10 50,000 - - - - - -

4. Anjuman Aziz Khan 0.0024% 5,000 10 50,000 - - - - - -

5. Latif Khan 0.0024% 5,000 10 50,000 - - - - - -

6. Muhammad Farid Khan 0.0024% 5,000 10 50,000 - - - - - -

7. Jafer Ummeed Khan 0.0024% 5,000 10 50,000 - - - - - -

8. Ayesha Aziz Khan 0.0024% 5,000 10 50,000 - - - - - -

9. Adeeba Aziz Khan 0.0024% 5,000 10 50,000 - - - - - -

10. Hasan Mahmood Raja 0.0024% 5,000 10 50,000 - - - - - -

11. Ahmed Ismail Hossain 0.0024% 5,000 10 50,000 - - - - - -

12. K.M. Ahsan Shamim 0.0024% 5,000 10 50,000 - - - - - -

13. Akhter Mahmud Rana 0.0024% 5,000 10 50,000 - - - - - -

14. Faridur Rahman Khan 0.0024% 5,000 10 50,000 - - - - - -

15. Abul Kalam Azad 0.0024% 5,000 10 50,000 - - - - - -

16. Moinuddin Hasan Rashid 0.0024% 5,000 10 50,000 - - - - - -

17. Wartsila Development & - - - - 6.10% 127,242 2 127,244 1,000 127,244,000

Financial Services (Asia) Ltd.

(incorporated in Cayman Islands)

100.00% 208,593,000 2,085,930,000 100.00% 2,085,924 6 2,085,930 2,085,930,000

2009 2008

On 21 June 2009, the entire shares (Class A and Class B) of Wartsila Development & Financial Services (Asia) Ltd. has been transferred equally to Summit Industrial

14.2 The shareholding position of redeemable cumulative class 'A' preference shares

As at 31 Dec 2009 2008

Name of shareholders Number of Nominal value Total value Total value

shares Taka Taka Taka

The City Bank Limited 600,000 1,000 600,000,000 600,000,000

Pubali Bank Limited 200,000 1,000 200,000,000 200,000,000

One Bank Limited 200,000 1,000 200,000,000 200,000,000

Trust Bank Limited 100,000 1,000 100,000,000 100,000,000

1,100,000 1,100,000,000 1,100,000,000

& Mercantile Corporation (Pvt.) Ltd. (Summit) and United Enterprises & Company Ltd. (United). As a result, the shareholding position of Summit and United wasincreased to 50.00 percent from 46.95 percent each. Further on 22 June 2009, Summit and United each have transferred 350 shares (total 700 shares) in favour ofabove 14 individuals, each getting 50 Class A ordinary shares.

The existing shareholders of the company on 19 July 2009, in an Extraordinary General Meeting (EGM) passed and resolved that the existing category of OrdinaryClass A and Class B shares shall be reclassified as ordinary shares. It was also decided that the face value of each ordinary shares shall be fixed at Tk.10 eachinstead of existing Tk. 1,000 each. Accordingly, Clause V of the Memorandum of Association and Article 6 of the Articles of Association of the company has beenchanged.

15. Deferred liability for gratuity and earned leave

2009 2008Gratuity Earned leave Total Total

Taka Taka Taka Taka

Opening balance 7,051,344 3,157,436 10,208,780 11,663,278 Add: Provision made during the year 828,153 62,462 890,615 1,789,142

7,879,497 3,219,898 11,099,395 13,452,420 Less: Payment made during the year 145,200 63,000 208,200 3,243,640 Closing balance 7,734,297 3,156,898 10,891,195 10,208,780

16. Operating revenues2009 2008Taka Taka

Other monthly tariff 1,982,771,320 1,766,492,389 Fuel tariff 4,410,496,025 6,393,930,729

6,393,267,345 8,160,423,118

16.1

16.2

17. Operating expenses

Consumption of Heavy Furnace Oil (HFO) and related expenses* 4,968,204,906 6,941,000,084

Consumption of Light Furnace Oil (LFO) 1,868,518 1,080,640 Fuel storage charges 11,054,211 11,685,465 Operation and maintenance cost to operator 496,387,941 455,870,479 Security service - Plant 2,609,210 2,613,768 Duty on spare parts 50,343,948 82,731,051 Repair and maintenance -Plant - 636,774 Depreciation of power plant 187,962,567 169,199,460

5,718,431,301 7,664,817,721

Other monthly tariff is the price component of all other costs including profit per KW of energysupplied at the delivery point excluding fuel.

The price component of fuel tariff is comprised of the cost of fuel per KW of energy generated which isreimbursable from BPDB after making some adjustments as per agreement.

Operating revenues comprise other monthly tariff and fuel tariff invoiced to BPDB:

*The above expenses arise after considering various fuel related expenses and adjustments which are not relevant with HFO inventory. That is why, the actual consumption shown in HFO inventory (note no. 5) is not directly matchable with the above mentioned expenses.

18. General and administrative expenses2009 2008Taka Taka

Salary and allowances 13,226,172 17,822,640 Employer's contribution to P.F. 554,400 734,558 Gratuity provision 828,153 1,334,844 Earned leave provision 62,462 454,298 Leave fare assistance 243,400 354,777 Office rent and maintenance 2,120,177 1,786,363 Telephone, fax and e-mail 391,012 681,340 Advertisement, publicity, press and seminar 81,480 56,150 Entertainment expenses 121,610 266,627 Bank charges and commission 214,373 999,156 Printing, postage and stationery 86,799 252,858 Travel and conveyance 507,736 2,395,429 Vehicles fuel and maintenance 124,582 503,612 Newspaper, books and periodicals 20,939 19,182 Social goodwill 636,712 26,685 Business promotion, subscription, gift and donation 683,634 216,865 Enlistment and annual licence fee - BERC 500,000 1,050,500 Uniform and liveries 18,200 16,920 Insurance premium 32,466,173 41,396,459 Lease rent - BPDB (18.1) 3,355,293 7,271,213 Directors' fees and board meeting expenses 152,186 336,566 Audit fee 375,000 375,000 Legal, tax and other professional fees 2,393,626 12,191,528 Survey, testing and inspection fees 376,322 459,162 Company matter expenses 938,000 697,200 Performance bond/bank guarantee charges - (33,356,039) Environmental compliance expenses 864,371 998,124 Computer consumable and maintenance 275,143 100,907 Expenses of MD and Directors - 2,960 River intake dredging 130,000 150,000 Depreciation - Other property, plant and equipment 2,130,845 1,712,017 Miscellaneous and incidental expenses 199,471 196,325

64,078,271 61,504,226

18.1 Operating leases

Amount due:Not later than one year 3,242,955 3,242,955 Later than one year but not later than five years 14,268,998 13,620,407

Later than five years - 3,891,545

The future minimum lease payments in respect of operating leases as at 31 December 2009 are asfollows:

The company is obligated under non-cancellable lease for use of land leased out by BPDB that arerenewable on a periodic basis at the option of both lessor and lessee. During the year, rental expensesunder non-cancellable operating leases aggregated Tk. 3,355,293 (2008: Tk. 3,355,293).

19. Other income2009 2008Taka Taka

Dividend income - 2,408,996 Gain on sale of property, plant and equipment - 1,091,500 Income from El Paso's term loan waiver (Note 19.1) 91,481,290 -

91,481,290 3,500,496

19.1

20. Finance expenses

Interest on:

Term loan provided by El Paso Power Khulna Holding Ltd. (9,714,483) 9,307,891

Term loan provided by Wartsila Development and Financial Services (Asia) Ltd. 224,919 1,504,713

"A" loan provided by International Finance Corporation (IFC) - 10,788,249

"B" loan provided by International Finance Corporation (IFC) - 9,564,996

Working capital facility -Taka 24,213,366 7,459,695

Preference share money deposit - 33,375,000

Others:

Front end fee - IFC A loan - 3,951,376

Front end fee - IFC B loan - 5,267,060

Arrangement and success fee - IFC B loan - 5,267,060

CAP agreement fee - IFC B loan - 12,323,496

Arrangement fee - working capital (club financing) - 25,415,000

Prepayment charge - IFC A loan - 45,276,707

Prepayment charge - IFC B loan - 2,887,449

Trust agent fee - Citibank, N.A. - 4,347,800

Escrow agency fees - Citibank, N.A. 1,174,725

Annual agency fee - Security & Facility Agent (preference shares) 2,760,000 -

17,483,802 177,911,217

El Paso Power Khulna Holding Ltd., a company incorporated in the Cayman Islands, has issued a letterto the Managing Director of Khulna Power Company Ltd. on 25 May 2009 stating that the amount due toit by KPCL (equivalent USD 1,322,365.89) has been waived .The Company thus considered it as otherincome. EL Paso Power Khulna Holdings Ltd. ceased to exist with effect from 30 September 2009.

21. Earnings per share (EPS)2009 2008

Basic earnings per share Taka Taka

The computation of EPS is given below:

a) Profit attributable to the ordinary shareholders 582,648,084 201,624,776

b) Number of ordinary shares outstanding 208,593,000 208,593,000

c) Earnings per share (EPS) 2.79 0.97

Diluted earnings per share

22. Remittance of foreign currency

Purpose of payment Name of the recipient 2009 2008USD USD

Trust agent fee Citibank, NA, New York - 40,000

Cash margin for import of spare Wartsila Finland OY 748,392 2,208,275 parts on behalf of Wartsila Finland OY

Insurance premium CODAN Marine, Finland 462,081 - Ltd, Singapore

Insurance premium JLT Risk Solutions Asia Pte - 597,077 Ltd, Singapore

Operation and maintenance Wartsila Finland OY - 260,688 expense

Purchase of fuel (HFO) Coastal Fuji Oil, Singapore - 13,145,224 Purchase of fuel (HFO) Kuo Oil (s) Pte Ltd. 7,396,659 10,083,199

Legal service/Barge registration Quijano & Associates 15,503 590

Consultancy services RW Beck International Ltd. - 635 Legal service Chadbourne & Parke LLP 7,599 11,714 Consultancy Fee Envirotech East Pvt Ltd. 6,100 6,052 Passive analysis (air) MAXXAM Analytics Inc. 3,872 7,611 Loan repayment with interest Wartsila Development and 214,172 45,199

Financial Services (Asia) Ltd.Loan repayment with interest IFC, Washington DC - 1,407,130

No diluted earnings per share is required to be calculated for the year as there was no scope fordilution during the year under review.

Purpose of payment Name of the recipient 2009 2008USD USD

Bank charge Citibank, N A - 712 Bank Charges Elpaso Energy International - 1,000 Legal service fee Thompson Hine LLP - 3,000 Legal service fee Fullbright & Jaworski, LLP - 149,021 Legal service fee Franco & Franco - 1,500 LC add confirmation charges BRAC Bank Ltd. - 33,928 LC add confirmation charges Standard Bank Ltd. - 34,398 LC add confirmation charges Pubali Bank Ltd. - 10,940 Dividend payment Wartsila Dev. & Fin. Service - 949,292 Deferred interest for fuel L/C Citibank, N A 9,226 -

23. Receipts of foreign currency

Nature of receipt Name of party 2009 2008USD USD

Other monthly tariff (99%) BPDB 8,922,913 20,102,515

24. Value of imports calculated on CIF basis2009 2008Taka Taka

Heavy furnace oil (fuel) 3,874,798,895 5,351,606,441

25. Related party transactions

Nature ofName of party Relationship transactions Transaction value (Taka)

2009 2008

United Summit Coastal Oil Subsidiary of Fuel carrying, storage 292,401,937 502,435,583 Ltd. shareholder and temporary loan

El Paso Power Khulna Subsidiary of Payable for interest - 9,342,620 Holding Ltd. parent company

Summit Industrial & Shareholder Temporary loan, office 84,306,222 946,708,429 Mercantile Corporation rent and dividend paid(Pvt) Ltd.

Summit Corporation Subsidiary of Service charge for other 747,330 622,908

shareholder office facilities

Wartsila Development & Shareholder Repayment of loan, 14,118,362 80,960,331 Financial Services (Asia) Ltd. payment of interest and

dividend paid

Coastal Fuji Oil Subsidiary of Fuel cost and handling - 648,738,314 parent company commission

Summit Shipping Ltd. Subsidiary of Temporary loan - 38,225,000 shareholder

United Enterprises & Shareholder Temporary loan and 83,437,200 977,709,244 Company Ltd. dividend paid

Key management Board of Directors Directors fees 82,000 190,000 personnel

Key employees Salary, allowances and 7,980,663 12,699,150 long term benefits

Bonus 1,506,000 2,322,000

26. CapacityLicensed Installed Plant factor Energy Energycapacity capacity (% on licensed generated sold

Period (MWh) (MWh) capacity) (MWh) (MWh)

January to December 2009 110 114 Average 83.55 792,887 780,178 Maximum 102.00

January to December 2008 110 114 Average 73.00 705,384 693,544 Maximum 94.50

Key management personnel includes managing director, project director and financial controller. However,the managing director did not receive any salary during the year under review.

27. Salary and allowances

Year Amount (Taka)

1998 (13 Oct to 31 Dec) 973,147

1999 5,517,180

2000 6,217,183

2001 6,198,705

2002 7,127,044

2003 10,839,299

2004 12,275,209

2005 17,220,059

2006 18,660,004

2007 20,438,758

2008 17,822,640 2009 13,226,172

28. Commitment for capital expenditure

29. Contingent liability

30. Post balance sheet event

30.1

30.2

31. General

31.1

31.2 Previous year's figures have been rearranged, wherever considered necessary, to conform to current year'spresentation.

There is no other commitment for capital expenditure as of 31 December 2009 for the company except of an'Alternator' for which procurement order was being initiated by the company amounting to Euro 287,745 but noshipment is being made by the seller.

There is no contingent liability as of 31 December 2009 for the company.

There is no material event that has occurred after the balance sheet date to the date of issue of thesefinancial statements, which could affect the figures stated in the financial statements.

During the year the company had nine permanent employees and their individual remuneration rate was notless than Tk 36,000 per annum (2008: ten permanent employees).

Year wise break up of salary and allowances of the employees of the company for the since inception are asfollows:

The company has applied to Dhaka Stock Exchange and Chittagong Stock Exchange for the purpose of directlisting under the Direct Listing Regulations 2006 and the matter is in the process of approval.

Khulna Power Company LtdProjected Income Statement for the year ended 31 December

2009 2010 2011 2012 2013 2014Taka Taka Taka Taka Taka Taka

RevenueFuel Tariff 4,410,304,818 7,980,019,317 13,817,350,187 14,272,563,416 14,659,976,586 15,100,287,579 OMT Tariff 1,982,771,320 2,775,869,075 4,649,962,505 4,803,011,181 4,933,299,290 5,081,357,739 Total Revenue 6,393,076,138 10,755,888,392 18,467,312,692 19,075,574,597 19,593,275,876 20,181,645,317

Fuel expense 4,979,552,938 8,577,539,929 14,445,141,275 14,920,922,283 15,326,404,432 15,786,522,644

Gross Margin 1,413,523,200 2,178,348,463 4,022,171,417 4,154,652,314 4,266,871,444 4,395,122,673 Operating Expenses

Operations and maintenance 496,387,941 704,627,345 1,009,786,516 1,055,908,154 1,098,742,466 1,146,270,553 Other Operating expenses 57,372,293 34,888,874 39,371,774 40,437,738 41,538,738 42,675,846 General & Administrative Expenses 22,880,851 33,043,718 38,631,482 40,949,563 43,466,125 46,199,543 Operating insurance 32,466,173 34,247,500 51,984,100 53,543,700 55,150,200 56,804,700 Depreciation and amortization 190,006,089 209,543,848 325,444,900 325,448,488 325,452,172 325,455,976 Total other operating expenses 799,113,347 1,016,351,285 1,465,218,773 1,516,287,644 1,564,349,700 1,617,406,618

Operating income (loss) 614,409,853 1,161,997,178 2,556,952,645 2,638,364,670 2,702,521,744 2,777,716,056 Other (income) and expense

Interest expenses & other financial charges 17,483,802 268,869,793 807,479,962 793,136,251 735,197,794 677,315,726 Interest & Other (income) (101,411,971) (5,611,875) (9,829,728) (9,996,828) (10,168,956) (10,346,172) Exchange loss/(gain) (2,174,414) 5,901,251 8,713,148 8,824,556 8,939,300 9,057,452

Net profit before income tax 700,512,436 892,838,009 1,750,589,263 1,846,400,692 1,968,553,606 2,101,689,050

Income tax - - - - - - Net profit after income tax 700,512,436 892,838,009 1,750,589,263 1,846,400,692 1,968,553,606 2,101,689,050

Accumulated Profit brought forward 85,844,827 255,733,763 287,393,982 1,032,618,555 1,617,661,809 2,269,121,927

Accumulated Profit before Preferred Dividend 786,357,263 1,148,571,772 2,037,983,245 2,879,019,247 3,586,215,415 4,370,810,977

Dividend on 10.3125% Preference Shares 113,437,500 113,437,500 90,750,000 68,062,500 68,062,500 68,062,500

Accumulated Profit after Preferred Dividend 672,919,763 1,035,134,272 1,947,233,245 2,810,956,747 3,518,152,915 4,302,748,477

Redemption of 10.3125% Preference Share - 220,000,000 220,000,000 220,000,000 220,000,000 220,000,000

Proposed Dividend -Equity Shareholders' 417,186,000 527,740,290 694,614,690 973,294,938 1,029,030,988 1,170,200,472

Accumulated Profit carried forward 255,733,763 287,393,982 1,032,618,555 1,617,661,809 2,269,121,927 2,912,548,005

Earnings per share 2.81 3.40 7.17 7.31 7.39 7.82

Note: Redemption of preference shares shall effective from May 2010.

Khulna Power Company Ltd.Projected Balance Sheet

12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14Taka Taka Taka Taka Taka Taka

Current Assets:Cash 701,992,195 196,461,548 402,935,465 1,149,249,334 1,940,687,588 2,721,068,571 Accounts Receivable 387,749,398 2,411,582,694 2,483,995,560 2,558,584,496 2,635,416,454 2,689,886,558 Other Receivable 12,497,004 9,000,000 9,000,000 9,000,000 9,000,000 9,000,000 Fuel inventory 885,884,269 540,750,000 556,972,500 573,682,500 590,895,000 608,625,000 Consumables Inventory 95,758,000 95,758,000 95,758,000 95,758,000 95,758,000 95,758,000 Advances, Deposits & Prepaids 1,393,292 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000

Total Current Assets 2,085,274,158 3,256,052,242 3,551,161,525 4,388,774,330 5,274,257,042 6,126,838,129

Fixed Assets:Property, Plant and Equipment 5,159,691,860 10,385,499,860 10,387,727,750 10,390,022,480 10,392,386,060 10,394,820,560 Less: Accumulated Depreciation (1,852,315,982) (2,061,859,830) (2,387,304,730) (2,712,753,218) (2,712,753,218) (2,712,753,218)

Net Fixed Assets 3,307,375,878 8,323,640,030 8,000,423,020 7,677,269,262 7,679,632,842 7,682,067,342

Total Assets 5,392,650,036 11,579,692,272 11,551,584,545 12,066,043,592 12,953,889,884 13,808,905,471

Current Liabilities:Current portion of long term debt - - 504,700,000 504,700,000 504,700,000 504,700,000 Accounts Payable 1,533,800,273 2,297,800,000 1,336,734,000 1,376,838,000 1,418,148,000 1,460,700,000 Interest Payable & other financial charges - 25,235,000 25,235,000 22,711,500 22,711,500 22,711,500

Total Current Liabilities 1,533,800,273 2,323,035,000 1,866,669,000 1,904,249,500 1,945,559,500 1,988,111,500

Long-Term Liabilities:Term Loan - 5,047,000,000 4,542,300,000 4,037,600,000 4,037,600,000 4,037,600,000

Total Long-Term Liabilities - 5,047,000,000 4,542,300,000 4,037,600,000 4,037,600,000 4,037,600,000

Stockholders' Equity/Preference Share:Common Stock 2,085,930,000 2,294,523,000 2,315,382,300 2,433,237,345 2,572,577,469 2,600,445,494 10.3125% Redeemable Preference Shares 1,100,000,000 880,000,000 660,000,000 440,000,000 220,000,000 - Capital Redemption Reserve A/C - 220,000,000 440,000,000 660,000,000 880,000,000 1,100,000,000 Dividend (Incl. TDS) -Equity Shareholders' 417,186,000 527,740,290 694,614,690 973,294,938 1,029,030,988 1,170,200,472

Retained Earnings 255,733,763 287,393,982 1,032,618,555 1,617,661,809 2,269,121,927 2,912,548,005 Total Stockholders' Equity/Pref Sha 3,858,849,763 4,209,657,272 5,142,615,545 6,124,194,092 6,970,730,384 7,783,193,971

Total Liabilities & Stockholders' Equity/Pref Share 5,392,650,036 11,579,692,272 11,551,584,545 12,066,043,592 12,953,889,884 13,808,905,471

Net asset value per share 13.23 14.51 19.36 23.36 26.24 29.93

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Additional disclosure by the management as requested by DSE

Khulna Power Company Ltd. (“KPCL”) shall continue its operation on expiry of the current Power Purchase Agreement (“PPA”) with Bangladesh Power Development (“BPDB”) for the reasons:- 1.1 That Article 2.3 of the PPA has the clear provision for extension of duration of the PPA. 1.2 That KPCL plant is the most reliable plant in the BPDB grid, available for 363 days of the

year and with its 19 generating units, it is the most flexible and capable to meet BPDB’s ever varying load demand.

1.3 That the plant operates on Furnace Oil, for dwindling natural gas production in the country, the operation of the KPCL plant shall be continued for the years to come. The Government policy on utilization of energy has already been shifted to use of liquid fuel for generation of electricity, accordingly the future power plants are being built based on liquid fuel operation.

1.4 That KPCL plant is the least cost plant operated on liquid fuel. 1.5 That the existing shortage in generation capacity of the country shall continue to exist

much beyond the year 2013, when the tenure of the current PPA expires. 1.6 That for the reasons stated above the Government of Bangladesh is actively considering

expansion the KPCL plant capacity by another 100 MW, its apparent that the extension of the current PPA would be natural viable option for BPDB to minimize overall generation shortfall.

Additional disclosure by the management as requested by CSE

1. El Paso Corporation (“El Paso”) was the sponsor shareholder of Khulna Power Company Ltd. (“KPCL”) and

provided Term Loan amounting to USD 44.17 million during the implementation of the project. The loan was being repaid on 18 semi-annual installments. In the year 2008, before the full repayment of term loan, El Paso, as a part of its corporate business strategy, decided to withdraw from the power sector of this region. Accordingly disposed of their shareholding in KPCL to other existing sponsor shareholders, i.e Summit Industrial & Mercantile Corporation (Pvt) Ltd. and United Enterprises & Co. Ltd. The outstanding balance of Term Loan amounting to USD 1.322 million (Equivalent BDT 91.48 million) was waived as being a part of total purchase consideration package.

2. As mentioned above, as a part of their corporate business strategy, El Paso had withdrawn their

investment from the power sector of this region. Apart from Bangladesh, they had also sold out their power establishment in India, Pakistan, China, Phillipine and Korea. El Paso’s earnings from the power segment comparing to their credit exposure, country risk and other financial involvement was insignificant. Moreover, El Paso wanted to focus on their core business i.e, Gas exploration and pipeline network. Therefore, their main object was to get rid of their power investment in this region. Under the Members’ Agreement, El Paso was obligated to dispose their share holding in KPCL to the other interested existing shareholders. Accordingly, El Paso had offered their shareholding to Summit and United. Under the Members Agreement, El Paso was obligated to shoulder about USD 40 million exposure required for the operation of the project. Therefore, in order to get rid of those obligations, El Paso had disposed of their share under special consideration.

As per the Members Agreement, Wartsila was also required to provide corporate guarantee and other undertakings required for the working capital facilities and operation of the project. Wartsila was not interested to take all these huge exposure for their small shareholdings, rather wanted to focus on their O&M operation business and other business prospect with Summit and United and therefore offered their shareholding to the existing shareholders under special consideration.

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Name and Address of the shareholder of Summit Industrial and Mercantile Corporation (Pvt) Ltd and United Enterprise & Co. Ltd.

United Enterprises & Company Ltd.

Sl # Name Address % of Shareholding

1 Hasan Mahmood Raja House # 10, Road # 55 Gulshan -2, Dhaka-1212 16.47%

2 Khandaker Moinul Ahsan Shamim House # 10, Road # 55 Gulshan -2, Dhaka-1212 17.28%

3 Ahmed Ismail Hossain House # 10, Road # 55 Gulshan -2, Dhaka-1212 17.28%

4 Akhter Mahmud Rana House # 1/C, Road # 35 Gulshan -2, Dhaka-1212 17.28%

5 Hafeza Mahmood House # 10, Road # 55 Gulshan -2, Dhaka-1212 1.61%

6 Shirin Ahmed House # 10, Road # 55 Gulshan -2, Dhaka-1212 0.80%

7 Khaleda Ahsan House # 10, Road # 55 Gulshan -2, Dhaka-1212 0.80%

8 Nasrin Mahmud House # 10, Road # 55 Gulshan -2, Dhaka-1212 0.80%

9 Moinuddin Hasan Rashid House # 10, Road # 55 Gulshan -2, Dhaka-1212 18.08%

10 Faridur Rahman Khan House # 10, Road # 55 Gulshan -2, Dhaka-1212 5.02%

11 Abul Kalam Azad House # 10, Road # 55 Gulshan -2, Dhaka-1212 5.02%

100%

Summit Industrial & Mercantile Corporation (Pvt) Ltd.

Sl # Name Address % of Shareholding

1. Muhammed Aziz Khan 14/A Shaheed Sarani Road Dhaka Cantonment, Dhaka 16.01%

2. Anjuman Aziz Khan 14/A Shaheed Sarani Road Dhaka Cantonment, Dhaka 2.36%

3. Mohammad Farid Khan House # 68, Road # 7 Dhaka Cantonment, Dhaka 5.12%

4. Ayesha Aziz Khan 14/A Shaheed Sarani Road Dhaka Cantonment, Dhaka 15.81%

5. Adeeba Aziz Khan 14/A Shaheed Sarani Road Dhaka Cantonment, Dhaka 15.81%

6. Azeeza Aziz Khan 14/A Shaheed Sarani Road Dhaka Cantonment, Dhaka 15.81%

7. Sanadina Khan House # 5, Road # 32 Sector-7, Uttara, Dhaka 2.83%

8. Salman Khan House # 5, Road # 32 Sector-7, Uttara, Dhaka 2.83%

9. Jafer Ummeed Khan House # 5, Road # 32 Sector-7, Uttara, Dhaka 3.78%

10. Transnational Electricity Inc 11, Collyer Quay # 14-01 The Arcade, Singapore-049317 4.97%

11. Latif Khan House # 51, Road # 28 Gulshan, Dhaka 5.02%

12. Mohammad Faisal Karim Khan House # 68, Road # 7 Dhaka Cantonment, Dhaka 2.71%

13. Fadiah Khaleda Khan House # 68, Road # 7 Dhaka Cantonment, Dhaka 1.81%

14. Farhan Karim Khan House # 68, Road # 7 Dhaka Cantonment, Dhaka 2.71%

15. Farhana Khaleda Khan House # 68, Road # 7 Dhaka Cantonment, Dhaka 1.81%

16. Cosmopolitan Traders (Pvt) Ltd. Summit Centre (11th Floor) 18 Kawran Bazar, Dhaka 0.50%

17. Azharul Hoque, FCA Flat # N/4, Road # 4 House # 22, Dhanmondi, Dhaka 0.10%

Total: 100%

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CSE’s observation for Direct listing of Khulna Power Company Limited 1) The terms and conditions of El Paso’s term loan waiver resulting in an income of Tk. 91,481,290

(equivalent to USD 1,322,365.89) should be mentioned in the Information Document (ID). (ref. page # 83) 2) The per share price / consideration value at which the shares of El Paso (73.9%) and Wartsila (6.1%) in

Khulna Power Company Ltd. have been acquired by Summit Industrial and Mercantile Corporation (Pvt) Ltd. and United Enterprises & Co. Ltd should be disclosed in ID. (ref. page # 13)

3) The names and addresses of shareholders of Summit Industrial and Mercantile Corporation (Pvt.) Ltd. and

United Enterprises & Co. Ltd. along with their holding positions in the share capital in these respective companies and also their interest in other listed companies as sponsors/directors, if any, should be provided in ID.

4) In justifying the indicative price the company has considered the following quantitative factors: i) Earning Based Value Per Share (EBVPS) based on the last financial statement ended on December 31, 2009

with an average market P/E of 30. ii) Earning Based Value Per Share (EBVPS) based on projected financial statements for the years ended

December 31, 2010 to 2014 with the same P/E. It would have been more rational if EBVPS could be calculated also on weighted average basis considering the

financial statements for immediately preceding five years. iii) The company has considered market value of some companies which are not similar as per the nature of

their businesses. Only the market value of Summit Power Limited should be considered as similar share, the six months average price of which is Tk. 129.46 as mentioned in the ID.

5) The indicative price which has been determined by the company is seemed to be high in consideration of

the observations in serial (4) mentioned above. However, the company has given some qualitative justifications in favor of their indicative price.

6) As per the indicative price mentioned in the information document the P/E stands at 58.06 which is

unusually high. As per SEC’s Directive, the investors are not presently allowed to use the security, having P/E in excess of 50, as marginable securities and enjoy credit facility to purchase it under the Margin Rules, 1999. This is presumably because the equity security with P/E exceeding 50 is too risky.

7) In order to have a full range of justification on the indicative price, other quantitative factors such as

Price /Book Value (P/BV) multiple, Dividend Discount Model etc. should also be provided for the interest of the investors.

8) The Net Asset Value (NAV) per share on the basis of discounted cash flow considering the discount factor

should also be provided under the Projected Balance Sheet. (ref. page # 88) 9) The risk on non-continuation of “Operation and Management Agreement” by “Wartsila” along with the

management perceptions should be included in the risk factors as a separate point. 10) In page# 84 in serial 21.(a). detail calculation to arrive at the attributable profit (from net profit) to the

ordinary shareholders amounting Tk 582.65 mil should be provided in ID. 11) The designated bank account (Escrow Account) number for collecting bid money from the bidders should

be mentioned in ID. 12) Information on “non-operating history” should be mentioned in Risk Factors. 13) The latest development of the expansion plan with BPDB which was mentioned in the draft information

document should be furnished. (ref. page # 11) 14) “Break down of issue expenses” to be furnished in detail with figures (ref. page # 30). 15) No. of shares to be offloaded by each of the shareholders should be furnished. 16) Remuneration paid to top 10 executives should be furnished. (ref. page # 39) 17) Aggregate amount of remuneration paid to all officers in the last accounting year should be furnished.

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18) Ratios in the information document should be furnished under the respective heads like liquidity ratios, operating ratios, profitability ratios and solvency ratios. (ref. page # 83)

19) The shares of the company which are intended to offload should be dematerialized as per relevant rules

and regulations prior to commencement of trading. 20) The words “exchange does” in the 3rd line of the statement in the cover page of the ID should be replaced

by the words “exchanges do”. 21) The web site addresses of CSE and DSE should be mentioned under the head of “Availability of Information

Document”. 22) The words “The company shall offload” under the head of A. 1. (page # 1) should be replaced by the

words “The existing shareholders of the company shall offload”. 23) In page # 2, the content should not include future direction under the head “Declaration about Listing of

Shares with the stock exchange(s)”. 24) The words “which has been hosted at DSE & CSE Trading System” mentioned in serial # 2. (vi) (page # 2)

should be omitted. 25) In serial # 3 (page # 3), the reference no. of rule should be mentioned as “8.B.(16)(4)( c)” in place of

“16(4)( c)”. Moreover, the words “five” and “three” in the first line should be consistent with the relevant information in the table.

26) In page # 31 in serial # F, the title of Anjuman Aziz Khan should be mentioned as “Mrs” in place of “Mr”. 27) In page # 39 in serial # 1 of point G, the word “prospectus” should be replaced by the word “information

document” and the words “or within 2 (two) years prior to that time” should be removed. 28) Information regarding any loan either taken or given from or to any director or any person connected with

the director, any interest and facility enjoyed by a director is pecuniary or non-pecuniary etc. should be provided under the head of “ certain relationships and related transactions with related parties”. (ref. page #39)

29) In serial # “d” of point H, the words “brothers & sisters” should also be included with the information

provided in the bracket. (ref. page # 39) KPCL Management’s perception regarding aforementioned observation of CSE All the relevant above mentioned observation are accommodated in the relevant sections of the Information Document (ID).