This thesis focuses on the evaluation and mitigation of power quality problems of Unique Macaroni PLC factory which is found in Bahir Dar town. The evaluations investigate the major electrical power quality problems of the factory. The necessary data has been collected from the factory, Bahir Dar substation two and Ethiopian Electric Utility (EEU) North West region Bahir Dar through direct measurement and previously recorded data. Based on the analysis of the collected data there is high power interruptions such as 57.75 interruptions per month and 33.25 hours interruption duration per month on the industrial feeder, working with lower power factor 0.7167, voltage variations up to 9.09%, the average voltage unbalance is 2.2% and from the analysis of both current and voltage harmonic distortion are occurred in the factory. The average harmonic distortions due to nonlinear loads of current is 24.17% and voltage is 10.16% harmonic components have been existing in the power distribution system of the factory. Based on the analysis the power quality problems found in the factory, DSTATCOM has been designed to improve the power quality of the factory. The model of the DSTATCOM has been studied and modeled using matlab/simulink software. The control system of the DSTATCOM is designed in matlab simulink based on the mathematical analysis of the parameters. It has observed that the outputs of the matlab simulation, the designed DSTATCOM can improve the power quality of the factory. After the insertion of DSTATCOM into the network, the load voltage level has been improved and current level has been reduced. As a result the THD level of load voltage is minimized to 1.55% and load current THD level is 7.09%. The reactive power needed by the loads (442kVAr) is almost provided by the DSTATCOM so the source generation of the reactive power is very small such as 22kVAr so that the power factor of the source tends to unity. From the cost analysis, the total power losses due to different power quality problems equal to 102707.136 Birr per year. The mitigation device indicates that, the total cost coverage will take less than 6 years and it is optimum solution depending on the severity of the problems.