Investor Presentaiton

ANNUAL REPORT 2018-2019 Notes to the Financial Statements For the year ended 30 June 2019 102 1 Reporting entity 1.1 Company profile Notes to the Financial Statements ANNUAL REPORT 2018-2019 1.4 Extension of Contract for Supply of Electricity on Rental Basis for KPCL-II and KPCL-III After successful completion of 5 years of Contract for Supply of Electricity on Rental Basis, KPCL-II and KPCL-III were awarded extension for further 5 years starting from 1 June 2016 and 29 May 2016 respectively which were signed on 27 December 2016. Khulna Power Company Ltd. ("the Company") was incorporated in Bangladesh on 15 October 1997 as a private limited company under the Companies Act 1994 and has subsequently been converted into a public limited company on 19 July 2009. The plant came into operation on 13 October 1998 for 15 years and after successful completion of that tenor the Company was awarded extension for another 5 years starting from 12 October 2013. The address of the company's registered office is Landmark, 3rd floor, 12-14 Gulshan North C/A, Gulshan-2, Dhaka-1212, Bangladesh. On 18 April 2010, the Company listed its shares with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. The authorised capital of the company is BDT 7,000,000,000 divided into 500,000,000 ordinary shares of BDT 10 each and 2,000,000 redeemable preference shares of BDT 1,000 each. Out of 2,000,000 redeemable preference shares, 1,100,000 were issued and fully paid up. These were redeemed on 14 May 2014. In 2010, the company took majority interest in two companies named Khulna Power Company Unit II Ltd. (KPCL-II) and Khanjahan Ali Power Company Ltd. (KPCL-III). Both companies were amalgamated with Khulna Power Company Ltd. with effect from 30 September 2014 pursuant to a Scheme of Amalgamation approved by the Honourable High Court Division of Bangladesh Supreme Court on 22 March 2015. 1.2 Nature of business 1.3 The principal activity of the Company is to generate electricity, to sell such generated electricity to Bangladesh Power Development Board (BPDB) and to acquire fuel required for such electricity generation from home and abroad. For this purpose, the Company has set up a nominally rated 110 MW (KPCL-I) liquid fuel-fired, convertible to dual fuel-fired (liquid gas), barge mounted power plant in Khulna, Bangladesh. Since inception the Company has been supplying electricity to the national grid of Bangladesh through selling the same to BPDB under Power Purchase Agreement (PPA) between the Company and BPDB. The Company has two other units, KPCL-II and KPCL-III, which were awarded two separate contracts by BPDB to supply electricity under the Contract for Supply of Electricity on Rental Basis. KPCL-II and KPCL-III have set up the nominally rated 115 MW and 40 MW liquid fuel-fired, rental power plant respectively in Khulna and Jessore, Bangladesh for generation of electricity. The principal activity of the units is to supply electric power and energy to BPDB on rental basis for a period of five years (extended for further five years as explained in note 1.4). KPCL-II commenced commercial operation from 1 June 2011 and KPCL-III from 29 May 2011. Amalgamation of Khulna Power Company Unit II Ltd. and Khanjahan Ali Power Company Ltd. On 22 March 2015, the Honourable High Court Division of the Supreme Court of Bangladesh issued an order giving effect to a Scheme of Amalgamation under Company Matter No. 322 of 2014. The High Court ordered that under the amalgamation scheme, the entire undertaking of Khulna Power Company Unit II Ltd. and Khanjahan Ali Power Company Ltd. (the transferor companies) as going concerns will be transferred to and vested in the Khulna Power Company Ltd. (the transferee company) with an effective date of 30 September 2014. Accordingly both subsidiaries, Khulna Power Company Unit II Ltd. (KPCL-II) and Khanjahan Ali Power Company Ltd. (KPCL-III), have been merged with Khulna Power Company Ltd. with the sanction of the Honourable High Court Division of the Supreme Court of Bangladesh in terms of an application submitted by both the transferor and transferee companies as per Section 228 read with Section 229 of the Companies Act, 1994. Though the Scheme of Amalgamation became effective from 2 April 2015, the day of the certified copy of the court order was submitted to the Registrar of Joint Stock Companies (RJSC), Dhaka, Bangladesh, and both Khulna Power Company Unit II Ltd. and Khanjahan Ali Power Company Ltd. ceased to exist since then, for financial reporting purposes the recording of all transactions on an amalgamated basis is effective from 30 September 2014. 2 Basis of accounting 2.1 Statement of compliance 2.2 2.3 The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSS) as issued by International Accounting Standards Board (IASB) and adopted by The Institute of Chartered Accountants of Bangladesh (ICAB) vide letter no 1/1/ICAB-2017 dated 14 December 2017, Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations. Details of the Company's accounting policies are included in Note 39. Authorisation for issue The financial statements were authorised for issue by the Board of Directors on 23 October 2019. Functional and presentational currency and level of precision The financial statements have been presented in Bangladesh Taka (BDT), which is the Company's functional currency. All amounts have been rounded to the nearest integer, unless otherwise indicated. 2.4 Reporting period The current financial period of the Company covers one year from 1 July 2018 to 30 June 2019 and it is followed consistently. Use of estimates and judgments 3 In preparing the financial statements, management has applied judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties at 30 June 2019 that have a significant risk of resulting in a material adjustment in the year ended 30 June 2020 is included in the following notes: Note 4 and 39C Note 6 and 39B Note 14 and 39K Note 15 and 39J Note 13,19, 27 and 39G Note 35 and 390 Property, plant and equipment Inventories Employee benefits Asset retirement obligation (ARO) Provision for income tax Contingencies and commitments 103

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