Another spell of regulatory adversity is here to hurt the profits of Titas Gas Transmission and Distribution Company.
The Bangladesh Energy Regulatory Commission (BERC) has recently reduced the charge Titas enjoys against distributing per cubic metre gas to its clients to Tk0.13 from Tk0.25, ignoring the company's plea for raising the rate near to the previous weighted average level of Tk0.55 per cubic metre.
On the other hand, the charge against the bulk gas transmission Titas and other companies make through their wider pipelines has been increased to Tk0.4778 per cubic metre from the previous rate of Tk0.4235 the BERC set in mid-2019.
Analysts say the increased transmission charge would barely benefit Titas as its transmission business is virtually nothing compared to its distribution business right now.
The almost halved distribution charge would eat up a significant portion of Titas' gross and net profits away.
According to the company's FY21 financial statement, 96.2% of its gross revenue came from gas sales, while transmission made 0.11% of the gross revenue and 3.69% revenue came from other operational activities.
Despite a lack of clear reporting of how much the company earned from distribution charges, it is apparent that the narrow distribution margin of Tk0.25 per cubic metre made a significant portion of its FY21 gross profits amounting to Tk678 crore.
Titas Managing Director Md Haronur Rashid Mullah did not respond to phone calls or SMS for a comment.
However, one of the company's senior officials told The Business Standard that this is a fresh blow to Titas as its profitability is in decline only because of the gradually narrowing distribution margin.
Once, the company used to earn a weighted average of Tk0.55 per cubic metre gas distribution to various types of clients and the BERC kept lowering it, depriving the publicly traded state-owned energy company of a decent margin which is essential for its financial strength and shareholders' interest.
Titas entered the stock market in 2008 and investors warmly welcomed it paying good prices against each share.
A protected market, fixed profit margin and decent cash dividends each year made Titas lucrative to foreign investors too.
But in the middle of the last decade, the BERC began lowering the approved charges for Titas which analysts and experts barely found justified.
Foreign shareholders immediately responded through selling off Titas shares in the bourses of Dhaka and Chattogram and their confidence on listed state-owned enterprises is yet to restore.
Titas Gas stock closed at Tk43.9 on Tuesday in the Dhaka Stock Exchange, which bottomed at below Tk30 in early 2020 and once peaked at over Tk127 in 2010.