Earnings of the power sector companies listed on KSE-100 Index have portrayed a sharp uptick of 22 percent on a year-on-year (YoY) basis during the fiscal year 2020-21, mainly due to lower finance costs and Pakistani rupee depreciation.
According to a report issued by Arif Habib Limited, the payouts of the power companies have significantly improved as well due to the first tranche payment of the circular debt reduction plan of the government in June 2021.
The report also presented a detailed analysis of Hub Power Company Limited (HUBC) and Kot Addu Power Company Limited (KAPCO).
According to the report, during 4QFY21, HUBC posted a profit after tax (PAT) of Rs33,688 million (EPS: Rs25.97), up by 35% YoY compared to Rs25,044mn (EPS: Rs19.31) during the same period last year. This rise in earnings is due to lower finance cost, rupee depreciation and higher share of profit from China Power Hub Generation Company (CPHGC).
Net sales witnessed an increase of 34% YoY to PKR 15.8bn due to a 101% YoY increase in dispatches to 367 GWh (Hub plant: 76GWh, 3% load factor, Narowal plant: 147GWh, 31% load factor; Laraib: 144GWh, 78% load factor). During FY21, sales increased by 13% YoY due to a 39% YoY uptick in dispatches.
During 4QFY21, gross margins of the company decreased by 16pps YoY to 56%. The decline in margins is mainly attributable to 9% YoY rupee appreciation and higher load factor during the quarter under review. During 4QFY21, the company recognised share of profit from CPHGC of Rs3,818 million, down by 19% YoY mainly due to 9% YoY rupee appreciation. Finance costs decreased by 34% YoY to Rs1,682mn in 4QFY21. The decline in finance costs was on the back of lower interest rates, said the report.
In June 2021, the government made payments to the IPPs under 1994 Power Policy and this development enhanced the liquidity of the company and it announced a cash dividend of Rs5/share with the full year result. The company has also given Rs7/share and full year payout reached to Rs12/share, the report said.
About KAPCO, the report said that during 4QFY21, the company posted a profit after tax (PAT) of Rs10.2bn (EPS: Rs11.62), down by 57% YoY compared to Rs23.6bn (EPS: Rs26.83) during 4QFY20. The decline in earnings is witnessed due to CPP adjustment of Rs19.3bn during FY21. During FY21, sales declined by 3% YoY to Rs69.6bn, due to lower RLNG prices.
However, dispatches were 2% YoY higher than last year. Net sales witnessed a decline of 30% YoY due to capacity purchase price (CPP) adjustment of Rs19.3bn. The dispute of outstanding liquidity damages between the company and Central Power Purchasing Agency has been resolved. Hence, the PPA of the company has been extended for 485 days with effect from June 27, 2021, the report said.
During 4QFY21, sales increased by 58% YoY to Rs24.0bn (ex. CPP adjustment). The rise in sales is witnessed due to higher (+43% YoY: 1,221 GWh) dispatches along with higher FO and RLNG prices. During 4QFY21, other income increased by 74% QoQ to PKR 3.9bn. The rise in other income is witnessed due to tariff true-up. Finance cost decreased by 63% YoY during FY21 on the back of lower interest rates and lower short term borrowings.
The company announced a cash dividend of Rs3.50/share with the full year result. The company has also given Rs6.5/share and full year payout reached Rs10/share, the report said. TLTP