Financial Performance Analysis of United Ashuganj Energy Limited

Abstract

For the economic development of a country, electricity plays a vital role. United Power as a whole is playing a significant role in economic development through its production of electricity which is ultimately consumed in the national grid. I discussed the financial performance of an independent power-producing company in this project. Here calculated growth rates, some key financial ratios, and trends during the previous five years covering from 2018 to 2022 which are needed for the identification of a company’s problem areas and potential is included. Different analyses like- ratio analysis, vertical analysis, horizontal analysis, and DuPont analysis were done for an in-depth assessment of the company’s performance. UAEL revenue is secured by its 15 years of Power Purchase Agreement (PPA) with BPDB which effects ultimately the overall sustainable & satisfactory growth. But the revenue is declined over the years due to BPDB’s electricity demand declining & less tariff rate as per the agreement. Revenue decline impacts negatively both working capital turnover and total asset turnover which is fully co-related with revenue to measure. UAEL current & quick ratio increased over time but due to the early settlement of the int’l loan it decreased in 2020 & 2021. On the other hand, the company’s trade receivable days outstanding from BPDB are increased & inventory holding days also increased which is not good for UAEL. Gross and net profit margins both increased over the years but this affects massively foreign exchange loss due to the higher fluctuation rate of USD. The company could raise its profit margin which affects retained earnings that decreased the financial leverage ratio, a good indicator for the company. Its liquidity ratio & cash position are quite good enough; already paid off its int’l loan outstanding without taking any bank loan which makes down the loan outstanding and also could avoid more foreign exchange loss which eventually secures a good cash balance. Return on Equity decreased a little bit over the years but the company’s EPS increased meticulously and paid a dividend to its shareholders very consistently.