Nishat Power Limited

Nishat Power Limited is the third Independent Power Producer (IPP) which was incorporated as a public limited company in 2007 under the Power Policy 2002, after Attock and Atlas. The IPP is a subsidiary of Nishat Mills Limited of Nishat Groups.
Nishat group has presence in many sectors like cement, textile, insurance, banking and aviation. Through Nishat Mills Limited, the group currently holds 56.84 percent of the thermal based IPP, Nishat Power Limited.
Nishat Power Limited is principally involved in building, owning, operating and maintaining a fuel fired power station in District Kasur of Punjab with a gross capacity of 200MW. Its main customer is National Transmission and Dispatch Company Limited (NTDC), and it has signed a fuel supply agreement (FSA) with Shell Pakistan.
OPERATIONAL HIGHLIGHTS Nishat Power Limited is close to completing its three years of operations. Though after achieving 1,473 gega watt hours (GWh) of generation in the first year of the project's operations, generation dipped by 28 percent in FY12. This was due to non-availability of fuel on account of non-payment by the power purchaser.
In terms of efficiency, the plant operated at an average capacity factor of around 61 percent in FY12 compared to the astounding 86 percent in FY11. A comparatively lower average capacity load factor was due to lower percentage load during the five months from October till February 2012.
On the contrary, the year FY13 so far has been relatively better for the IPP in terms generation as well as efficiency. During the nine months ending March 2013, the electricity that the firm dispatched to its customer was the highest so far, with 73.7 percent average capacity factor
FINANCIAL PERFORMANCE During FY12 the top line of Nishat Power Limited remained flattish at Rs 21 billion primarily due to lower generation and the restricted supply of fuel to the IPP. However, higher fuel prices and growing indexation factors compensated for the lower load factor and helped the company maintain its top line around previous levels.
It's important to note something: the inclusion in the sales figures an amount totalling Rs 599 million. It exaggerated the company's sales which would otherwise have been lower by 2.4 percent YoY. The company's turnover consists of two components: Energy Purchase Price (EPP) and Capacity Purchase Price (CPP). Top line for FY12 included the said amount which has been deducted by the NTDC, the power purchaser from the CPP receipts due to under utilisation of the plant.
While the IPP blamed non-availability of fuel on account on non-payment by NTDC, the power purchaser refused to acknowledge this amount Nishat Power Limited has included in its trade debts. The bottom line of the company witnessed a growth of 8.4 percent year on year during FY12 primarily due to slifght operation and maintenance savings, fuel efficiency, lower administrative charges.
Moreover, finance cost which is around 15 percent of net revenues, remained high in FY12 as previously. Growth in the earnings for FY12 was also supported by other operating income which basically included profits earned bank deposits. FY13 has been better for the IPP. Its latest performance (9MFY13) reveals a stupendous 45 percent year-on-year growth in earnings that stemmed from several underlying factors. The revenues of the firm propelled by 18 percent year on year during 9MFY13 compared to similar period of last year due to improved generation. Beside the sales growth, the up tick in the bottom line emerged from more than 20 percent and 27 percent year-on-year fall in finance cost during 9MFY13 and 3QFY13, respectively.
Over the entire time of project commencement, Nishat Power Limited has been able to maintain its gross and operating margin close to 22 percent both and has been able to lift the net margins from 5 percent in FY10 to 101 percent in 9MFY13.
LIQUIDITY Circular debt is a horror for independent power producers (IPPs). With the receivables piling up, they have been serving as a lifeline to the circular debt crisis. Total receivables from NTDC at the end of March 2013 stood at Rs 12 billion, out of which overdue receivables accounted for a staggering 70 percent. This piling up of receivables from NTDC and the government has compelled the IPP to keep going towards short-term borrowings for working capital requirements. As at March 30, 2013, the short-term borrowings of the company were Rs 5.6 billion.
OUTLOOK Circular debt continues to raise red flag for the IPP. As a result of a petition filed with the Supreme Court for the recovery of receivables, the power purchaser has been directed to make payments in accordance with the power purchase agreement (PPA) But, the bone of contention remains the non-compliance. Recently, the Supreme Court passed a provisional order for no deduction from capacity purchase price (CCP) component of the turnover as payment are not being made. The final decision will determine the fate of receivables of the IPP.

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Nishat Power Limited

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Rs(mn)                 FY10    FY11    FY12  9MFY13

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Profitability

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Gross margin            22%     23%     23%     21%

Operating margin        25%     23%     23%     20%

Net margin               5%      9%     10%     11%

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Liquidity

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Current ratio          1.17    1.63    1.47    1.62

Debt to equity         3.71    2.29    1.64    1.30

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Efficiency & Market

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Fixed asset turnover   0.06    1.32    1.41    1.31

EPS (Rs/share)         0.14    5.31    5.75    5.82

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