IPP'S PROFITABILITY 9M/FY07...

MARIAM NASIR
June 11 - 17, 2007

KAPCO

Kot Addu Power Company Limited ("KAPCO") was incorporated in 1996 with the purpose to contribute economical power to the national grid. KAPCO has shown exceptional results in the area of plant maintenance, availability, quality standards and financial performance. In April 2005 KAPCO was formally listed on all the three Stock Exchanges of Pakistan. The principle activities of the Company are to own, operate and maintain a multi-fuel combined cycle gas turbine power station of fifteen generating units with a nameplate capacity of 1,600 MW. In the nine month period, the power plant generated 5542 GWh of electricity, resulting in a load factor of 62.8% with an overall availability of 82.3%, (94.2% excluding planned overhauls). The fuel mix for the dispatched output to our customer WAPDA was 65.8% gas, 33.3% fuel oil and 0.9 % HSD. The level of output had no material impact on the Company's nine month's profit as electrical sales have no influence on the Capacity Purchase Payments made by WAPDA to the Company. Turnover for the Period was Rs. 25,901 million and operating costs were Rs. 19,625 million. Profit after tax was Rs. 3,628 million (EPS: Rs4.12) compared to Rs. 6,227 million (EPS: Rs7.07) in the corresponding period last year. The Company's profits are now subject to tax at the corporate rate of 35%. The impact of tax has contributed to a reduction of the Company's profit after tax and EPS in comparison to the previous corresponding period.

KAPCO'S EXPANSION

Kapco has announced that it is seriously considering a 0.4-0.5GW expansion at its current plant site. The project is intended to be a dual fuel generation plant, capable of running on both gas and furnace oil. The company has already received approval from the PPIB to go ahead with the expansion. The Private Power and Infrastructure Board, Ministry of Water and Power, Government of Pakistan (PPIB) conveyed approval of the Feasibility Study submitted by the Company for expanding its generation capacity by approximately 450 MWs. Following the approval of the Feasibility Study, the Company is in the process of approaching the National Electric Power Regulatory Authority ('NEPRA') for tariff determination. Approval of the Feasibility Study and approaching NEPRA for tariff determination is no assurance/guarantee at this stage that the Company will increase is generation capacity.

(Rs. In Million)

HUBCO

KAPCO

 

9M/FY07

9M/FY06

Change 
%

9M/FY07

9M/FY06

Change
 %

Sales

29,954

16,139

86%

25,901

23,523

10%

Cost of sales

(26,849)

(12,869)

109%

(19,625)

(16,287)

20%

Gross Profit

3,105

3,270

-5%

6,275

7,236

-13%

Admn and Gen Expense

(189)

(222)

-15%

(137)

(181)

-24%

Other operating income

153

209

-27%

289

366

-21%

Operating Profit

3,069

3,257

-6%

6,427

7,421

-13%

Finance costs

(1,045)

(1,197)

-13%

(941)

(1,118)

-16%

Profit Before Tax

2,024

2,060

-2%

5,486

6,303

-13%

Taxation

-

-

-

(1,857)

(76)

2342%

Profit After Tax

2,024

2,060

-2%

3,629

6,227

-42%

EPS (Rs.)

1.75

1.78

-2%

4.12

7.07

-42%

HUBCO

The Hub power station is the first and largest power station to be financed by the private sector in Southern Asia and one of the largest private power projects in the newly industrialized world. The Hub power station was the first project to be successfully co-financed by several governments, the World Bank as well as international private sector lenders and investors. It sets the standards for the formulation of a private power framework in Pakistan which has elicited numerous responses from international investors. Several medium sized projects have since completed their financing, construction and now are in operation. The company's performance was marginally below that of last year. Turnover for the nine month period was Rs. 29,954 million (2006: Rs. 16,139 million) and operating costs were Rs. 26,849 million (2006: Rs. 12,869 million). The Company earned a net profit of Rs. 2,024 million, resulting in earnings per share of Rs. 1.75, compared to a net profit of Rs. 2,060 million and earnings per share of Rs. 1.78 in the corresponding quarter last year.

HUBCO'S EXPANSION

The electricity deficit in Pakistan (currently 0.5GW and expected to grow to 5GW by 2010 in a zero supply addition scenario) has propelled the government into approaching both existing IPPs and potential new entrants to the sector for investment in new generation capacity. At present, the Pakistan Power Infrastructure Board (PPIB) is considering 50 new projects with an estimated joint capacity of 13.4GW. Hubco, while not planning for any capacity expansion at its own site, is pre-qualified to participate in the bidding for three power projects (of ~0.45GW each) launched by the PPIB refer to PPIB projects (Uch 2, Faisalabad, Lahore). The company has also expressed an interest in a number of smaller power generation projects across Pakistan as well as a potential JV partnership in a coal-based power plant under consideration by the government. The company has also expressed an interest in bidding for Sui Southern Gas Company (SSGC). SSGC is one of Pakistan's two vertically integrated government owned transmission and distribution companies. The government intends to privatize the company through offloading 51% of its stake in SSGC.