KAPCO in 1HFY22

Kot Addu Power Company Limited (PSX: KAPCO) announced its financial performance for 1HFY22 yesterday where its earnings were seen declining by half. The decline in earnings for 2QFY22 was 37 percent year-on-year.

KAPCO’s earnings fell despite the growth witnessed in its revenues. Net sales increased by 58 percent year-on-year in 1HFY22, while the growth in 2QFY22 revenues was around 83 percent year-on-year. The rise in topline came from higher dispatches as well as higher RLNG prices and furnace oil prices. Dispatches were noticeably higher in 2QFY22- posting a growth more than two times on a year-on-year basis. Overall, total dispatched by the power company were up by around 25 percent year-on-year in 1HFY22.

However, the company’s gross profits were adversely impacted with gross margins falling staggeringly due to lower capacity payments. Recall that an agreement was reached between the IPP and the government for the extension of Power Purchase Agreement and resolving the issue of liquidity damages with the CPPA-G in the last quarter of FY21 – which has resulted in lower capacity payments in 1Q and 2Q of FY22.

Apart from that, the company’s net profits were also affected by lower other income in 1HFY22 primarily due to lower other income received in 1QFY22. Finance cost also remained muted in 1QFY21. However, lower other income and higher finance cost were seen in 2QFY22 due to rising interest rates, and bank borrowings, which helped the bottomline in 2QFY22.