SUMMIT POWER INTERNATIONAL–Powering Bangladesh’s Economic Growth
Time | VOL. 194, NO. 26 I 2019
The Bangladesh Economic Zones Authority (BEZA), for example, plans for the development of 59 economic zones (EZs) with a combined power capacity load requirement of 9,560 megawatts. According to the World Bank in its most recent Bangladesh Development Update, overall electricity demand is expected to grow to 34 gigawatts by 2030, more than double the country’s current installed capacity.
One company that will undoubtedly be playing its part in meeting this demand is Summit Power International (SPI) through its subsidiary Summit Corporation in Bangladesh.
Incorporated in Singapore and responsible for the development of Bangladesh’s first independent power plant back in 1997, the company is the largest Independent Power Producer (IPP) in the country. It owns majority stakes in 17 power plants across Bangladesh and is responsible for approximately 21% of Bangladesh’s total private installed capacity and 10% of the country’s entire installed capacity.
Summit’s pivotal contribution to Bangladesh’s power generation and importing energy capacity owes an enormous debt to the vision and determination of its chairman and founder Muhammed Aziz Khan, who originally started his commercial career in the import/export trade. By the 1990s, he had moved into the large-scale import of chemicals and export of molasses, the latter destined for use in cattle feed by European farmers. And because he was also responsible for the storage and transportation of these products, he decided it would be logical to move into warehousing as well. But there was a problem.
“There wasn’t enough electricity,” Khan recalls, “and this was a big issue with molasses, which solidifies at lower temperatures. I would pay to charter a ship and it would be waiting in port, but there would be no electricity for heating.”
In a classic example of lateral thinking, Khan turned the problem on its head and offered to build a power plant for the port that would make it operational around the clock, rather than having to shut down for up to eight hours a day. The government agreed, and in 1996 introduced its Private Sector Generation Policy, thereby creating the requisite regulatory environment for the project to get off the ground. Powered by nineteen 18V32 engines supplied by Wärtsilä Finland (Khan is Finland’s honorary consul general in Bangladesh) the Khulna power plant has been operational ever since.
The Summit chairman has not looked back since. “I realized that I liked building infrastructure and that it was a real blessing to be involved in a business that I enjoyed,” says Khan. “It is also a really big business. We presently have about $2 billion invested in Bangladesh and it is difficult to invest that kind of money in, for example, the garment industry. Although it does not create the same levels of direct employment, what we do underpins the creation of employment elsewhere. We support all of Bangladesh’s government-backed and service industries, not to mention the education and healthcare sectors.”
However, the bigger the business the bigger the risk, and Khan and his team have spent the past 15 years accumulating the technological and financial expertise required to keep that risk to the bare minimum. “We hire well-educated engineers and then give them on-site training,” says Khan. But, according to the chairman, what’s more of a challenge is finding senior managers with the range of skills needed to run a company as complex as SPI. In response, the company has invested a great deal of effort developing the company’s financial and commercial teams. “We have had to raise significant capital over the past 15 years with the help of a whole array of financial institutions and corporations, and that is where the challenge will continue to be,” he predicts. “We must be able to fund developments which, once complete, will provide affordable power.”
A key to the company’s success has been Khan’s ability to reach out to other industry practitioners around the world. Today Summit counts JERA, Mitsubishi, IFC and GE among its long-standing partners, along with Wärtsilä, and each has helped Summit broaden its employees’ technical skill sets. “Strength certainly does come from experience,” he says. “The longer you work with a technology provider, the better you understand their technology. It takes time for two enterprises to fully understand each other, and our partnerships have developed over the years.”
As a socially responsible organization, these partnerships have also enabled Summit to adopt the cutting-edge, environmentally friendly technologies that are simply not being developed at home in Bangladesh. “If you are more efficient in your electricity generation, you produce less carbon dioxide,” Khan explains, “and if you distribute power properly, you waste less. These technologies are very important to us.”
From Summit’s perspective, there is another very good reason to partner with blue-chip multinationals, and that is the access to more competitive rates of funding such alliances bring with them. This is a significant issue when, like Summit, the sums involved run into the billions of dollars. Rather than being obliged to borrow against Bangladesh’s BBrating, the company is able to secure the same loan interest rates enjoyed by companies registered in countries with AAA ratings.
Access to lower-cost investment was also partially behind Khan’s decision to incorporate the company in Singapore four years ago. Of the estimated $530 million it is going to cost to build the Meghnaghat II, a combined cycle gas turbine dual-fuel 590 megawatt plant currently under construction outside Dhaka, for instance, $300 million has been guaranteed by SERV, the Swiss export credit agency. IFC of the World Bank group has been a reliable provider of the funds, perhaps with the highest exposure to a single company. It has proved to be a winning formula. Summit’s consolidated revenues total $546 million and its installed capacity 1,941 megawatts and rising, with several new projects expected to come on stream over the next few years. Summit’s recently completed floating storage and regasification unit (FSRU) at Moheshkhali near Cox’s Bazar is able to store 138,000 cubic meters of liquefied natural gas (LNG) and has regasification capacity of 500 million cubic feet per day (mmcfd).
“THE GOVERNMENT IS LOOKING TO IMPORT LNG, WHICH IT EXPECTS TO PLAY AN IMPORTANT PART IN FULFILLING THE DEMAND FOR ELECTRICITY,”
Khan says. “And although this is currently our only FSRU project, it plays to our strengths. At the end of the day, our job is to deliver electricity.” With this in mind, Summit has agreed to receive investment from JERA, the joint venture company set up in 2015 by the Tokyo and Chubu Electric Power Companies to give Summit access to cutting-edge LNG containing technology.
Looking to the future, there are even more ambitious plans to develop a 3,600-megawatt complex and an on-shore LNG regasification project for the proposed deep-sea port at Matarbari in Moheshkhali. Backed by a $3 billion investment from a combination of JERA, Mitsubishi and GE, this will represent the largest private foreign direct investment ever secured by a Bangladeshi company.
The fact that JERA, Mitsubishi, GE and others are prepared to put their financial muscle behind such a project is a testament to their confidence in Summit to deliver at cost and on time. That faith will have been reinforced last year when the company completed two Heavy Fuel Oil (HFO) plants at Gazipur (40 kilometers north of Dhaka) in under nine months. The second of these two installations was named the “Fast-Track Power Plant of the Year” at last year’s Asian Power Awards, while also helping Summit secure the “Best Private Power Generation Company Award” at Power & Energy Week 2018, with Prime Minister Sheikh Hasina doing the honors.
Not content with being the main privatesector force behind Bangladesh’s vital energy infrastructure, Khan and his colleagues now have their sights set on the country’s connectivity -- or, more accurately, the lack of it. Khan is not only determined to see electricity installed in every household in the country, he also wants Summit to see to it that they are equipped with fiber-optic facilities. “If we can leapfrog from 3G directly to 5G, we can kickstart Bangladesh’s knowledge-based industry and overtake most of our neighbors, many African countries and even large parts of the U.S.,” he says. Summit is already responsible for 60% of all Bangladesh’s telecommunication and internet infrastructure, and it is a source of great personal satisfaction to Khan that his company is giving so many of his fellow citizens the opportunity to learn.
Summit Power International is as deeply embedded in the future of Bangladesh as the infrastructure it provides. That is good news for both country and company. “Bangladesh is just taking off,” Khan says, “and there is no country that can give you the certainty of income that Bangladesh can. In the field of infrastructure there are so many things to do.” And so many opportunities for the right partner.