Summit attracts foreign investment
SUMMIT Group has attained the ability to finance billion-dollar projects thanks to its goodwill in implementing successful ventures, wooing global investors to team up with the company to tap opportunities in Bangladesh, said a top official.
Ayesha Aziz Khan, finance director of Summit, said foreign investors are keen on investing in the company's Bibiyana II and Meghnaghat power projects.
“They have also offered to invest more than $400 million in equity in future Summit projects,” she told The Daily Star in an interview.
Her comments came as the 340-megawatt Meghnaghat plant in Narayanganj started producing power commercially for the national grid.
Also, the simple cycle part of the Bibiyana II project in Habiganj is producing 210MW on a test run basis and it will start to supply electricity on a commercial basis within a month.
The two developments will take the total power generated by Summit to 1,260MW, making the company the largest power producer in the private sector.
For the Meghnaghat project costing $319 million, Summit received long-term loans of $190 million from Standard Chartered, DEG of Germany, FMO of the Netherlands, Opec Fund for Industrial Development of Austria, CDC Group of the UK, OeEB (Development Bank of Austria), Belgian Investment Company for Developing Countries, and Infrastructure Development Company Ltd of Bangladesh.
Summit's equity investment of $117.6 million in this project also makes it the single largest investor in a project by a local company.
The Bibiyana II 341MW gas-fired power plant, one of the largest independent power projects in Bangladesh, has received financing of $210 million from International Finance Corporation, Asian Development Bank and Islamic Development Bank.
Summit Industrial and Mercantile Corporation Ltd (SIMCL) owns 80 percent of this project and the rest 20 percent is owned by US conglomerate General Electric.
“Our balance sheet is very strong, helping to attract large amounts of equity investment from external sources,” said Khan.
Summit, with more than 25 years of experience, is a group of companies owned by SIMCL. Its investments are diversified across power, energy trading, port, telecoms, hospitality and real estate. The power sector accounts for 70 percent of its net revenue and 85 percent of net profits.
Khan said Summit borrowed from outside as local banks cannot lend a huge sum of money for long periods, despite sitting on huge liquidity.
“We just need to find ways to structure our policies and help the liquidity come to good investors and quality investment, such as in infrastructure.”
The government can provide some freedom to local companies so they can invest outside the country where opportunities are aplenty, said Khan.
The securities regulators must help all investors, small and large, feel comfortable to invest, she added.
“Because of a lack of a vibrant stockmarket, people are investing in unproductive sectors such as land, property and savings instruments. We don't have adequate opportunities to invest.”
Summit would continue to do business in physical infrastructure development, she said.
The company is interested in investing in hydropower projects in Bhutan and bringing electricity to Bangladesh, but to make the plan a reality, agreements have to be signed between Bangladesh, Bhutan and India, as Dhaka would have to use the land in New Delhi to import power from Thimphu, Khan said.
The company also plans to set up coal-based power plants. “Summit is committed to meeting the infrastructural needs of the country.”
Bangladesh suffers from infrastructure bottlenecks, but these bottlenecks offer tremendous opportunities to companies willing to invest in infrastructure, Khan said.
“We have scope for investment in the areas of transport, energy and power, healthcare and education. The return is very good in these areas.”
Khan said the stockmarket, which has been in the doldrums for the last four-five years, has to be flourished to finance large projects.
“If investors can't borrow money from the capital market, large projects in Bangladesh will either not happen or they will have to go for foreign sources.”
The capital market regulators need to think about how to improve the market scenario so local companies can borrow locally, she said. “Besides, big business houses also need to trust the capital market to get the capital.”
Summit raised $600 million from international markets for the power sector in the last five years. “This is an extraordinary achievement for Summit and Bangladesh. But I would have been happier if I could raise $100 million from the domestic capital market,” said Khan.
The country should support local investors the way it supports foreign ones, said Khan, who graduated in economics and business from University College London, UK, and did her master's degree in business administration from Columbia University, USA.
“We can't give better treatment to foreigners compared to domestic investors. There are specific laws to protect the interest of foreign investors, but there are no such protections for local investors. The country should give me the same encouragement because Bangladesh is the only place where I can invest, as we are not allowed to invest outside the country.”
Bangladesh offers the most liberal foreign direct investment regime in South Asia, allowing 100 percent foreign ownership with an unrestricted exit policy, easy remittance of royalties and repatriation of profits and incomes. The country also offers a number of export-oriented industrial zones with infrastructural facilities and logistical support for the foreign investors.
“If local investors are given the same privileges, Bangladeshis would be investing more and more in the country,” said Khan.
Money flowing to the country in the form of remittance has to be brought into investment as well, she added. “The beneficiaries of remittance don't have the opportunities to invest their money.”
In Bangladesh, 84 percent of remittance is consumed, and only 14 percent is saved, according to the Asian Development Bank.
Like Bangladesh, a lot of Filipinos also live outside the country and send billions of dollars home, Khan said. “But the Philippines created big infrastructure funds for the migrant workers to participate in. They can invest as little as $100. These funds are used to finance large infrastructure projects, whose profits directly go the shareholders.”
She hopes the government would award more contracts to set up large power projects as the need for power in the country is huge.
“If the government does not award some large power plant projects, there will be a shortage of electricity within the next four years as demand is increasing fast. Then the country will have to go for small power plants to meet the demand.”
About 65 percent of the country's population has access to the national grid, even though it produces 7,500MW of electricity on average; the current average production capacity falls far short of its demand for 10,000MW.
Khan said local companies should also be allowed to invest outside the country so they can grow. “Foreign companies are doing good business in Bangladesh and are growing. We can do the same.”
“The government can tag conditions that the money to be invested outside and the dividends to be declared have to be brought back to Bangladesh. Companies don't have problems with that.”
Under its corporate social responsibility, Summit supports SEID Trust to help them run two schools for autistic children, and Friendship, an NGO, to provide solar power to people living in char lands.
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