K-Electric Limited's (PSX: KEL) share price has grown by 178 percent over the past five years, and its earnings have remained resilient since 2012. Its revenue has increased at a CAGR of 9.6 percent between FY09 and FY15 on the back of decreasing transmission and distribution losses, increasing average revenue per unit billed and decreasing fuel price environment.
For the 9MFY16, the power company's performance continues to be on track. KEL's overall efficiency has improved from 30.4 percent in FY09 to 37.3 percent in 1HFY16. The growth in KEL's earnings emanated from improvement in transmission and distribution losses and increase in units sent out ? results of which can be seen in improved margins and earnings. KEL's margins also benefited from lower fuel cost and power purchase due to lower crude oil prices. For 9MFY16, KEL's revenue decreased by four percent primarily because of tariff adjustment component of total revenues.
Other factor that led the net earnings and margins trot up for the power company include the reduction in finance cost that came from lower interest rate environment and lower mark-up costs from its Sukuks. Earnings for 9MFY16 scaled up by over 40 percent year-on-year.
In 9MFY16, KEL witnessed increase in its generation and transmission and distribution and consumer service and administration costs due to increased activity.
The firm has started work on $400 million transmission project that will increase the firm?s transmission capacity by 30 percent.
Among its key projects, K Electric is working into coal conversion of its two units of Bin Qasim Power Station. It has also acquired land at Port Qasim for its 700 MW (2x350MW) coal-fired project earlier this year, which would bring around a billion-dollar investment into the country.
The firm has partnered with China Datang Overseas Investment Company (CDTO) and China Machinery Engineering Company (CMEC). In its 9MFY16 accounts, KEL has disclosed that its Board of Directors has approved the incorporation of a new joint venture private limited company, and that it will subscribe to the shares representing 24 percent of the initial issued and the paid up capital. The financial close of the projects expected to be around September 2016.
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