An Evaluation of the Project Appraisal Report for Debenture Financing of S. Alam Power Generation Ltd. prepared by Investment Corporation of Bangladesh

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An Evaluation of the Project Appraisal Report for Debenture Financing of S. Alam Power Generation Ltd. prepared by Investment Corporation of Bangladesh


1.1 Historical Background

The Investment Corporation of Bangladesh (ICB) was established on 1 October 1976, under “The Investment Corporation of Bangladesh Ordinance, 1976” (no. XL of 1976).The establishment of ICB was a major step in a series of measures undertaken by the Government to accelerate the pace of industrialization and to develop a well-organized and vibrant Capital Market particularly securities market in Bangladesh. ICB caters to the need of institutional support to meet the equity gap of the companies.

In view of the national policy of accelerating the rate of savings and investment to foster self-reliant economy, ICB assumes an indispensable and pivotal role. Through the enactment of the Investment Corporation of Bangladesh (Amendment) Act, 2000 (no. 24 of 2000}, reforms in operational strategies and business policies have been implemented by establishing and operating subsidiary companies under ICB.

Initially, the activities of ICB were limited to underwriting public issue of shares, bridge financing, debenture financing and opening/maintaining investors’ accounts (Investors’ Scheme). ICB had largely expanded its areas and scope of activities and now provides various types of investment and banking services. Added activities include providing debenture loans to companies and margin loans to investors, providing advances against ICB unit certificates, leasing of industrial equipment, managing unit fund and mutual funds, and participating in trading of securities.

2.1 Objectives

³ To encourage and broaden the base of investments

³ To develop the capital market

³ To mobilize savings

³ To promote and establish subsidiary companies for business expansion

³ To provide for matters ancillary thereto

2.2 Business Policy

³ To act on commercial consideration with due regard to the interest of industry, commerce, depositors, investors and to the public in general

³ To provide financial assistance to projects subject to their economic and commercial viability

³ To arrange equity and loans singly or through consortium of financial institutions including banks.

³ To develop entrepreneurs and encourage them

³ To diversify investments

³ To inspire small and medium savers for investment in securities

³ To create employment opportunities

³ To encourage more on investment in Agro-based and Information & Communication (ICT) sectors

2.3 Functions

³ Direct purchase of shares and debentures including placement and equity participation

³ Participating in and financing of joint-venture companies

³ Providing lease finance singly and through syndication

³ Managing existing Investment Accounts

³ Managing existing mutual funds and unit fund

³ Managing Portfolios of existing businesses

³ Providing advance against ICB Unit and Mutual Fund certificates and ICB AMCL Unit Fund Certificates

³ Providing Consumer Credit

³ Providing Bank Guarantee

³ Acting as Trustee and Custodian

³ Participating in and financing of joint-venture companies

³ Providing investment counseling to investors

³ Participating in Government Divestment Program

³ Introducing new business products suited to market demand

³ Supervising the activities of the subsidiary companies

³ Dealing in other matters related to Capital Market

³ Venture Capital Financing

³ Managing Equity and Entrepreneurship Fund (EEF)

2.4 Capital Structure

Capital Structure as on 30 June 2009:

2.5 Milestones

Date of Establishment/Commencement

Investors’ Scheme

ICB Chittagong Branch

First ICB Mutual Fund

ICB Unit Fund

ICB Rajshahi Branch

Second ICB Mutual Fund

Third ICB Mutual Fund

ICB Khulna Branch

ICB Sylhet Branch

Fourth ICB Mutual Fund

Fifth ICB Mutual Fund

Sixth ICB Mutual Fund

ICB Barisal Branch

Nomination as the country’s Nodal DFI in SADF

Seventh ICB Mutual Fund

Eighth ICB Mutual Fund

ICB Bogra Branch

ICB Local Office, Dhaka

Purchase of own Land & Building

Participation in equity of SARF

Advance against ICB Unit Certificates scheme

Lease Financing Scheme

The Investment Corporation of Bangladesh

(Amendment) Act, 2000

Formation and Registration of

three Subsidiary Companies

Computer Training Programme

Commencement of Operations of Subsidiaries:

ICB Capital Management Ltd.

ICB Asset Management Company Ltd.

ICB Securities Trading Company Ltd.

Registration as a Trustee with SEC

Registration as a Custodian with SEC

Bank Guarantee Scheme

Advance against ICB Mutual Fund

certificates scheme

Consumer Credit Scheme

Venture Capital Financing Scheme

Purchase of own land (at Agargaon)

Equity and Entrepreneurship Fund (EEF) management

1 October 1976

13 June 1977

1 April 1980

25 April 1980

10 April 1981

9 February 1984

17 June 1984

19 May 1985

10 September 1985

15 December 1985

6 June 1986

8 June 1987

16 May 1988

31 May 1988

7 May 1992

30 June 1995

23 July 1996

6 October 1996

15 April 1997

11 December 1997

16 January 1998

12 October 1998

22 April 1999

6 July 2000

5 December 2000

25 March 2001

1 July 2002

1 July 2002

13 August 2002

20 August 2002

20 August 2002

21 June 2003

21 June 2003

15 February 2004

26 April 2007

3 March 2008

1 June 2009

2.6 Organizational Structure

ICB includes 11 divisions under the operation wing and administration wing, which leads to 25 departments. Beyond these two wings ICB has 2 other divisions-Audit and methods divisions and secretary’s division.

a. Operating Wing

With a view to supporting industrialization and to developing a well-organized and vibrant capital market, ICB continued to provide financial assistance to companies in different forms.

The divisions under operations wings are presented below:

  • Audit & Method Divisions
  • Loan Appraisal Division
  • Funds Division
  • Merchandising Division
  • MIS Division

b. Administrative Wing

In order to accelerate the ICB’s operational activities the Administrative Wings has to work very hard and has to do a lot of works to maintain the good reputation in the capital market. The divisions under Administrative Wing are as follows:

  • Administrative Division
  • Accounts and Finance Division
  • Legal Affairs Division
  • Implementation & Recovery Division
  • Secretary’s Division
  • Branch & Subsidiaries Division

2.6.1 Board of Directors

The head office of the corporation as per the requirement of the ordinance of ICB is located at Dhaka. The general direction and superintendence, of the corporation operated in a board of directors, which consist of 11 persons including the chairman and managing director of ICB.

The board of directors consists of the following directors:

  • The chairman to be appointed by the government.
  • The directors to be appointed by the government from among persons serving under the government.
  • One director to be nominated by Bangladesh Bank.
  • The managing directors, Bangladesh Shilpa Bank.
  • The managing directors, Bangladesh Shilpa Rin Sangstha.
  • Four other directors to be elected by the shareholders other than the government, BB, BSB and BSRS.
  • The managing director of ICB to be appointed by the government.

2.6.2 Shareholding Position

The shareholding position as on 30 June 2009 was as follows:

Board of Directors
Managering Director


MD’s Secretary

Operations Wing Administration Wing

GM Operation’s Secretariate GM Administration’s Secretariate

Audit & Appraisal Planning and Funds Merchnadising Depository Leasing and Computer Administration Accounts & Finance Legal Affairs Implementation Trustee Branch & Secretaries

Methods Division Research Division Division Division Venture Capital Division Division Division Division & Recovery Division Subsidiaries Division

Division Division Division Division Division

Audit Organization Planning Management Securities Shares Dematerialization Personnel Establishment Human Implementation Recovery Trustee Custodian

Dept. & Methods Dept. Research Information Analysis Dept. Dept. Dept. Dept. Resources & Followup Dept. Dept. Dept. Dept.


Appraisal Lien and Consumers Unit Repurchase Unit Registration Mutual Funds

Dept. Credit Dept. Dept. & Procurement Dept. Central Fund Project Loan Branch Affairs Subsidiaries

Dept. Accounts Dept. Management Dept. Accounts Dept. Dept. Affairs Dept.

Investors’ Securities Reconciliation Venture Capital Leasing

Dept Dept Dept Dept Law Dept. Documentation Dept. Public Issue Dept.

System Analysis Dept. Programming Dept. Data Management Dept.

Chittagong Branch Rajshahi Branch Khulna Branch Sylhet Branch Barisal Branch Bogra Branch Local Office Dhaka Secretary’s Dept. Public Relations Dept

2.8 Products of ICB

1. Private Placements

ICB is authorized to act as an agent of the issuers and investors for private placements of securities. Under this arrangement, ICB places securities to individuals/institutions on behalf of the issuer for which it charges fees. ICB also acquires shares/securities for its own portfolio both in pre-IPO placement and equity investment.

2. Custodian and Banker to the issues

To act as the custodian to the public issue of open-end & closed-end mutual funds, ICB provides professional services. It also acts as banker to the issues and provides similar services through the network of its branches. Fees in this regard are negotiable.

3. Venture Capital Financing

As part of business diversification and to encourage rapid industrialization of non-traditional, risky but potential industries in the country ICB has launched Venture Capital Financing Scheme during the year.

4. Lease Financing

ICB Provides lease finance mainly for procurement of industrial machinery, equipment and transport. ICB provides professional advice and financial assistance to the intending clients. The period of lease, rental, charges, and other terms and conditions are determined on the basis of type of assets and the extent of assistance required by the applicants. Since introduction of this scheme in 1999, good responses have been received from the intending lessees.

5. Consumer Credit Scheme

As part of business diversification programme, ICB has introduced “Consumers Credit Scheme” in 2003-04 considering at the need of various household commodities of different employees of govt., semi-govt., autonomous bodies and some established private sector organizations. Under this scheme one can enjoy minimum Tk 1.0 lakh but maximum 5 lakh credit facilities. The rate of interest on the loan is reasonable and competitive which is fixed by the board of directors of ICB considering the bank rate and with the guidelines of Bangladesh Bank.

6. ICB Mutual Fund

It is a recognized principle that diversification of investment reduces risk. An individual may not have the time, expertise and resources to undertake such diversification. Here arises the advantage of a Mutual Fund. Mutual Funds pool the savings of a great number of investors and make investments in a wide array of securities. In Bangladesh ICB has pioneered Mutual Funds for the sake of investors and of the capital market. Mutual Funds are also known as close ended Mutual Funds. The issued capital of a Mutual Fund is limited, that is, a Mutual Fund offers a limited number of certificates for sale to the public. The amount of capital and the number of certificates of each Mutual Fund remains unchanged. ICB Mutual Funds are independent of one another. A Mutual Fund being listed is traded on the Stock Exchanges. Price of Mutual Fund certificates after IPO is determined on the Stock Exchanges through interaction of supply and demand. The market price of a Mutual Fund certificates is available in Stock exchange quotations and in newspapers.

7. Investors Scheme

The Investors’ Scheme was introduced in 1977 with the objective of broadening the base of equity investment through mobilizing savings of small and medium size savers for investment in the securities market. In addition to Head Office, Investment Accounts are also operated at the 7 branch offices of ICB located at Dhaka, Chittagong, Rajshahi, Khulna, Barisal, Sylhet, and Bogra. However in view of strategic changes in policy reform, from 01 July 2002 ‘ICB Capital Management Ltd.’ started opening and managing investment accounts. ICB will continue to provide services to its existing accounts only. Further steps were undertaken to enhance the quality and speedy service under the scheme like computerization of all activities and installation of merchandizing operation management software. This enables the management to offer better and quick service to the investors including instant supply of the financial statement, portfolio, balance of the accounts, etc. Installation of telephone banking system in Investors’ Account enabling investors to collect information and operate their account over telephone was at the final stage of operations. Besides, installation of Electronic display system of DSE online trading on the floor of ICB was in progress.

8. Advance against Mutual Fund certificates Scheme

Advance against ICB Mutual Fund certificates Scheme was introduced in 2003, designed for the ICB Mutual Fund Certificate-holders to meet their emergency fund requirement. One can borrow maximum of 50% value of last one year’s weighted average market price of certificates at the time of borrowing by depositing his/her certificates under lien arrangement from any of the ICB offices. The rate of interest on the loan is reasonable and also competitive.

9. Advance against Unit Certificates Scheme

Advance against ICB Unit Certificates Scheme was introduced in 1998, especially designed for the ICB unit- holders to meet their emergency fund requirements. One can borrow maximum Tk. 85 per unit by depositing his/her unit certificates under lien arrangement from any of the ICB offices where from such unit certificates were issued. The rate of interest on the loan is reasonable and competitive.

10. Bank Guarantee scheme

ICB introduced Bank Guarantee scheme in 2002-03. ICB provides (i) Bid Bond for enabling the business people to participate in any tender or bidding; (ii) Performance Bond for helping the business community to continue their business smoothly by fulfilling their obligations promised by them to their clients; and (iii) Customs Guarantee for solving different disagreements between the customs authority and the business classes at the initial stage. The maximum limit of guarantee is Tk. 2.00 crore and would be issued against at least 20% cash and 80% easily en-cashable securities or against 100% cash margin. Re-guarantee from other financial institution is required for guarantee against the amount exceeding Tk. 2.00 crore.

11. ICB Unit Fund

Sponsored by the Government of Bangladesh, ICB Unit Fund was established on April 10, 1981. Its main objective is to mobilize savings through sale of its units to small investors and invest these funds in marketable securities. The schemes provides a potential source of equity and debt to industrial and commercial concerns and thus contribute to the industrial development of the country. Unit fund is an open ended Mutual Fund. It provides an opportunity to the unit holders to invest their funds in a well managed and diversified portfolio with a high degree of security of capital and reasonable yearly returns. However, under the ICB’s restructuring program new unit certificates are being sold by ICB’s subsidiary company, the ICB Asset Management Company Ltd.

12. Mergers and Acquisitions

Companies willing to expand their business through mergers or acquisitions or to divest projects that no longer viable into present capacity of operation can contact the Corporation. ICB provides professional services & advices in respect of shaping up the cost and financial structures to ensure best possible operational results. Besides, in case of divestment, the corporation, through network and established business relationship, bring buyers and sellers together, help them to negotiate final agreement and advice on the emerging corporate structure.

13. Corporate Financial Advice

Government enterprises and Companies intending to go public issue often seek professional & financial advice on corporate restructuring & reengineering. ICB through its expertise provide such services through its expertise.

14. Trustee to the debenture and Securities assets

ICB is acting as trustee to the debenture issues and asset-backed securitized bonds. ICB acted as trustee to the issues of 17 companies of which 7 companies have been redeemed successfully.

2.9 Functions of Different Departments

The functions of the various departments are given below:

Personnel Department:

  • Recruitment of officials and staffs.
  • Handling all personal matters including confirmation, posting, transfer, leaves etc.
  • Processing of all promotion and retirement
  • Dealing retirement benefits i,e gratuity, pension, provident fund etc.
  • Controlling of attendance.
  • Processing of Annual Confidential Report.
  • Maintaining all types of disciplinary action.
  • Arrange training for the employee both in home and abroad.
  • Maintaining liaison with ICB employees unions.

Secretary’s Department:

  • Arranging meeting of Board of Directors, Executive Committee and other Committee.
  • Placing working papers to the Board of Directors.
  • Maintaining attendance register of directors.
  • Obtaining signature of the chairman on the minutes book.
  • Collect and send any action needed to approve or implement.
  • Maintaining register of shareholders of the company.
  • Send minutes of the meeting to the Board and Government of Bangladesh.
  • Making payments of dividend to the shareholders.
  • Arranging Annual General Meeting.
  • Arrange transfer splitting of shares and issuance of duplicate certificates.

Investors Department:

  • Opening and maintenance of investors account
  • Sanction loans against deposit in investment accounts provide account loan margin at 1:2 ratio subject to ceiling of Tk. 3 Laces at a rate of interest of 13.5%
  • Buy and sell shares on behalf of the investors both from the primary & secondary market.
  • Counsel investors in respect of building up their portfolios.
  • Withdraw funds and shares from investment accounts.
  • Issue income tax certificates, portfolio statement accounts statement etc.
  • Receive direct applications against public issue of shares.
  • Receive allotment letters from the companies.
  • Collect commission as banker to the Issue and brokerage commission from the companies.
  • Processing of withdrawal of funds.
  • Calculate quarterly interest of all investors account.

Shares Department & Reconciliation cell:

To avoid complexity the function of the department is divided into four sections.

1. Funds Portfolio Section

2. Investors Portfolio Section

3. Sale and Withdrawal Section

4. Dividend Collection/Allocation Section

Funds Portfolio Section:

  • Receiving of IPO share, making arrangement of filling up of 117 forms and splitting up shares information market.
  • Receiving of securities from the securities from the companies after registration, splitting up and arrangement for safe preservation.
  • Receiving of sales order from the securities purchase & sale committee and providing information to the transaction department.
  • Delivering of sold securities to the transaction department.
  • Receiving of bonus and right share and allocates properly.

Investors Portfolio Section:

  • The purchase of shares in the investors accounts.
  • Receives shares from the transaction department for preservation
  • Send shares and debentures at the time of book closure for making registration in the name of the particular investors.
  • Receives shares and debentures from the companies after registration.
  • Collect bonus or right shares and allocate to accounts accordingly.

Sale and Withdrawal Section:

  • Receive sale and withdrawal order from the investors department
  • Examine the actual existence of securities and to get out of the same from the volt
  • Give information to the computer department about salability of the securities
  • Making arrangement for the signature of attorney & filling up of 117 form
  • Send the securities to the investors department in case of withdrawal

Dividend Collection Section:

  • Procurement of dividend and interest declared by the different companies
  • Update the statements related to book closure, AGM, rate of dividend, rate of bonus/right share.
  • Collect dividend and interest
  • Distribute dividend and interest among the investors account and different portfolios.

Unit Sales Department:

  • Act as manager of unit fund
  • Sell and issue unit certificate to the applicants
  • Repurchase unit certificate
  • Co-ordinate activities of Bank Branches in respect of unit sale and repurchase
  • Determine sale and repurchase prices of unit certificate it to Bank Branches and ICB Branches.
  • Split and consolidate unit certificates as requested by unit holders.
  • Issues and distribute Cumulative Investment Plan (CIP) certificates.

Unit registration and procurement department:

  • Register and transfer unit certificates.
  • Maintain separate register for unit holder CIP
  • Verify signature of transfer deed
  • Issuance dividend warrants and CIP certificates to the holders.
  • Evolve various prescribe forms and registers, print them and distribute them among ICB Branches and Bank Branches as per requirement.
  • Co-ordinate all activities relating to procurement and issue of unit certificates.

Mutual Funds Department:

  • Act as manager of all mutual funds
  • Prepare prospectus in connection with the floatation of mutual funds
  • Receive applications from the general public in respect of new issues of mutual fund
  • Scrutinize the applications for allotment of shares against applications made
  • Arrange for lottery if necessary for allotment
  • Issue allotment letters/share certificates.
  • Arrange refund of excess application money.
  • Effect transfer and registration of certificates.
  • Issue dividend warrants to the holders of the certificates
  • Make correspondences with the branches of the Corporation, Banks and Certificate holders.

Central Accounts Department:

  • Identify the source of fund and manages funds of the Corporation
  • Preparation of salary statements, overtime statements.
  • Maintaining liaison with commercial audit and external audit
  • Preparation of annual budget and revise it as per requirement
  • Preparation of financial statement of the corporation
  • Arranging call loan & term deposit.

Loan Appraisal Department:

  • Receiving application from the entrepreneurs
  • Appraise the proposed project
  • Submit the appraisal report to the board and consortium
  • Visit the project and make a feasibility study on the proposed project.

Project Implementation Department:

  • Disbursement of loan as per sanctioned
  • Monitor the progress of the project
  • Provide counseling for solution of any dispute and problems
  • Recommend for more loan if project need thereafter

Recovery & Follow-up Department:

  • Measures operational performance
  • Meet the sponsors as the recovery would be smooth
  • Identifying the sick project and restructure them
  • Assist law department in case of default

Project loan Accounts Department:

  • Maintaining loan ledger, calculate interest and making repayment schedule
  • Making adjustment of accounts in case of interest wave as per authority decided
  • Adjustment of accounts as per recovery
  • Making interest suspense account.

Public Issue Department:

  • Analyzing financial statements of sponsor and projects
  • Assistance to prepare prospectus
  • Arrange the legal permission of different authorities for floatation
  • Collecting No object certificate from main banker.
  • Collect IPO Proceedings as Banker to the Issue

Economic & Business Research Department; MIS Cell:

  • Sales and purchase of holding of Ten (10) Portfolios.
  • Consider market trend and related companies position to take necessary steps to diversify portfolio risk.
  • It fixes budget for branches and department in the shadow of overall budget, analyze their performance and finalize consolidated EBR report to the management.
  • Finalize annual report of ICB and Fund subject to the approval of the Board.
  • Prepare five year performance appraisal reports of the listed companies.
  • Prepare MIS report that contains updated business and administrative performance.
  • Convey EBR’s decision directly or through computers department to the necessary department.
  • Prepare Board memo regarding declaration of dividends on ICB’s own portfolio, unit and mutual funds.
  • Analysis securities and categorize them.
  • Maintain information related to DSE, dividend/right/bonus declared by different companies’ public issue half yearly accounts of listed companies etc.
  • Maintain liaison with Ministry of Finance, Bangladesh Bank, and Foreign Investors and provide ICB related information to interest parties.
  • Arrange of offloading of government portion of shares in different companies and public corporations as per privatization decision.


A project is a temporary endeavor, having a defined beginning and end (usually constrained by date), undertaken to meet particular goals and objectives, usually to bring about beneficial change or added value. Unique means that the product or service created by the project is in some distinguishing way from all similar products or services. According to Gittinger a project is “The whole complex of activities involved in using resources to gain benefits.”

Differently a project can be defined as any scheme or part of scheme for investing resources which can reasonably be analyzed and evaluated (on the basis cost and benefit) as an independent unit. The term “PROJECT” can be broken-down like P-Product, R-Resources, O-Organization, J-Judgment, E-Economic, C-Commercial and T-Time bound.


Projects can be divided into two types:

a. Quantifiable Projects:

Quantifiable projects are those in which a plausible quantitative assessment of benefits can be made. Projects like industrial development, agricultural development, power generation etc. fall in this category.

b. NonQuantifiable Projects :

Non-Quantifiable Projects are those where such an assessment is not possible. Projects involving health, education, defense etc. fall in this category.

Projects can again be divided as:

a. New Project:

A new project is the one, which is undertaken to create a unique service or product distinguishable from any other existing project.

b. BMRE:

The abbreviation BMRE refers to Balancing, Modernisation, Renovation and Expansion activities. Generally sick industries go under such activities to improve their performances.

Bangladesh Planning Commission however, has classified projects under the following three categories:

Category “X”: Self financing projects i.e. projects which will earn revenue through the sale of their output.

Category “Y”: Productive but non-revenue earning projects i.e. projects which will give rise to tangible output, benefits of which do not accrue directly to the projects themselves but to other parties.

Category “Z”: Service sector projects i.e. projects which do not give rise to tangible output but provide service benefits to the community.


Project finance is the long term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of the project sponsors. Usually, a project financing structure involves a number of equity investors, known as sponsors, as well as a syndicate of banks that provide loans to the operation.

Project Financing is different from traditional forms of finance because the financier principally looks to the assets and revenue of the project in order to secure and service the loan. In contrast to an ordinary borrowing situation, in a project financing the financier usually has little or no recourse to the non-project assets of the borrower or the sponsors of the project. In this situation, the credit risk associated with the borrower is not as important as in an ordinary loan transaction; what is most important is the identification, analysis, allocation and management of every risk associated with the project. Thus, understanding the rationale for project financing, how to prepare the financial plan, assess the risks, design the financing mix, and raise the funds are the main disciplines of project financing. In addition, one must understand the cogent analyses of why some project financing plans have succeeded while others have failed.

The major participants of a project are:

· Sponsor

· Project Vehicle (The newly organized firm)

· Construction Contractor

· Lender

· Insurance Providers

· Off-takers

· Third-Party Operator

· Resource Suppliers

· Government


Project Appraisal is a formal assessment of the viability of a proposed undertaking and the robustness and predictability of revenue generation. It involves critically examining an investment project with a view to determining its market, technical and financial feasibility, economic viability and social desirability before funding. The term “Project Evaluation” is used in ex-post assessment of the performance of a funded project.

Effective project appraisal offers significant benefits. A good appraisal justifies spending money on a project. It is an important tool in decision making and lays the foundation for delivery and evaluation.


A project proposal should be evaluated taking into account the following aspects:

Technical Aspects
Financial Aspects
Economic Aspects
Ecological Aspects
Managerial Aspects
Potential Market
Market Share
Technical Viability
Sensible Choices
Market/Commercial Aspects
Benefits and Costs in Shadow Prices
Other Impacts
Environmental Damage
Restoration Measures
Organizational Structure
Control over Management
Competency of Management


S. Alam Power Generation Ltd. was established in April 09, 2009 as a private limited company under the company’s Act 1994. It is a concern of S. Alam Group. The company was formed to take an opportune decision to ensure power supply to the industrial production area of the country. The authorized capital of the company is Tk. 100.00 crore and paid-up capital of the company is Tk. 20 lakhs. The corporate office of the company is located in Asadgonj, Chittagong. It generates an annual turnover of Tk. 18 million and the current manpower of the company is 84.

The company was established to cater the the power need of S. Alam Cold Rolled Steels Limited for 15 years which is a sister concern of S. Alam Group. The project is located at Ichanagar, Banglabazar, Chittagong. It produces a heavy fuel oil (Furnace Oil) and is estimated to produce 15 MW/hr of electrical energy output, of which the power need of 8 MW/hr of S. Alam Cold Rolled Steels Limited will be fulfilled and the balance will be sold to REB (rural electrification board). The estimated total project cost by the company was Tk. 145.94 crore of which 87.00 crore was to be financed through debenture issue, 0.44 crore was to be financed by directors’ loan and the rest was to be financed through equity. The above debt financing was envisaged to accommodate by issuing a 13.50% redeemable, non-convertible, non-cumulative, non-participative debenture worth of Tk. 87 Crore, which was likely to be mainly subscribed by the Investment Corporation of Bangladesh (ICB) and other institutions under the leadership of ICB. The debenture would have been redeemable in 10 semiannual equal installments having a moratorium period of 1year. The debenture was to be secured by the way of creating first charge over the project land, plant to the equivalent amount of debenture value.


1. Name of the Company: S. ALAM POWER GENERATION LTD.
2. Location of the Project: The project will be located at Ichanagar, Banglabazar, Chittagong (The project site is enjoying every facility like electricity, gas, water, skilled labor and good road communication.)
4. Brief Description of the Project: The proposed project will set up a 15 MW/hr Thermal Power Plant (Based Load Type, Furnace Oil)
5. Type of the Project: A Private Limited Company
6. Capital Structure of the company:

Date of Registration with Register of Joint Stock Company 09/04/2009
Registration number CH-6951 (297) of 2009
Authorized Capital Tk. 100.00 Crore
Paid-up Capital Tk. 20 Lakhs
Number of Outstanding Shares 20,000
Face Value of Share Tk. 100.00
7. Product Mix and Production Capacity:

Daily Shift 3
Duration of each shift 8 hrs
Working Days in a Year 330 days
Name of the product Electricity
Annual Production Capacity 15 MW
8. Investment : The cost of the project is estimated at Tk 145.94 crore. Project will be set up by sponsor’s contribution and debt raised through bank loan.

Appraisal Report of

S. Alam Power Generation Ltd. (as appraised by ICB)

The assigned topic of this report is the evaluation of the appraisal procedure of ICB. For describing the whole procedure, an appraisal report as appraised by ICB has been taken for evaluation and description. As a case study, the case of debenture financing by ICB for S. Alam Power Generation Limited has been considered. For evaluating this report at first the appraisal report summary of the company is presented in this section.


When a project proposal is submitted, generally ICB follows the steps below for evaluating the project:

1. Application for financial assistance should be placed to the Project Appraisal Committee (PAC) of ICB with the required information as below:

I. The project profile need to be submitted

II. In case of existing company, audited financial statement for the last 3 years need to be submitted with application for assistance;

III. The audited financial statements/information/TIN related information of the subsidiary companies of the concerned company need to be submitted;

IV. The national ID card, individual wealth statement, bank account related information and income tax statement of the directors of the company need to be submitted;

V. Other information should be submitted by the company upon request by ICB;

2. If the project proposal seems to be satisfactory by the ICB’s management, then the concerned company is asked to apply in the prescribed form of ICB for financial assistance with project examination fee of minimum of Tk. 50,000;

3. Information from different banks and other financial institutions about financial strength and transaction activities of the company will be collected by ICB;

4. ICB will visit the project and a project visit report will be provided to the committee;

5. Based on the collected information, visit report, sound CIB report and acceptable credit rating report, the project appraisal report will be made by ICB by estimating project cost from information related to the project;

6. Memorandum is prepared for the project appraisal committee/managing director/ directors of the company’

7. The project appraisal report with the memorandum is presented to the project appraisal committee;

8. The recommended project by the project appraisal committee is submitted to the General Manager/Managering director/ICB execution committee/ ICB Board of Directors according to the financing size of the project and then the project evaluation report is finalized;

9. If the project proposal is granted by the Board of Directors, the company will be provided with Sanction Letter.

The Subject Company for this Assignment is M/S. S. Alam Power Generation Limited, the above stated steps have been followed, which are discussed one by one in the following paragraphs.

5.2 Financial Statements

As per the application of the company for financial assistance through debenture financing mode of Tk. 87 crore, ICB evaluated the project proposal from different aspects. For getting started with the evaluation process, the first requirement is to submit the audited financial statement of the concerned company for the last 3 years. But the company is a new venture and accordingly ICB considered the performance of its main customer S. Alam Cold Rolled Steels Ltd. as the performance of the company will depend upon its customer’s sound financial position.

Financial Statement

S. Alam Cold Rolled Steels Ltd.

(In thousands)
Particulars 2008 2007
Fixed Assets( After depreciation) 1,381,375 1,437,114
Investment 4227 6341
Preliminary Expenses 149 298
Total Fixed Assets 1,385,751 1,443,753
Net Current Assets 261,347 185,881
Total 1,647,098 1,629,634
less: Deferred Income Tax 106,032 70,004
Total Assets 1,541,066 1,559,630
Liabilities and Equity
Shareholders’ Equity:
Paid-up Capital 533,448 533,448
Retained Earnings 52,524 21,252
Total equity and reserve 585,972 554,700
Long term Liabilities:
Loan from Bank 800,100 788,289
Loan from subsidiary companies 154,994 216,641
Total Liabilities 955,094 1,004,930
Total liabilities and Equity 1,541,066 1,559,630
Income Statement

S. Alam Cold Rolled Steels Ltd.

(In thousands)
Particulars 2008 2007
Turnover 1,508,149 1,339,096
Profit After Tax 1,121,959 715,689
Price per share 22.87 13.42

5.3 Organizational Structure:

The next requirement is providing with personal information related to the board of directors and their share holding patterns.

Board of Directors & their Shareholdings

The name of the shareholders and their designation are provided below:

Sl. No. Names of Board of Directors Status Share Holding (No. of Shares) Share Holding (%)
1. Alhaz Md. Saiful Alam Chairman 4000 20%
2. Alhaz Md. Abdus Samad Managing Director 2000 10%
3. S. Alam Cold Rolled Steels Ltd.

Represented hereto by

Alhaz Md. Shahidul Alam

Director 14,000 70%
Total 20,000 100%

Directors Profile

1. Alhaz Md. Saiful Alam Mr. Alhaz Md. Saiful Alam is the chairman of the company. He is a graduate of science by education. He is 45 years old and he is the founder of S. Alam group. S. Alam group is one of the renowned groups of our country. The company has been contributing in the industrialization, foreign remittance and production of import substitute products. He has succeeded in establishing a number of industries in a short period of time. Apart from these, he has been actively associated with social and humanitarian organization for establishing schools, colleges and Madrasa in the country.
2. Alhaz Md. Abdus Samad Mr. Alhaz Md. Abdus Samad is the Managing Director of the company. He is a graduate of Business Administration by education. He is currently 37 years old. He is in a responsible position in the finance department of S. Alam Group.

5.4 Project Cost and Means of Finance:

Company’s estimate of project cost Tk. 145.94 Crore
ICB’s estimate of project cost Tk. 132.82 Crore
Fixed Cost Tk. 131.14 Crore
Net Working Capital Tk.1.68 Crore

There is a difference in the estimation of project cost by the company and by ICB. The project cost has reduced in total by Tk. 13.12 crore in ICB’s estimate compared to the company. The difference can be attributed to the reduction and addition of excess expenditures as per ICB’s consideration based on the layout and design provided by the company and quotation of costs for estimating project costs.

5.5 Technical Analysis:

a) Land and land development of the project:

Location of Project S. Alam Power Generation Ltd.; Ichanagar, Banglabazar, Chittagong.
Total Land Total land amount of the project is 50 decimals.
Infrastructural Facilities The project site is enjoying every facility like electricity, gas, water, skilled labor and good road communication.
ICB’s estimation of cost of land Tk. 2.00 Crore

b) Building and other Civil Works:

Quantity of Total Civil Works 37,000 Sq. Ft
Description of Civil Work Plant shade, office room, guard room, generator room etc. Will be constructed in the project location. Also, overhead tank, boundary walls and internal roads and passages will be constructed.
Company’s estimation of cost Tk. 8.06 Crore
ICB’s estimation of cost Tk. 2.61 Crore

c) Machineries:

Description of Machineries For the proposed project, reconditioned machineries will be imported from South Korea. The main imported machineries will be oil engine, boiler machine, steam turbine, substation, switch board etc.
Company’s estimation of cost Tk. 114.58 Crore
ICB’s estimation of cost Tk. 114.58 Crore

d) Local Machineries:

Description of Machineries Deep tube-well , firefighting equipment, diesel generator, sub-station, air conditioning system, electric cable etc.
Company’s estimation of cost Tk. 2.57 Crore
ICB’s estimation of cost Tk. 2.43 Crore

e) Other Facilities:

Electricity: The proposed project will obtain power connection from REB 11 KV High Tension Line. Apart from these, to meet up emergency power need, a generator of 200 KVA power will be obtained too.

Water: The water requirement of the project will be met from the river & projects own deep-tubewell provisions.

Gas: There is gas connection adjacent to the project.

Production Process of Electricity:

Sensitivity Analysis:

It has been observed that the profitability of the projct experiences negative effect if the production cost of is increased by 10% and the sales price is decreased by 10%. However, reduction is sales price has much more effect in prfitability of the project. The details of the sensitivity analysis has been enclosed in the report.

5.6 Financial Analysis:

The financial operational activity of the company has been decided based upon the information provided by the company. The estimated profit and loss statement, cash flow statement and balance sheet, breakeven point analysis, internal rate of return, payback period and debt service coverage ratios are shown in the annexure of the report. The 5 years statement with other information and estimated ratios of the company are shown below:

S. Alam Power Generation Ltd.

Financial Statement

(Tk. in Thousands)
Particulars Year-1 Year-2 Year-3 Year-4 Year-5
Capacity Utilization 90% 90% 90% 90% 90%
Sales 892652