Pakistan’s largest independent power producer (IPP), Kot
Addu Power Company (KAPCO), is scheduled to announce its second quarter (2QFY16)
financial results on 23rd February 2016. The Company is expected to post profit
after tax of Rs2.6 billion (EPS: Rs2.94) for 2QFY16, showcasing muted growth of
7%YoY taking 1HFY16 cumulative profits to Rs4.7 billion (EPS: Rs5.34). The
Board of Directors is also expected to approve payment of an interim dividend
of Rs4/share, where upside may stem from improved liquidity.
Earnings are likely to be a function of: 1) load factor of 57%
as compared to 61% for the corresponding period year, 2) increased generation
on gas (18.7% of units generated as compared to 5.5%) allowing for higher
efficiency coupled with O&M savings and 3) drastic (68%YoY) dip in finance
charges in part due to falling cost of borrowing, and lower working capital
requirements from falling input costs.
Assessing the heavily regulated and GoP reliant nature of
the Power sector, KAPCO bears risks in the form of: 1) liquidity concerns
hampering payouts as the company had a negative spread on receivables as
compared to payables, relying on short term loans to fill the gap, 2) mechanism
for generation on LNG yet to be sorted, with standby letters of credit a
possible roadblock and 3) delay in planned privatization due to the process
being devoid of technically sound sponsors.
