September 8, 2020: Nishat Power Limited held its analyst briefing on Monday, wherein the management of the company analyzed the latest financial performance as well as the impact of change in the economic dynamics on its ongoing endeavors.
The company made profits of Rs. 4.9 billion (EPS: Rs. 13.96) during the year ended June 30, 2020, i.e. nearly 31% higher than the earnings of last year. Despite an underwhelming performance in sales, the company managed to increase its gross profits by 28%, which can be attributed to a decline in the cost of sales by 50%.
The fall in sales was due to lower dispatches made during the year, while the decline in the cost of sales was a result of PKR depreciation. The management of the company attributed the decline in revenue to lower plant utilization i.e. 16% in FY20 as compared to 39% in FY19.
It is pertinent to note that the company benefitted majorly from the Energy Sukuk ll Payments, under which it received an amount of Rs. 1.6 billion. The finance cost saw a surge of 21% on the back of an increase in short term borrowings made by the company during the period under review.
Commenting on the performance, the management of the company stated that the increase in profitability was also due to higher USD indexation in tariffs as well as late payment surcharge.
According to Taurus Securities, the management was hopeful of a positive change in the profitability of upcoming periods, as the company has successfully gotten rid of its long term debt according to its determined tenure in Power Purchase Agreement, which means that the debt repayment component of the tariff shall not apply going forward.
However, the company might need to raise another long term debt as its plant may require a major overhaul. The company has set aside reserves of around Rs. 3,154 million for overhauling purposes but additional funds may still be needed.
It also spoke about completing the winding process of Lalpir Solar Power (Private) Limited, i.e. a subsidiary of NPL, by FY21. The management stated that there was reluctance on the part of CPPA to sign any Power Purchase Agreement with Lalpir, mainly due to the expiry of its renewable power policy and complications in tariff mechanism.
Talking about the recent MoU signed between the IPPs and the government, the management said that the implementation of it would be subject to the approval of the board of directors. Further, it may take around 6-12 months for the company to resolve the delayed payment issue, therefore, the company is expecting the same payment schedule for now. There is going to be no alteration to the benchmark fuel efficiency rate once the MoU is implemented, the management added.
The arbitrage suit that the company won against NTDC in International Arbitrary court was also deliberated upon, with the management stating that the ancillary recoveries under the award amounted to Rs. 615 million.
The management also spoke about how the company’s utilization would suffice to meet the fixed operating cost post competitive market model owin to superior plant technology and proximity to the demand hub.
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