May 9, 2014

Analysis of Financial Performance: A Study on Bakhrabad Gas Systems Limited

Overview on Bakhrabad Gas Systems Limited

Bakhrabad Gas Systems Limited (BGSL) is a company of Petrobangla under the Ministry of Power, Energy & Mineral Resources, Government of the People's Republic of Bangladesh, was incorporated on 7th June, 1980.  The registered head office of the government-owned company is located at its own complex at Comilla. The company commenced its operations as a model company with its core responsibilities of gas production, transmission and distribution. The Company was primarily entrusted with the responsibilities of drilling 4 (four) wells including work over of one well, construction of 174.65 kilometers long Bakhrabad-Chittagong Gas Transmission Pipeline and installation of gas distribution network in South-East Bangladesh with a view to supplying gas to the South-East region of the country. On successful completion of these projects within the requisite time, the Company began its commercial trek in FY 1984-85 from Chittagong on 20th May, 1984. It is noteworthy that the initial authorized capital of the Company was Tk. 300.00 crore which the government providing the total equity requirement of the company. The paid up capital of the company is Tk. 122.62 crore and Tk. 248.07 crore retained in the company as share deposit.


2.1 Objectives

BGSL was established with three-fold responsibilities of production, transmission and distribution of natural gas to south-east Bangladesh (excluding Brahrmnanbaria district) through the development of Bakhrabad Gas field and construction of Bakhrabad-Chittagong gas transmission pipe line. Later, BGSL also has given the responsibility to develop Feni gas field and to construct Bakhrabad-Demra gas transmission pipeline to supply gas in the Titas system to meet the increasing demand of gas in greater Dhaka. On successful completion of these projects, BGSL started its commercial  operation in its franchise area  on 20 May, 1984
and gas supply to Titas system from 16 September, 1985.

2.2 Present Status

The gas production activities of the company relating to Bakhrabad and Feni gas fields were transferred to Bangladesh Gas Fields Company Limited (BGFCL) in May, 1989 under a reorganization plan of Petrobangla. Since then the major activities of BGSL confined to transmission and distribution of gas. As per government decision BGSL has handed over its main transmission lines to Gas Transmission Company Limited (GTCL) in the month of November, 2003 and as a result BGSL is now engaged only with the gas distribution and marketing responsibilities
2.3 Information of Bakhrabad Gas Systems Limited at a glance

Name of the company
:
Bakhrabad Gas Systems Limited
Date of Incorporation
:
7th of June, 1980
Registered Address   
:
BGSL’s Complex, Chapapur, Comilla
Franchise Area           
:
Comilla, Chandpur, Feni, Noakhali, Lakshmipur, Chittagong and Chittagong Hill districts including the metropoliton area of Chittagong covering CEPZ and other industrial areas of Chittagong. Besides, gas supply has been extended to Kasba and Bancharampur upazillas of  Brahmanbaria
First Conducted Pipeline
:
174.65 kilometers                                             long Bakhrabad-Chittagong Gas
Transmission Pipeline
First Gas Supply
:
20th May, 1984
Initial Authorized Capital
:
Tk. 300.00 crore
Paid up capital(up to June 30,2010)
:
Tk. 122.62 crore
Retained in the Company share deposit
:
Tk. 248.07 crore
Corporation
:
Petrobangla
Administrative Ministry
:
Ministry of Power, Energy & Mineral Resources
Sources of Gas Supply (Gas fields)
:
Sangu(IOC),
Bakhrabad, Meghna, Feni (IOC) , Bangora,Salda gas fields and gas transmitted through Ashuganj-Bakhrabad Pipe Line (National Gas Grid).
Manpower (up to June 30,2010)
:
1190
Officers
:
501
Staffs
:
689

Table- 2.1: Information of Bakhrabad Gas Systems Limited at a glance



Fig - 2.1: Franchise Area of Bakhrabad Gas Systems Limited



2.6 Vision, Mission, Objective

To be a best gas distribution/marketing company in the country with best practices and highest social commitment- this is the vision of BGSL.

2.6.1 Vision

Ø  To contribute to the socioeconomic development of the country.
Ø  To attain highest level of customer satisfaction through extension of services by dedicated and motivated team of professionally.
Ø  To maintain continuous growth of Gas connection.
Ø  To maximize profits by ensuring its steady growth.
Ø  To maintain the high moral and ethical standards.
Ø  To ensure participative management system and empowerment of Human Resources.
Ø  Nurture an enabling environment where innovativeness and performance is rewarded.

2.6.2 BGSL Objective

Strategic Objectives


Ø  To achieve positive Economic Value Added (EVA) each year.
Ø  To be one of the top two Financial Institutions in Bangladesh in terms of Gas Distribution under Petrobangla.
Ø  To be one of the top two Financial Institutions in Bangladesh in terms of marketing Gas in all significant franchises.

2.6.3 Financial Objectives

To achieve a return on equity of 100% or more on average.





Development Activities3.0 Annual development Programme

The company has expanded its network through implementation of new pipeline under the Annual Development Programme (ADP).

3.1 Pipeline Construction

The gas distribution network of the Company is extended up to chittagong, Rangamati Hill Tracts, Comilla, Chandpur, Feni, Noakhali and Laxmipur District under South-East Bangladesh and also to Kasba and Bancharampur Upazila under Brahmanbaria District. The Company’s target for construction of distribution pipelines under development activities during the financial year under review has been surpassed, like previous years. During FY 2009-10 the actual distribution pipeline construction was 181.37 km with pipes diameters ranging from 3/4"  to 6" as against a target of 80.00 km. It shows a 126.71 percent achievement over the target. During the year under review construction of pipeline like previous year was not possible due to shortage of gas though there was huge demand of Gas in the franchise area. The total length of pipeline stood at 6427.99 km, after installation of the aforesaid pipeline which include transmission pipeline of 67.46 km, lateral pipeline of 263.64 km and distribution network pipeline of 6096.89 km. A comparative statement of pipeline construction during FY 2007-08 and 2008-09 is appended below

Year
Target (Km)
Actual (Km)
Comment
2009-10
80.00
181.37
126.71% higher than the target
2008-09
150.00
155.12
3.41% higher than the target

Table- 3.1: A comparative statement of pipeline construction (FY 2009-10 & 2008-09)

3.2 Construction of 8" dia  Pipeline  from 20" dia  Bakhrabad - Demra  Gas Transmission Pipeline at Kutumbapur Point to inlet of Kutumbapur TBS

According to the decision of Petrobangla for increasing the gas supply of Bakhrabad Franchise Area, the construction of above mentioned pipeline was completed on 19 May 2009 at a cost of Tk. 197.84 lakh and supply og gas started to Comilla region by this pipeline through Kutumbapur TBS on 22 June 2009.

3.3 Installation of  20" dia  1250  Meter  Pipeline  under Karnaphuli  River at Kalurghat point of Eastern Leg of Chittagong Ring Main by HDD Method

An incident took place in 20" dia  pipeline of the Eastern leg of Ring-Main, Chittagong under Karnaphuli River crossing at kalurghat point. International Tenders were invited for the above mentioned work, where M/S. Mersing Construction and Engineering Sdn Bhd, No-84 A Jalan SG, 4/8, Taman Sri Gombak, 69100, Batu Caves, Selangor Daru Ehsan, Malaysia was considered as first lowest of the four Bidders, at their quoted price equivalent to foreign currency USD 15,37,158.09. The evaluation report with the recommendation of tender committee was placed at the 416th Board Meeting of BGSL held on 13 September 2009 and the Board has given their kind approval to award the work in favour of the first lowest bidder. According to the decision of the Board Notification of Award was issued in favor of first lowest bidder on 19 October 2009 and the contract has been signed on 15 November 2009.

3.4 Other’s Development Activities

The Company’s success over the years has resulted in more responsibility, i.e., three more projects have been commissioned. Out of these, two projects are GOB financed “Gas Supply to Chandpur 150 MW Combined Cycle Power Plant Project” and “Exploration and Production Capacity Building of BAPEX (BGSL portion) Project” for Gas supply from Samutang Gas Field to BKB-Chittagong Transmission Pipeline. BGSL’s own financed Project is “Construction of 8" dia 6.00 Kilometer long pipeline from Begumgonj Gas Field to Setubhanga of Maijdee lateral line.

The following is a brief narration of the progress on the above metioned three project which are under implementation:

3.4.1    Gas supply to Chandpur 150 MW Combined Cycle Power Plant Project

This project was approved by ECNEC in a meeting held on 12 July, 2006, wherein it was decided to implement the project between July 2006 and June 2009 with GOB financing to the tune of Tk.80.03 crore. Out of the total project cost, provision was kept for an amount of Tk.44.57 crore for purchase of materials, Tk.1.70 crore for acquisition of land, Tk.9.88 crore for construction of pipeline and Tk.23.88 for miscellaneous expenses. In order to complete the project within the deadline, International Tenders were invited for procurement of materials in 6 groups and tenders were opened in September and October 2007. However due to non-allocation of fund as per requirement, the tenders were kept pending for evaluation and, as a result, the validity of tenders and bid bonds expired despite receiving a sufficient number of tenders. This situation was discussed in the meeting held at Petrobangla on 24 April, 2008, and considering the uncertainty of the installation of power plant(s) by PDB, a decision was taken to cancel the tenders and at the same time to continue the activities of the project in line with the physical progress of the power station. As per the decision of the meeting, the Company was awaiting the progress of the power station. The company’s three years project period expired on 30 June, 2009 due to the stagnant state of the Power Station. It, therefore, became necessary to amend the present DPP of prepare a new DPP, considering the above facts, a decision was taken to prepare a new DPP at the meeting held on 17 August, 2009 at the administrative Ministry and on 26 August, 2009 at Petrobangla. According to the decision, the new DPP for the said project was prepared and sent of Ptrobangla showing a project cost of Tk.79.28 crore and the project implementation period between January 2010 and June 2012.

3.4.2    Exploration and Production Capacity Building of BAPEX (BGSL Portion Project)

This project was approved on 3 February, 2009. Under this project, 10" Æ dia 65 Kilometer long high pressure pipeline will be constructed from Semutang Gas Field to Chandgaon of Chittagong Ring Main. The project will be implemented entirely with GOB financing to the tune of Tk.140 crore  which includes foreign currency of Tk.83.45 crore (the Company’s portion). The project period has been determined between July 2008 and June 2011.

During FY 2008-09, Tk..05 crore  was released against this project out of which Tk..034 crore was spent for purchase of computers, scanners, photocopy machines and furniture and remaining amount of Tk..47 crore was returned to GOB by depositing it with the Government Treasury.

During FY 2009-10, Tk.7.25 crore has been allocated against the Company’s portion of the project out of which expenditure of Tk..0029 crore equivalent 0.0397% was made till September,2009. At resent, collection of 156 Mouza map for acquisition of land and preparation of tender documents for procurement of 10" Æ dia pipeline, coat & wrap materials, valves, fittings, TBS components etc. is undergoing.


3.4.3    Construction of 8" dia 6.00 Kilometer Pipeline from Begumgonj Gas Field to Setubhanga of Maijdee Lateral Line Project

Petrobangla has given the decision to construct a 8" dia 6.00 Kilometer long pipeline with related installations from Begumgonj Gas Field to Setubhanga of Maijdee lateral line with the Company financing between January 2010 and December 2011. As per the said decision, the Company has prepared a DPP determining the project cost to the tune of Tk.10.38 crore, including foreign currency component of 5.19 crore and sent the same to Petrobangla. Upon successful implementation of this project, an additional 5 MMSCFD gas is envisaged to be added to the Company’s system. But at present some technical problems have arisen to convert the well of Begumgonj Gas Field into production well. As a result BAPEX has taken a plan to acquire land in another place to drill the well. Petrobangla has given verbal order to postpone the construction work related to the pipeline until the plan of drilling of the well is finalized.

3.5            Customer Connection


The Company was able to provide gas connections to 44,673 new customers under its development activities during FY 2009-10 as against target of 25,000 customers, which includes 12 Captive Power, 12 industrial, 68 commercial, 14 CNG and 24,894 domestic customers. Hence, the cumulative gas connection stands at a total of 5,10,954  including 10 power, 3 fertilizer, 1031 industrial, 182 captive power, 4,691 commercial, 1 tea garden, 136 CNG and 5,04,900 domestic connections. A comparative statement of customer connection of 2007-08 and 2008-09 is appended below:

Category of Customers
Target
2009-09
Actual
Target
2007-08
Actual
Chittagong
Comilla
Total
Chittagong
Comilla
Total
Power
-
1
-
1
4
1
3
4
Industrial
12
14
2
16
11
22
6
28
Captive Power
12
6
8
14
11
12
19
31
Commercial
68
72
61
133
183
162
189
351
Domestic
24,894
22,634
21,860
44,494
24,765
18,939
13,139
32,078
Seasonal
-
-
-
-
-
-
-
-
Tea Garden
-
-
-
-
-
-
-
-
CNG
14
9
6
15
26
15
40
55
Total
25,000
22,736
21,937
44,673
25,000
19,151
13,396
32,547

Table- 3.2: Category wise Gas Connection
The achievements of gas connection in FY 2008-09 and FY 2009-10 were 30.19 percent and 78.69 per cent higher than the respective targets.

3.6 System Loss Reduction Programme

The company has been implementing different action plans to reduce overall system loss/unaccounted for gas.  Actions include monitoring area wise gas input-output and thereby fixing responsibilities for system loss. RMS sealing, Calibration and replacement of old meters, intensive vigilance, disconnection of unauthorized gas use by task force.  Installation of internal pipeline of industrial, commercial customers etc above ground level. A programme  is being implemented by assigning officers to collect meter readings including visit to customer premises. Meter sealing and testing programmes are being implemented in time. The premises of the industrial & disconnected customers are being inspected by special teams.

3.7 System Loss Reduction Project

The system (loss)/gain of BGSL in FY 2009-2010 is 1.15%. Due to reduction system loss BGSL,s takes some projects. Such

Procurement and installation of Turbine and Rotary Meters equipped with Electronic Volume Corrector (EVC) for improving of area wise TBS/DRS inputs and gas measurement facilities at customers ends.

3.8 Gas Supply Efficiency Improvement Project

 Energy efficiency is a vital issue for gas conservation. Most industrial, captive, commercial and domestic customers are not quite aware of the efficient utilization of gas. Domestic customers of BGSL use unmetered gas. They pay bill on a flat rate basis, irrespective of the volume of gas consumed. Some unscrupulous customers also indulge in gas pilferage, using gas in unauthorized appliances. This is one of the factors which contribute to the wastage of gas resulting in system loss of this non-renewable resource. Inefficient utilization of natural gas in different gas in different boilers, generators, re-rolling furnaces and may other gas consuming equipments and inefficient gas burners causes loss of a huge amount gas, posing a visible threat to national energy security.  Inefficient gas use is an inevitable outcome of incomplete combustion of gas.

These unburnt carbon and carbon monoxide produced this way degrade our environment.

For gas supply efficiency improvement efficiency BGSL takes some steps. Such Design, supply,installation, testing & commissioning of Remote metering system on Turn-key basis including procurement and installation of Turbine meters equipped with EVC.


Development of ICT for Building Digital Bangladesh

4.0 Domestic Customer’s Ledger/Bill Computerization

With a view to improving customer services, computerization of domestic customer’s ledger of area/sub-area offices has been completed.

4.1 Modernization of IT System of the Company

The present Government has declared its Vision 2021 to build Digital Bangladesh. With a view to modernization of IT system of BGSL, Bangladesh University of Engineering & Technology (BUET) has been appointed as consultant for preparing a time bound implementation plan. The computer system will be further modernized as per BUET’s recommendation. Gradually all the area/sub-area offices of the company shall be brought under the existing server facility of the Head Office and the customers will be provided with the following facility:

• All metered customers will be able to check their usage accounts online.
• They can also apply online for new connections.


4.2 Introduction of Bill Pay System

In order to remove consumer sufferings associated with standing in long queues and various post-payment hassles in payment of gas bills, Bakhrabad Gas and GrameenPhone have jointly launched the Bill Pay Service from November,2009. Under this new system domestic customers can pay their gas bills from anywhere at anytime through their mobile phones or at any GP authorized Bill Pay Centers.


Marketing and Operational Activities

5.0 Gas Purchase

The company purchased 2990.40 million cubic meters (MMCM) of gas during FY 2009-10 as compared to 2899.75 MMCM in the previous year. The purchase of gas during the year under review has increased by 3.1344 percent. Out of the total purchase, 1326.45 MMCM, 788.31MMCM, 320.11 MMCM i.e. total 2434.87 MMCM was taken from the government owned Companies i.e. Bangladesh Gas Fields Company Limited, Sylhet Gas Fields Limited and BAPEX (Salda Gas Field) respectively. Another 555.53 MMCM was purchased from Sangu,Feni  and Vangura gas fields operated by International Oil Companies (IOC) through Petrobangla. The gas purchase from government owned and International companies during the year had been 2434.87 MMCM and 555.53 MMCM respectively, the ratio being 81:19. During the previous year, a volume of 2368.04 MMCM of gas purchased from the government-owned gas fields while the IOC-owned Gas Field supplied 531.71 MMCM, the ratio being 82.18. The value of gas purchased during the year under review was Tk.859.92 crore as compared to Tk.743.59 crore in the previous year, which registered 15.64 percent annual increase.

A comparative statement of gas purchase during FYs 2008-09 and 2009-10 is appended below:

Category of Customers
2009-10
2008-09
Growth
Purchase Target (MMCM)
Actual Purchase (MMCM)
Value (Taka in crore)
Actual Purchase (MMCM)
Value (Taka in crore)
Taka in crore
%
Power
511.00
636.84
117.58
437.81
76.61
40.97
53.48
Fertilizer
807.00
659.96
111.30
963.17
147.09
(35.79)
(24.34)
Industrial
415.96
433.70
154.48
378.43
123.34
31.14
25.24
Captive Power
418.39
388.92
101.23
340.93
81.26
19.97
24.58
Commercial
60.91
63.33
35.57
58.51
29.26
6.31
21.56
Seasonal
-
-
-
-
-
-
-
Tea Garden
0.05
0.06
0.02
0.03
0.01
0.21
100.00
CNG
245.06
257.97
164.89
221.25
141.21
23.68
16.77
Domestic
531.63
549.62
174.85
499.62
144.81
30.04
20.75
Total
2990.00
2990.40
859.92
2899.75
743.59
116.33
15.64

Table- 5.1: Comparative statements of Gas purchase (FY 2009-10)




5.1 Gas Sales

The Company’s sale of gas during FY 2009-10 has been recorded at 3 008.93 MMCM as against the target of 2953.00 MMCM i.e. an increase of 55.93 MMCM from the target but 128.34 MMCM is higher than the previous year’s actual sale of 2880.59 MMCM. The amount of revenue earned from gas sales was Tk.1600.07 crore during the FY 2009-10. In the previous year it was Tk.1792.52 crore. During the year under review the revenue earning decreased by an amount of Tk.192.45 crore i.e. 10.74 percent in  comparison with the preceding year. In spite of receiving an amount of Tk. 264.04 crore from the additional gas sale of 128.34 MMCM than the preceding year and increased rate of gas price effective from 1 August 2009, the total revenue earnings decreased by an amount of Tk. 192.45 crore due to the decrease of sale of KAFCO by an amount of Tk. 456.49 crore than the previous year as international market of fertilizer price has come down on which basis KAFCO’s gas price determined as per contract signed between KAFCO & BGSL.

A comparative statement of gas sales during FYs 2008-09 and 2009-10 is given below:


Category of Customers
2009-10
Percentage of total Sales (%) Quantity
2008-09
Growth
Sales Target (MMCM)
Actual Sales (MMCM)
Value (Taka in crore)
Actual Sales (MMCM)
Value (Taka in crore)
Taka in crore
%
Power
507.00
645.45
11407.83
21.45
437.08
114.08
66.46
58.26
Fertilizer
Government
KAFCO

311.61
483.39

222.63
435.86

57.27
308.01

7.40
14.48

369.84
584.44

59.23
764.50

(1.96)
(456.49)

(3.31)
(59.71)
Industrial
411.03
436.67
277.30
14.51
375.92
219.72
57.58
26.21
Captive Power
413.11
390.76
170.24
12.99
338.98
133.74
36.50
27.29
Commercial
60.16
63.76
63.25
2.12
58.03
51.17
12.08
23.61
Seasonal
-
-
-
-
-
-
-
-
Tea Garden
0.08
0.05
0.03
-
0.03
0.02
0.01
50.0
CNG
242.40
259.93
259.93
8.64
220.03
221.46
37.87
17.10
Domestic
524.22
553.82
553.82
18.41
496.24
228.60
55.50
24.28
Total
2953.00
3008.93
3008.93
100.00
2880.59
1792.52
(192.45)
(10.74)

Table- 5.2: Comparative statements of Gas sales (FY 2009-10)



5.2 Operational & Marketing position (FY 2009-10)

Constructed pipeline
:
Total-                                6427.99 Km

i. Transmission Line         67.46 Km
ii. Distribution Line          6096.89 Km
iii. Lateral Line                 263.64 Km
Number of Customers
:
Total-                                510958

Power-                             14
Fertilizer-                        3
CNG-                              136
Captive power-              182
Industry-                        1031
Tea Garden-                  1
Commercial-                 4691
Domestic-                    504900


Table- 5.3: Operational & Marketing position (FY 2009-10)

5.3 Wheeling Charge

The company paid a wheeling charge of Tk. 79.75 crore during the FY 209-1 as compared to Tk. 69.84 crore in the previous year for the gas transmitted to BGSL franchise area through Transmission Pipeline of GTCL. The wheeling charge during the year under review was increased by an amount of Tk. 9.91 crore due to higher amount of gas supplied through the Transmission Pipeline of GTCL.


Financial and Commercial Performance

6.0 Introduction

The company performs some financial and commercial performance in FY 2009-10 are given bellow:

6.1 Price Deficit Fund

In December 1998, a Price Deficit Fund (PDF) was created to cover the loss incurred by Petrobangla by way of procuring gas from IOCs at higher prices and selling the same to the customers at a lower rate. An amount of Tk.186.96 crore was collected for PDF during FY 2009-10 as compared to Tk.175.38 crore in the previous year. PDF is accumulated on the volume of gas supplied from the government-owned gas fields. The Price Deficit Fund margin was increased by an amount of Tk.11.58 crore during FY 2009-10 due to the increased amount of gas supply of 66.83 MMCM from government-owned gas fields than the previous year.

6.2 Gas Development Fund

The Gas Development Fund was created on 1 August 2009 for financing the companies to increases gas production and discover/development of the new gas fields. During the FY 2009-10 total amount of Tk. 48.82 crore was collected against this fund.

6.3 Company Margin

The Company’s total revenue earning during FY 2009-10 stood at Tk.1600.07 crore. After deduction of a total amount of Tk.1194.34 crore (i.e. Tk.859.92 crore for gas purchase, Tk.9.15 crore for BAPEX margin, Tk.79.75 crore for wheeling charge, Tk.186.96 crore for PDF ,Tk.9.74 crore for Deficit well head margin and Tk. 48.82 crore for Gas development fund), the company’s net margin stood at Tk.405.73 crore, showing a decrease of Tk.380.95 crore over the margin of Tk.786.68 crore in the previous year. The Company’s margin has been idecreased due to decrease of sales of KAFCO by an amount of Tk. 456.49 crore than the previous year as international price of fertilizer has come down on which basis KAFCO’s gas price determined as per contract signed between KAFCO & BGSL.It may be mentioned here that the net margin of the company stood at Tk. 208.16 crore as against Tk. 405.73 crore since Tk. 197.57 crore received from KAFCO in addition to government tariff was paid to Petrobangla and other agencies.

6.4 Net Profit

The Company’s pre-tax net profit during the FY 2009-10 has been recorded at Tk.345.94 crore as compared to Tk. 735.54 crore of the previous year, showing a decrease of Tk. 389.60 crore or 52.97 percent. The net profit has been decreased mainly due to decrease of sales of KAFCO by an amount of Tk. 456.49 crore than the previous year as the international price of fertilizer has come down on which basis KAFCO’s gas price determined as per contract signed between KAFCO & BGSL in spite of receiving of Tk. 264.04 crore from the additional gas sale of 128.34 MMCM than the preceding year and the increased price rate effected from 1 August 2009.

6.5 Workers Profit Participation Fund (WPPF)

The Workers’ Profit Participation Fund (WPPF) during FY 2009-10 was created with an amount of Tk.17.30 crore at the rate of 5% on net profit. In the preceding year, the amount stood at Tk. 36.78 crore.

6.6 Rate of Return on Average Fixed Assets

The Company’s Rate of Return (ROR) during FY 2009-10 was 136.92 percent as compared to 284.15 percent in the preceding year. The ROR during the year under review was decreased by 147.23 percent as compared to the previous year due to the decrease of net profit.

6.7 Debt-Equity Ratio

During FY 2009-10, the Debt-Equity Ratio of the Company was 1:99 as against 2:98 in the previous year. The Debt-Equity Ratio during the year under review stood in this position due to the payment of Tk.6.84 crore of long-term loan.

6.8 Debt-Service Ratio

The Company’s debt-service ratio was  1:32.73 during the FY 2009-10 as against 1:79.88 of the previous year. The loan giving agencies have determined standard Debt-Service Ratio 1:1.5.

6.9 Payment to National Exchequer

Bakhrabad Gas Systems Limited is not only earning profit, it is also playing an important role in the national economy by contributing significantly to the National Exchequer through regular payment of CD/VAT, Corporate Tax and DSL. The company pay to National Exchequer is Tk. 11.31 crore in the FY 2009-10.

6.10 Accounts Receivable

The accounts receivable of the Company during FY 2009-10 was Tk.277.55 crore or equivalent to 1.98 month’s average sales excluding provision for bad debts as compared to Tk.250.40 crore  or equivalent to 1.94 months’ average sales of the previous year. 

6.11 System (Loss)/ Gain

The Company purchased 2990.40 MMCM of gas and sold 3008.93 MMCM of gas during FY 2009-10. As a result, the company recorded a gain of 18.53 MMCM or 0.62 percent of gas.

6.12 Financial Position (FY 2009-2010)

Gas Sales
:
 3008.93 MMCM
Gas Sales  in Tk.
:
Tk.. 1600.07 crore
Net Profit
:
Tk. 345.94 crore
Rate of Return (%)
:
136.92
Debt-Equity Ratio
:
1:99
Debt-Service Ratio
:
1:32.73
Payment to the national Exchequer
:
Tk. 11.31 crore

Table- 6.1: Financial Position (FY 2009-2010)



Administrative Activities of BGSL



7.0 Introduction

Company’s overall performance depends upon a strong and efficient administrative system. BGSL, as the major gas marketing company attaches due importance to the need of improved customer service and with this end, a “Revised Organ gram” was introduced in the Company. Highlights of the company’s administrative activities within the financial year are given below

7.1 Manpower and Human Resources Development

The development of Manpower and Human Resources has been running satisfactorily keeping coherence with overall development and financial activities. The total manpower of the Company was 1222 as on 30 June 2009. After the retirement and death of some employees, the total manpower of the company as on 30 June 2009 stood at 1190 comprising of 501 officers and 689 staff. Among the total member of officers and staff, 31 are female officers and 23 female staff respectively.

To ensure efficient use of human resources of the company, and to bring dynamism and modernization in the activities of human resources division, Bakhrabad Gas Human Resources Information System (BHRIS) was introduced on 18 June 2009 as part of present government’s dream of building Digital Bangladesh. Personal Data of the employees of the company is being recorded by using this system.
A comparative statement showing the year-wise manpower position of the company for FY 2009-10 and 2008-09 is given below:

Financial Years
Number of Officers
Number of Staffs
Officers
Total Other Staffs
Grand Total
Male
Female
Total
Male
Female
Total
2009-10
470
31
501
666
23
689
501
689
1190
2008-09
489
30
519
679
24
703
519
703
1222

Table- 7.1: Comparative statement of manpower position of the company for FY 2009-10

An efficient work force is the key to effective management and development of an organization. HRD programs are underway to develop potentialities of existing manpower and keeping them abreast of the latest developments in respective fields of operation. Accordingly 129 Officers and staffs were sent for training on various subjects in different reputed training institutions like BPI, BIM, IRI, Planning and Development Academy, Engineering Staff College, Atomic Energy Centre, CDMP etc. within the country during the year under review. In addition 10 officers were sent for foreign training/conference. Such training programme will continue for creating and developing efficient/ skilled employee.

During the year 2009-10 a provision of Tk.0.40 crore has been kept for foreign training of the officers of the company. Collection of course calendars from the foreign reputed training institutions are going on for implementing the training programme.

7.3 Management- Employee Relations

Management- Employee Relationship was quite satisfactory during the year under review and mutual cooperation was prevalent. In a meeting held between the leaders of the existing two registered Trade Unions of the company with BGSL management, the trade union leaders vowed to work together for improvement of customer Services, reduction of system loss and realizing accounts receivables, thereby upholding the reputation of BGSL.

7.4 Employee Welfare

The company undertakes various motivational activities to improve human values, mutual understanding, interpersonal relationship and loyalty among the offi cers and employees. In the year 2009-10 the company arranged the following social, cultural, religious and entertainment programmes on regular basis:


7.4.1 Education

Head Office Complex of Bakhrabad Gas Systems Limited is about 3 to 4 kilometers away from the Comilla main town. So to give the opportunity of education of the children of the employees of the company within BGSL area, the BGSL authority established primary school namely Bakhrabad Gas Adarsha Bidhyalaya in 1995. Later on it was upgraded into Secondary School and no it is running as a High School with Science, Commerce and Arts Groups from Children Class to ten. Students are admitted to the school on merit basis through admission test for both of the children of he employees of BGSL and the outsiders. Students participated in SSC Examination for the first time in 2006.

During the FY 2009-10 the company awarded stipend to the tune of Tk. 0.10 crore to 282 children of the officers and staffs for their outstanding performance in Primary and Junior Scholarship Examinations and SSC and HSC Examinations. The officers and staffs observed various occasions of national importance with due solemnity and participated in the Company’s annual picnic and sports enthusiastically.



7.4.2 Loan

The welfare programs are progressing ahead, keeping pace with physical, operational and financial activities of the Company. As per approved policy of the Company a total of Tk.5.66 crore was disbursed among the officers and staffs a s advance for land purchase, house building and purchase of motor cycles and bicycles during FY 2009-10. For execution of government policy for IT, 3 officers of the Company have been provided with an advance of Tk. 0.024 crore for purchase of personal computers. Besides, officers and staffs were given grant as per policy of Company’s welfare fund.

7.4.3 Entertainment and Sports

Officers and staffs of Bakhrabad Gas Systems Ltd also participated in Inter-Company sports competition organized by Petrobangla. Besides this, Annual Sports Competition-2010 of the company was organized by BGSL Club. In 16 events, all levels of employees participated in this competition. Administration Division became champion and Sales  Division became runner-up in this competition. Apart from this, BGSL Club and different Divisions/Departments arranged picnic for entertainment of the employees during the year.

7.4.4 Religious Programme

As in the previous year, Milad Mehfil was  arranged on the occasion of ‘Eid-E-Mildunnabi’ at BGSL Complex Mosque and Iftar pary also was arranged on the occasion of ‘Mahe Ramadan’ at BGSL complex  during the year under review.

7.5 Health

Doctors and ambulances including Government approved medicines are available in Head Office for the treatment of the employees of the Company. The Retainer Doctor including medicines are also available in other installations. During financial year 2009-10 treatment was given to 10056 numbers employees and their dependents in 13 installation of the company. During the year under review First Aid Box was given to all the TBS & DRS for primary treatment. No. one became sick during the hazardous job in this financial year due to the precautionary measures undertaken by the Company. Doctors, medicines, ambulance and the experienced manpower are deployed at the hazardous job site like pipeline pigging etc. so that necessary actions may be taken in the event of any accident.

7.6 Environment

Before connection of all types of customers excepting domestic customers, environment clearance certificate issued from he Environment Directorate is obtained to ensure good environmental conditions. Gas generators are pollution and sound free. In addition, the cost of maintenance and generation of electricity of gas generator is also less than the liquid fuel generator. Considering all of the above facts, gas connections were made to 40 numbers of generators under “Captive category” during this financial year. A Section named “Environment and Safety” has been created in the company to monitor the environment. The Company undertakes training programme from time to time on environment and safety issues to train up the engineers and engineers train up the personnel working for them. To ensure better environment, huge number of trees were planted in the Head Office Complex which has enhanced the beauty of the complex as well. A section name “Environment and Safety” has been created in the company to monitor the environment.

7.8 Safety

The security of the company is ensured by deployment of company’s own Security Guard and Ansars in different installations. The activities of Security Guard and Ansars are regularly monitored by the duty officer. The risers installed at the customers’ premises are kept under their own custody. The risers, specially for domestic and commercial customers, are kept under open sky. As a result those may damaged by rust, hit by vehicle, fall of trees and their branches during cyclone and storm, corrosive, waste of drains etc. During this FY, 238 numbers of domestic risers were out of order.157 numbers of risers  were replaced by repairing the old ones. Where it was not possible to repair the old risers, new risers were installed for continuation of gas supply. The customers are advised to keep their risers within a fence where they are in a hazardous location. To ensure safety CMS and DRS are always surrounded by fence. The operators who are posted to the CMS & DRS are trained in the operation of fire extinguishers to handle fires. As a precaution, signboards have been installed at the CMS and DRS and these stations are visited regularly be the officers. During this FY no incidents have occurred. Technicians and emergency vehicles are kept on call 24 hours a day to face this type of incidents. The technicians posted at the control room rush to the place of incident upon receiving  complain. If they feel that the incident is beyond their control, they immediately inform higher officials regarding the matter. Ring main pipeline, CMS, DRS, & RMS are visited by our officers regularly and during 2009-10 the said installations are visited 428 times. In addition, the CMS of bulk customers are visited and examined to ensure proper functioning. During this FY bulk customers’ CMS at Chittagong has been physically visited 144 times by the concerned officers of the company.

During the FY 2009-10, 45 employees were given training and two demonstrations were held for instant using of the fire fighting equipment at the time of incident. The fire fighting equipment are examined regularly.


7.9 Emergency Response

The company has Emergency Gas Control Rooms at BGSL Head Office Complex, All area offices the 24 hours emergency gas control. All the emergency calls were promptly attended to ensure safe and smooth supply of gas to the customers and to avoid probable accident and loss.



Future Programs of BGSL

8.0 Introduction

The company attempts some future programs as in the previous year.

8.1 Pipeline Expansion/Rehabilitation Programme

8.1.1 Extension of pipeline network and gas connection

Almost all the district headquarters and upazilas of South-East region of the country have been brought under BGSL gas distribution network. Extension of gas distribution network is progressing unhindered. During the FY 2009-10, target was fixed to construct 150 km pipeline and connect 25000 numbers of new customers in BGSL franchise area. But recently Government has given instruction to suspend the new connection other than domestic, commercial and the committed ones till the production of the gas reach 2200 MMSCFD. Due to such embargo target of gas connection could not be obtained during FY 2009-10.

8.1.2 Gas supply to Karnaphuli EPZ Area of Chittagong

After declaring the Chittagong steel Mill as abandoned, the Government of Bangladesh has decided to establish Karnaphuli EPZ in the same place. The design and estimate for construction of pipeline was submitted tot the concerned EPZ authority. As per the design and estimate 3840 meter (8”-270 meter, 6”-510 meter, 3”-1700 meter, 2”-1360 meter) pipeline was constructed in the first phase and a proposal for the construction of 4440 meter (6”-480 meter, 4”-1850 meter, 3”-1830 meter, 2”-280 meter) pipeline in the second phase is presently in the Company. Gas connection to three industrial and two domestic customers has already been given. M/s. Labiathon Global Corporation has applied for gas connection to their 50 MW Power Plant targeting production of power by 2013. Present average monthly demand of the said EPZ is 0.117 MMCM. But after setting up of industries and Power Plant in the EPZ, the requirement of gas will be 81.885 million cubic meter in 2014.

8.1.3 Gas supply to Chittagong Korea Export Processing Zone (KEPZ)

Chittagong Korean EPZ authority has forwarded their estimated demand of 2.75 MMSCFD Gas in 2010, 6.10 MMSCFD in 2011, 10.05 MMSCFD in 2012, 13.20 MMSCFD in 2013 total 32.90 MMSCFD vide their letter dated 14 July 2009. They also mentioned in their letter that a shoe Industry with the requirement of minimum 2.75 MSCFD gas will go into operation at the end of this year. While it was communicated to Petrobangla by the Company’s letter No.BGSL/MD/17/787 dated 27 August 2009, Petrobangla has informed on the same date by their letter No.41.06.01/77 that if gas is available in BGSL franchise area by 2010 then a minimum of 2.75 MMCF gas can be supplied daily to Korean EPZ. It is to be noted here that Petrobangla has not mentioned anything in their letter about the supply of gas in 2011 and subsequent years.


According to Petrobangla’s instruction, steps are being taken for construction pipeline including necessary infrastructure for supply of gas to Korean EPZ. At present, no infrastructure is available in Korean EPZ for connection of gas.


8.1.4 Gas supply to Medium/Small Power Plants in Private Sector

In the last year, Government has taken a decision to install some medium/small power plant all over Bangladesh through local/joint venture investment. According to the Government decision some power plants was installed in BGSL franchise area and gas connection was given to 33 MW power plant at Jangalia on 14 May 2009.


8.1.5 Ensure gas supply in the Company’s franchise area

The present demand of the Company franchise area is about 420 million cubic feet of gas per day. But the Company is being provided with 290-300 million cubic feet of gas per day which is less by 120-130 million cubic feet of gas demand per day. As a result gas supply is being provided to bulk consumers like CUFL, KAFCO and Rauzan 210 X 2 MW power plant through rationing system. The installation of factories in Comilla EPZ is increasing day by day. The gas supply to Karnaphuli EPZ have started. Korean EPZ in Chittagong is in the implementation stage. Every year, new industries the increased demand, the daily requirement of gas supply to the Company franchise area in the next Government has given the instruction to suspend the new connection except the committed connections till the production of gas reach 2200 MMSCFD. Due to such instruction new connections except domestic, commercial and committed ones has been suspended.



8.1.6    Gas Supply to The Proposed Chandpur 150 MW Combined Cycle Power Plant Project

This project was approved by ECNEC in a meeting held on 12 July, 2006, where in it was decided to implement the project between July 2006 and June 2009 with GOB financing to the tune of Tk.80.029 crore.


8.2            Improved Customer Services

In order  to  ensure  improved  customer  services, the number of offices under  Comilla area and Regional  Marketing  areas  will be  increased, steps will be taken to recruit  adequate  number of suitable  manpower, measures  to be taken  for construction  of gas  pipeline network through the enlisted  contractor of  the company. Steps  are  being taken  for  installation of pipeline network, installation/modification of CGS/TBS/DRS for ensuring  the future gas demand of the customers and to eradicate  the low  pressure  problem  prevailing in  different  parts of  Comilla/Chittagong City and adjoining areas, during winter season.








Audit Report and Statement of Accounts (FY 2009-2010)

9.0 Balance Sheet As on 30th June, 2010

Sl. No.
Particulars
Notes No.
2009-10
in Tk.

2008-09
in Tk.
1.
CAPITAL AND RESERVES





Share Capital
1
1,226,180,000.00

1,226,180,000.00

Deposit for shares
2
2,240,689,599.91

2,442,548,811.97

Capital reserve
3
683,947,144.31

642,415,320.10

Revenue reserve
4
5,678,248,931.19

4,899,404,447.64

Total capital and reserves

10,069,065,675.41

9,210,548,579.71






2.
LONG TERM BORROWINGS





Unsecured loans-Local sources
5
21,666,032.33

48,033,798.55

Unsecured loans-Foreign sources
6
99,171,216.46

141,172,424.82

Total long term borrowings

120,837,248.79

189,206,223.37






3.
OTHER LONG TERM LIABILITIES





Customers’ security deposits
7
3,775,017,679.60

2,972,944,446.06

Liabilities for deferred tax

35,350,373.44

57,446,512.36

Total other long term liabilities

3,810,368,053.04

3,030,390,958.42






4.
Total Capital Employed (1+2+3)

14,000,270,977.24

12,430,145,761.50







REPRESENTED BY




5.
FIXED ASSETS





Fixed Assets at cost less accumulated





Depreciation
8
2,617,577,601.77

2,738,210,156.68

Capital Work-in-progress
9
166,560,616.88

79,551,375.46

Total Fixed Assets

2,784,138,218.65

2,817,761,532.14






6.
INVESTMENT AND OTHER ASSETS





Fixed deposits
10
5,295,891,638.58

4,494,285,949.31

Loan to employee

248,711,846.81

226,751,630.06

Loan to Inter-company (KGDCL)

27,561,267.90

-

Investment (In shares of ICB Islamic Bank)

2,812,000.00

2,812,000.00

Customers securities (BG and PSP)

1,911,019,792.18

1,296,927,607.35

Total investment and other assets

7,490,301,609.47

6,020,777,186.72


Balance Sheet As on 30th June, 2010

Sl. No.
Particulars
Notes No.
2009-10
in Tk.

2008-09
in Tk.
7.
CURRENT ASSETS





Investors of stores and other materials
12
535,349,095.04

470,294,040.62

Trade Accounts Receivable (Net)
13
2,773,646,607.15

2,503,962,400.51

Advance, deposit and pre-payments
14
1,951,153,457.87

5,502,668,039.66

Cash and bank balances
15
3,679,206,880.80

3,695,871,468.46

Other Current Assets
16
254,751,358.30

207,592,304.79

Total Current Assets

9,194,107,399.30

12,380,388,254.04






8.
CURRENT LIABILITIES











GROUP COMPANY ACCOUNTS





Liabilities for Gas Purchase
17
1,994,614,842.60

1,719,545,842.81

Liabilities for transmission charges
18
206,542,349.49

176,518,013.49

Liabilities for BAPEX Margin
19
27,324,247.19

22,908,103.66

Liabilities for price deficit fund
20
400,514,868.49

442,179,057.73

Liabilities for BAPEX wellhead margin deficit fund
21



24,019,334.04

Payable to Petrobangla against KAFCO’s additional bill
22
22,322,092.96

199,411,235.32

Liabilities for Gas Development Fund  Payable to Petrobangla
23
130,186,636.00

-

Group Current Accounts
24
160,541,925.15

48,076,425.11

Total group company accounts

3,034,609,891.51

2,632,658,012.16







OTHER CURRENT LIABILITIES











Trade creditors and accruals
25
879,919,919.73

737,344,970.58

Current portion of long term loans
26
73,094,812.61

70,399,472.20

Workers’ Profit Participation Fund

172,969,470.32

367,770,192.21

Interest payable on loans

(493,229.45)

808,649.94

Provision for taxation
27
1,308,175,385.32

4,979,799,914.32

Total other current liabilities

2,433,666,358.53

6,156,123,199.25







Total Current Liabilities

5,468,276,250.04

8,788,781,211.40






9
Net Current Assets (7 – 8)

3,725,831,149.12

3,591,607,042.64






10
Net Assets (5 + 6 + 9)

14,000,270,977.24

12,430,145,761.50


9.1 Income Statement For the year ended 30th June, 2010


Sl. No.
Particulars
Notes No.
2009-10
in Tk.

2008-09
in Tk.






1.
SALES





Gas sales revenue
28
16,000,658,636.37

17,925,145,917.84

Other operational income
29
197,073,418.06

169,390,124.01

Total sales

16,197,732,054.43

18,094,536,041.85






2.
COST OF SALES





Gas purchase including SD & VAT
30
8,599,240,549.74

7,435,930,298.36

BAPEX Margin

91,499,217.53

75,508,061.04

Gas Transmission charges
31
797,450,681.70

698,384,705.81

Price deficit fund charges

1,869,581,616.03

1,753,783,717.84

Deficit wellhead margin fund charges

97,394,937.24

94,717,443.72

Gas Development Fund

488,230,200.77

-

Operating expenses
32
773,508,542.29

466,186,211.84

Depreciation charges

300,838,778.58

284,570,676.34

Amortization charges

44,161,398.41

43,958,277.72

Petrobangla service charges
33
40,919,000.00

64,4000,000.00

Bad debts expenses
34
69,916,155.92

58,619,085.72

Total Cost of Sales (2)

13,172,741,078.21

10,976,058,478.39






3.
OPERATING PROFIT ( 1-2)

3,024,990,976.22

7,118,477,563.46






4.
Other income (Non-operational)
35
108,022,583.30

176,177,943.71
5
Interest Income
36
506,815,437.87

438,029,550.74
6
Financial costs-Interest expenses
37
7,470,120.61

9,511,021.58
7
Net Profit Before Contribution to Worker’s Participation Profit (3+4+5-6)


3,632,358,876.78


7,723,174,036.33
8
Contribution to Workers’ participation in profit


172,969,470.32


367,770,192.21
9.
Net profit before taxation (7-8)

3,459,389,406.46

7,355,403,844.12






10
Provision for taxation

1,297,271,027.42

2,758,276,441.55






11
Net profit for the year after taxation (9-10)

2,162,118,379.04

4,597,127,402.57








9.2 Profit & Loss Appropriation For the year ended 30th June, 2010


2009-10
in Tk.

2008-09
in Tk.

Profit brought forward from previous year

4,899,404,447.64

3,988,594,961.79

Prior years adjustment

255,167.78

228,590,279.70

Provision for deferred tax

(35,350,373.44)

(3,813,556.08)







DISTRIBUTABLE PROFIT

7,026,427,621.02

8,810,499,087.99







Interim dividend

(382,384,000.00)

(778,064,000.00)

Payable to Petrobangla against KAFCO’s additional bill


(965,794,689.83)


(3,133,030,640.35)







Balance transferred to Balance Sheet

5,678,248,931.19

4,899,404,447.64


















9.3 Cash Flow Statement For the year ended 30th June, 2010


Sl.
Particulars
2009-10
in Tk.(Lakh)

2008-09
in Tk.(Lakh)





1.
CASH FLOW FROM OPERATING ACTIVITIES




Net profit before tax
34,593.89

73,554.04






Adjustment to reconcile net profit to net cash provided by operating activities:




Depreciation charge
3,008.40

2,845.70

Amortization charges
441.61

439.58

Interest expenses
74.70

95.11

Bad debts expenses
699.16

586.19

Decrease/(increase) in inventories of stores
(650.55)

260.32

Decrease/(increase) in advance, deposit and pre-payments

(181.35)


(170.44)

Decrease/(increase) in Trade Accounts receivable
(3,396.01)

5,809.70

Decrease/(increase) in other current assets
(471.59)

(329.51)

Increase/(decrease) in group current accounts
448.74

558.05

Increase/(decrease) in liabilities for purchase
2,750.69

2,246.35

Increase/(decrease) in liabilities for price deficit fund

(416.64)


2,212.44

Increase/(decrease) in liabilities for transmission charges

300.24


(917.89)

Increase/(decrease) in liabilities for BAPEX margin

44.16


126.89

Increase/(decrease) in liabilities for BAPEX wellhead margin deficit fund

(16.97)


240.19

Increase/(decrease) in trade creditors and accruals

159.18


4,891.24

Increase/(decrease) in workers’ profit participation fund

(1,948.01)


730.58

Cash security received from customers
1,879.81

2,625.43

Income tax paid including source tax
(14,564.37)

(30,564.50)

Increase/(decrease) for gas development fund
1,301.87

-

Net cash provided by operating activities (1)
24,056.96

65,239.47




Cash Flow Statement For the year ended 30th June, 2010

Sl.
Particulars
2009-10
in Tk.(Lakh)

2008-09
in Tk.(Lakh)





2.
CASH FLOW FROM INVESTING ACTIVITIES




Investment in fixed deposits
(8,016.05)

(7,475.58)

Acquisition of fixed assets
(3,076.81)

(2,987.31)

Interest received from investment of HCDF
415.31

386.33

Loan recovery from Inter-company (BCMCL)
-

1,200.00

Loan given to employee
(219.60)

(306.48)

Loan to KGDCL
(275.61)

-

Loan to Exploration Production capacity of BAPEX
(43.05)

-

Net Cash used by investing activities (3)
(11,215.81)

(9,183.04)





3.
CASH FLOW FROM FINANCING ACTIVITIES:




Repayment of foreign loan
(423.29)

(238.73)

Repayment of ADP loan
(270.41)

(284.00)

Payment of interest on loans
(87.72)

(101.50)

Equity received from Government
377.54

25.03

Dividend Paid
(3,823.84)

(7,780.64)

Amount received from roads and highway
1,266.57

-

Payment to Petrobangla against additional bill received from KAFCO

(10,046.64)


(37,503.13)

Net cash used by financing activities (3)
(13,007.79)

(45,882.97)





4.
Net increase/(decrease) in cash
(166.64)

(241.80)





5.
Beginning cash and cash equivalents
36,958.71

27,027.05





6.
Ending cash and cash equivalents (4 + 5)
36,792.07

26,785.25






9.4 Comparative statement of the company’s financial position for the financial year 2008-09 and 2009-10

Particulars
2008-2009
2009-2010
Budget
Actual
Budget
Actual
Gas Purchase (In MMCM)
2905.42
2899.75
2990.00
2990.40
Gas Sales (In MMCM)
2842.47
2880.59
2953.00
3008.93
Gas purchase (In Million Taka)
7351.87
7435.93
8408.06
8599.24
Gas Sales (In Million Taka)
16850.15
17925.15
15024.63
16000.66
Net Income (In Million Taka)
6286.65
7355.40
2165.62
3459.39
Debt Equity Ratio
N/A
2:98
N/A
1:99
Debt Service Coverage
N/A
1:79.88
N/A
1:32.73
Rate of Return on Average net Fixed Assets
N/A
284.15%
N/A
136.92%
Accounts Receivable (In Month)
3.00
1.94
3.00
1.98
System (Loss)/Gain

-0.66%

0.62%


Table-9.1: Comparative statement of the company’s financial position for the
                  FYs 2008-09 and 2009-10


Findings on Analysis
10.0 Findings on Analysis

Based on previous chapter analysis segments and the brief description of financial management/performance of BGSL following findings are originated


10.1 Business

Bakhrabad Gas Systems limited carried out transmission and Distribution of natural gas within the South-East of Bangladesh covering greater Comilla (except Brahmanbaria), Noakhali, Chittagong and Chittagong Hill Tracts. As per Government decision Bakhrabad-Demra and Bakhrabad-Chittagong Transmission Lines were transferred to Gas Transmission Company Limited on September 2, 2004 and October 18, 2004 respectively. Since then, company’s activities are mainly confined to gas distribution.

10.2 Accounting Conventions

The financial statements of the company are prepared using the historical cost convention and on a going concern basis. The financial statements are prepared in accordance with applicable accounting standards of the Institute of Chartered Accountants of Bangladesh which are consistent in al respects with international accounting standards.

10.3 Capital Reserves

Capital reserves consist of Hydro-carbon Development fund and grants from Government. Under a Government order the Hydrocarbon Development fund has been made out of sales revenue @2.5% on end users price for future development expenditure of the company and other group operating companies engaged in gas production, transmission and distribution. However, the creation of Hydrocarbon development fund was discontinued from 1st December, 1998. Grant received from Government has been used for extensions of the gas supply infrastructure.

10.4 Foreign Currencies

Foreign currencies are recorded at the exchange rate at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of closing dated and the resulting exchange fluctuation gains and losses are added with or deducted from the actual asset value of transmission and distribution pipe line.

10.5 Long Term Loans

Current portion of long term local and foreign loans i,e. overdue and loans repayable during the next financial year has been shown as current liability in the Balance Sheet and the remaining balances are shown under the head “Long Term Borrowings”.

10.6 Other Long Term Liabilities

Deposits by the customers in cash and other than cash (Bank Guarantee and PSP) as security against gas connection as required under gas supply contracts are shown as “Other long term liabilities”. Such deposits are not repayable till gas supply to the customers continues.


10.7 Fixed Assets

Freehold land and other land interest are stated at historical cost and other fixed assets are carried at depreciated historical cost.

10.8 Exchange Rate Fluctuation

Exchange rate fluctuation against foreign currency loans has been accounted for separately and merged with the carrying value of the assets acquired against the loans.

10.9 Fixed Deposits

Bank fixed deposits are classified as “Investment and other assets” which were invested up to the Balance Sheet date.

10.10 Loans And Advances To Employees

Loans and advances to employee after adjustment of recovery are excluded from current assets and included under the head “Investment and other assets”.
10.11 Inventories

Inventories are valued at weighted average historical cost. Stores in transit are valued at actual cost incurred thereon unto the closing date.

10.12 Trade Accounts Receivable

Trade accounts receivable are shown at book value less provision for bad debts.

10.13 Revenue

The company’s main source of income comes from sale of gas to different categories of customers at the prices set by the Government of Bangladesh. Sales are valued on an accrual basis except in respect of penalties for late payment by gas customers which is shown as cash basis under the head other operational income.

10.14 Expenditure

All know expenditure have been accounted for in the final accounts irrespective of whether the same is paid or not upto 30th June, 2010.

10.15 Depreciation

Freehold land and other land interest are not depreciated. Other tangible fixed assets are depreciated on a straight line basis at the rates sufficient to write off historical cost over their estimated useful lives. Depreciation is charged on assets acquired within first three quarters of the year and no depreciation is charged on assets acquired in the last quarter of the year.
Depreciation rates for the principal categories of assets are as follows:

Type of Assets
Rate of depreciation
Freehold concrete and brick structure
2.50%
Transmission Line
3.33%
Distribution Line
5.00%
Transmission and distribution plant
5.00%
Consumer Metering
10.00%
Vehicle
20.00%
Other assets
2.50% to 30.00%

Table- 10.1: Depreciation rates for the principal categories of assets

10.16 Amortization of Exchange Rate Fluctuation

Devaluation effect on foreign currency loan i,e. exchange rate fluctuation has been amortized on the basis of the life of the respective assets and charged to income statement as amortization charge.

10.17 Provision for Tax

Provision has been made for corporate tax amounting to Tk. 2,758,276,441.55 against net profit earned during the period under review.

10.18 Provision for Bad Debts

Bad debts provision has been made @ 3% on non-bulk customers accounts receivable.




Recommendation


For effective financial management of BGSL, credit monitoring & judgmental decision after efficient analysis is important that would result in good customer relationship with greater profit earning for the organization with fulfilling target. Most of the researchers have also drawn a sort of recommendations that should be considered necessary for effective financial management. Such

  • Creating better customer service than existing services.
  • Build up better management – employee relationships.
  • Try to reduce given loan to other organization.
  • Follow-up and monitoring expenditures of various development programme.
  • Try to finance in profitable/productivity tasks.
  • Financial system should be better computerized than existing.




Bibliography

1.     Annual Report Mannual-2010 of Bakhrabad Gas Systems Limited.
2.     Annual Report Mannual-2009 of Bakhrabad Gas Systems Limited.
3.     Annual Report Mannual-2008 of Bakhrabad Gas Systems Limited.
4.     Annual Report Mannual-2010 of Titas Gas T&D Company Limited.






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