How Incorporating in Singapore Allowed Summit Group To Provide Low-Cost Electricity in Bangladesh

Summit Group and Aziz Khan, the conglomerate’s founder and chairman, have deep roots in Bangladesh. Born in Bangladesh and educated at the University of Dhaka, where he earned an MBA, Aziz Khan expresses a deep love of his home country and a desire to continue playing a key role in its development. To do so, he moved a significant part of his business to Singapore. But how did that help Bangladesh?

Summit Power International, the largest independent power producer in Bangladesh, incorporated in Singapore in 2016. While it might appear counterintuitive, incorporating in Singapore has allowed Summit to improve what it offers in Bangladesh, including lower energy costs for consumers.

Fueling business growth and expanding access to electricity has been Aziz Khan’s goal since he founded Summit Group. The company built Bangladesh’s first independent power plant in 1997. SPI now operates 17% of Bangladesh’s total private installed electricity capacity and 7% of Bangladesh’s total installed capacity. The company has 18 power plants in operation or under development.

SPI also operates Bangladesh’s second floating storage and regasification unit and liquefied natural gas import terminal with a capacity of 500 million cubic feet per day.

All this represents enormous growth over the years by Summit Group, which started with the simple goal of extending the power supply to more people in Bangladesh.

“At that time, the biggest problem was not having electricity. Twenty percent of the people had access to electricity in 1995-96,” says Khan. “And I am so humbled and so happy that we at that time started with electricity and generated electricity. Today, 100% of people have access to electricity in Bangladesh. That I was party to it — that Summit was part of it — is the biggest satisfaction.”

Why Summit’s Move to Singapore Is So Important

To understand Summit Group’s approach to providing energy in Bangladesh, it’s vital to understand its structure. Summit Group operates as the largest infrastructure conglomerate in Bangladesh and employs over 6,000 people, with investments in the energy sector, ports, logistics, and information technology. Summit Power International manages all power-related operations.

In 2016, Aziz Khan entered into a partnership with the International Finance Corporation and co-investors to form SPI in Singapore. Prior to this deal, the IFC had worked with Summit to help the company finance projects, according to Ayesha Khan, managing director and chief executive officer at SPI. IFC, a member of the World Bank Group, focuses on investments in the private sector in developing countries.

“One of the most important things that define us is the fact that we are a Singapore company, based out of Singapore and owning assets in Bangladesh,” said Ayesha Khan.

“I think we are the only company in Bangladesh that holds assets in Bangladesh but is incorporated in Singapore. And a lot of people don’t understand that,” she added. “The IFC structure comes from a point of view of a lot of financial maturity and a lot of financially complicated structuring, which IFC is very able to do and very well aware of and has done all over the world.

“But it was the first time that they did it in Bangladesh and has been, to my knowledge, the only time that they have done it in Bangladesh.”

Khan and Summit established the company in Singapore to gain access to the corporate governance and financial markets there. The move made the company more attractive to established investors around the world.

“What Bangladesh has is a lot of opportunities and a lot of growth,” said Khan. “But what it lacks is governance and what it lacks is a mature financial market, both of which are very much necessary to do long-term infrastructure projects, which is what we want to do for Bangladesh.”

Summit Group and Foreign Partnerships Fuel Lower Energy Costs

The move to Singapore resulted not only in financing from IFC, but also a number of new foreign partners for Summit Group. For example, United States-based General Electric partnered with SPI on a power plant project, while Japan-based Mitsubishi joined with SPI on the development of the liquid natural gas floating storage regasification unit. Also, in 2019, Japanese power giant Jera bought a 22% interest in SPI.

These deals became possible because of SPI’s move to Singapore. “If SPI were to remain completely within Bangladesh, it would have been more challenging for Jera to obtain their approvals to invest directly into Bangladesh,” says Wu Yan Bin, chief financial officer at SPI.

“The Summit Power International platform is quite important in convincing international world-class corporations like Jera to invest in Bangladesh projects.”

The influx of capital and ability to forge foreign partnerships have also provided direct benefits to energy consumers in Bangladesh, said Ayesha Khan. The move to Singapore helped Summit “access financing for our projects which are very low cost, which, in turn, has helped us provide Bangladesh with electricity at the lowest cost.”

Ayesha Khan said that SPI’s power projects have offered value to consumers in Bangladesh over time. “If you go through our power projects, the tariffs are at the lowest if you compare it at that time with all the other projects being awarded or submitted at that time,” she noted.

“At any point in time, if you compare our projects, it was always at the lowest cost and the most competitive rate that we submitted those projects and signed those projects at both for our power projects and for our FSRU.”

Keeping the Focus on Sustainable Growth

Aziz Khan pointed out that the company’s expansion and foreign partnerships have also opened the door to more sustainability-focused projects in keeping with both his own ambitions for his companies and the goals of government leaders in Bangladesh.

For example, Summit Group has worked on a deal to import 100% clean energy into Bangladesh from solar and wind energy sources in India. Summit’s investment into liquid natural gas storage and transfer also marks an investment in a fuel with lower carbon emissions, notes Khan.

He recalls that in the early years of the Summit Group, helping Bangladesh transform its society was the first order of business.

“It was very important for Bangladesh to be able to employ its teeming millions — currently at 180 million. And employment could only come through industrialization,” Aziz Khan shares. “We had to move from an agrarian society to an industrial society and electricity is a fundamental requirement for that. I mentioned that 20% of people had access to electricity. That’s very important to keep in mind.”

However, Khan admits that while energy continues to fuel growth in the country, it’s also necessary to focus on sustainability. While those changes must occur in Western countries that rank among the highest emitters of carbon dioxide, he says Bangladesh also plays a role.

”We are one of the lowest emitters of carbon dioxide or greenhouse gases,” Aziz Khan says. “Having said that, it does not stop our responsibility to be a party to the sustainability program of the whole world.”

He adds that technology, especially machine learning and artificial intelligence, has a key role to play in this area.

“We need to harness artificial intelligence to contain emissions to bring about re-nurturing Mother Earth so that each and every aspect of Mother Earth, from its soil to its environment, improves,” he insists. “It’s very intriguing and it is very challenging, but it is a must if this world is to continue to be a happier world from the previous centuries as it has always been. It would be good to have that trend continue.”