Midterm review finds DHI companies performing significantly better from last year

Druk Holdings and Investment (DHI) completed a midterm review of its subsidiary companies this week which shows significant performance improvements in a majority of the companies.

The midterm review is conducted to take stock of achievements of company targets set out in the Compacts (Performance Agreements) signed at the start of every year and revisits targets of ten DHI owned companies and Bank of Bhutan to initiate discussions on challenges and whether deadlines need extension.

The targets of the midterm review is taken as half of the annual target unless specified. The targets stated hereunder are all half yearly, the increment or decrement is with comparison to results of 2015’s midterm review and achievements are as of June this year.

 

Bhutan Telecom Limited (BTL)

Bhutan Telecom has already surpassed all of its half yearly targets. The company generated 1.4 billion against the target of 1.3 billion which is an increase of 12% from the same period last year. Profitability is up by 74%, increase in return on equity has crossed 60% and, at the same time, containable costs have been driven down by 6%.

 

Druk Green Power Corporation (DGPC)

All important targets of DGPC are dependent on hydrological conditions and so two main parameters are monitored. For the lean seasons from January to May, November and December water utilization factor is monitored while the availability of power plants to use the increased water supply is monitored for June to October, the rainfall peak months. Availability and utilization targets were set at 98%, the same as last year. Availability so far has been almost perfect at 99.8% as was water utilization factor which was at 99.96%. These are miles above the industry average in our region.

The numbers show that DGPC has operated at maximum capacity but there was a drop in revenue by about 17%. This has been attributed mainly to the drier first half of the year that resulted in a decrease in generation and, hence, decrease in export sales. So far 1096 million units have been exported. The figures are expected to increase in the latter half of the year due to the ongoing monsoon.

 

Bhutan Power Corporation (BPC)

Due to a decrease in generation and export sales by DGPC, BPC has also seen a drop in its wheeling revenue by 25%. Electricity sales and construction of transmission towers are up by 10.6% and 22% respectively.

The company has also made significant inroads in containing distribution losses at 1.35% and transmission losses at 0.74%. Permissible limits for the losses are 2%. These numbers are again significantly better than regional industry averages.

 

Druk Air Corporation Limited (DCL)

Druk Air has seen the biggest growth among DHI companies. At this time last year the aviation corporation was running losses of up to 25mn but this year has seen Druk Air making a profit of 40mn, which is an increment of 158%. The main contribution to this high rise has been the reduction in global fuel prices as well as in operating costs including aircraft maintenance. The review also states that Druk Air services had improved.

High yield (dollar paying) passengers have been on the decline while regional passengers including Bhutanese have increased. This has resulted in a 5% decrease in passenger revenue per available seat.

The cost per available seat per km (CASK) has been brought down to 12%. This has enabled Druk Air to raise wages for out station non-Bhutanese employees.

 

Construction Development Corporation Limited (CDCL)

CDCL has seen a drop in revenue by 2.9% so far this year because of the commencement of the Paro Bridge and PHPA II infrastructure projects which have incurred only cost components while bills against these projects were no yet cleared. The corporation has so far completed and handed over bridges in Dechencholing, Hejo, Tang and Bondeyma. Good progress has also been made on the Taba bridge, 30% of which has been completed as of June.

CDCL has also signed a MOU with an Italian construction company Cooperativa Muratori Cementisti di Ravena to increase its construction capacity. CDCL has also signed a MOU with DGPC to undertake drift work for the Neyra-Amari project which is slated to start by the year end.

 

Thimphu TechPark Limited (TTPL)

TTPL has also seen a 90% increase in revenues so far including rental income and revenues from Bhutan Innovation and Technology Center (BITC) events. Since the DHI takeover of the park from 2015, TTPL had improved employment to 600 people. As of June, that number has further increased to 730 and the park has been able to lease out all spaces.

 

National Resources Development Corporation Limited (NRDCL)

NRDCL revenue generation has seen a drop of 6% due primarily to the inability to dispose of stone chips. However profits have seen significant rise due to a rise in other incomes and reduction in operational costs.

The corporation has also commenced operations of a glulam production unit which produces glued and laminated special (large) sized timber. Supply of special sized timber has already started to the Royal Academy in Paro.

 

State Mining Corporation Limited (SMCL)

The mining company has been preparing for mining activities since last year but was delayed due to overburden at mining site. Operations have however commenced from March this year.

 

DHI INFRA

DHI INFRA is currently undertaking the Amochu land reclamation project and making Integrated Detailed Project Reports. Meanwhile, it has also prepared a draft operations and management guideline for the Amochu Township.

The company, in line with its new mandate to construct transmission lines, has also signed a MOU with BPC at the beginning of the year to construct a 66kv transmission line from Bjemina to Changidaphu. The erection of towers is ongoing.

 

Dungsam Cement Corporation Limited (DCCL)

The most controversial of DHI companies last year, DCCL was incurring losses. This year brings good news. The company has seen revenue increase by 37%, clinker production up by 40%, cement production by 36% and sales by 41%.

The enhancement of plant capacity utilization and resolution of teething problems encountered last year has been driving factors and with the increase in production, market penetration has also increased. Another major reason for revenue increase has been the arrival of hydropower projects to the stage (like dam construction) where cement consumption is high.

 

Bank of Bhutan (BoB)

BoB revenue has increased by 16% but profits after tax have been reduced by as much as 80% due mainly to an increase in impairment losses. However this is normal for financial institutes which see a high number of Non-Performing Assets in the first half of the year. As the year ends and balance sheets are closed the revenue figures increase greatly.

The review also stated that BoB had improved ATM reliability to 96%, upgraded its core banking system at the beginning of this year and resolved 96% of all customer complaints within the first few days.

The progress observed in the companies so far this year has been contributed to by the Compacts’ conditions which link the salaries and service contract renewals of the employees and CEOs to the performance of their respective companies. The Performance Based Variable Pay (PBVP) is paid at the end of each year if the companies have achieved a minimum of 75% of total yearly target scores (both financial and non-financial). If the condition is fulfilled employees are paid 15% and CEOs are paid 25% of their annual salaries respectively.

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