Lalpir Power Limited (PSX: LPL) It is part of the reputable Mansha Group, which also has power companies like Pakgen Power Limited, Nishat Power Limited and Engen Private Limited as part of its portfolio. It is a power producer with the principal activities to own, operate and maintain an oil fired power station in Muzaffargarh, Punjab, set up in 1994 with a gross capacity of 362MW. The company was incorporated in Pakistan under the Companies Ordinance, 1984 and was set up under the Energy Policy 1994. The plant has been operating since November, 1997.
LPL's shareholding pattern Key shareholders of LPL include over 18 percent stake by Engen Pvt. Limited, over 28 percent by Nishat Mills Limited, and 7.2 percent by Adamjee Insurance Company Limited. Financial institutions including mutual funds together hold over 10 percent shares in the company, while the local public has around 8 percent shareholding. Breakup of the shareholding is shown in the illustration.
Past performance Commencing operations in 1997, the company's financial performance had been a roller coaster ride. From 2011-2014, revenues of the company were on an upward path but the subsequent couple of years witnessed a slide as revenues dropped by 30 percent year-on-year on average in 2015 and 2016.
Similarly, earnings growth in profits has also been volatile. From an EPS of Rs4.15 in 2011, the company has come down to an EPS of Rs2.24 in 2015 primarily due to increase in furnace oil prices that ate away profits on account of a higher generation cost.
A look at the margins for LPL - both GP and NP margins - show that they have improved continuously up till 2016, which can be explained by delta loss that measures fuel efficiency or fuel consumption as grams per kWh. It can be seen that delta loss has an inverse relation with margins. LPL's net margin has risen up to 3.85 percent in 2015 and then to 6.48 percent in 2016; these are the years where delta loss is minimal, which means lower fuel consumption per kWh generated.
Like many IPPs, LPL too has had issues with WAPDA, sole customer over payment of dues. In 2015, Rs6.68 billion was outstanding out of which Rs4.50 billion were classified overdue. The company has blamed this delay in payment for disruption in fuel supply, which in turn affects its generation performance. All this has resulted in erratic fuel supply and hence the reduced capacity factor for LPL. In 2016 as well, the company continued to face adverse impact of circular debt and was owed Rs8.6 billion as outstanding till 31 December, 2016 out of which Rs4.24 billion were classified overdue.
In CY17 where the revenues for the power company were seen to increase by 19 percent year-on-year, profits were down by two percent year-on-year - negating the trend in the previous years. Again, the key reason for decrease in the firm's profitability in 2017 was the increase in delta loss, which resulted in lower net margins for the power company. Lower utilisation came from plant closure in October 2017 due to an outage and plant closure in November 2018 due to industry wide furnace oil plant shutdown.
LALPIR in CY18 CY18 was another year for a decline in profits for LPL. The firm's revenues declined by 8 percent year-on-year, while earnings were down by around 23 percent, year-on-year. The main reason for a drop in profitability as highlighted in the annual report 2018 was increase in fuel consumption, which is shown by increase in delta loss by Rs70.313 million due to increase of 1.11 grams per kWh fuel consumption. The other major reason for decrease in profit was because of major overhauling. During the year, the Lalpir plant operated at capacity factor of 28.3 percent with a load factor of 56.2 percent and dispatched 868.284 GWh of electricity.
The issue with power purchase continues to linger for LPL; as on 31 December 2018 Rs13.659 billion was outstanding against CPPA-G, which is part of the ever increasing circular debt. Also, the company continues to face the issue of liquidity damages from CPPA-G
Outlook In 2015, LPL had approved investment in the Lalpir Solar Power (Pvt) Limited (LPSL). The principal activity of LSPL will be to build, own, operate and maintain a solar power project having gross capacity up to 20MW which will be located near its oil power plant. The company is also undergoing a Productivity Enhancement and Performance Improvement (PEPI) programme, which can reduce fuel losses.
End of furnace oil is likely to be beneficial for LPL. Considering LPL's lower position on Nepra's Merit Order List, furnace oil based power plants are likely to face capacity fall beyond 2020, which will reduce fuel losses for them. Lalpir is expected to dispatch in peak demand seasons, in case of interruption in supply of RLNG and in low water months only, thus minimizing fuel losses.
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LPL: Pattern of Shareholding (as at Dec 31, 2018)
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Category of Shareholders Percentage
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Directors and their spouse(s),children 6.84%
Associated Companies, undertakings and related parties
NISHAT MILLS LIMITED 28.80%
ADAMJEE INSURANCE COMPANY LIMITED 7.20%
SECURITY GENERAL INSURANCE COMPANY LIMITED 1.80%
M/S. ENGEN (PRIVATE) LIMITED 18.17%
Public Sector Companies and Corporations 0.37%
Banks,DFIs,NBFC, Insurance,Takaful, 7.05%
Modarabas and Pension funds
Mutual Funds 3.16%
General Public
a. Local 7.99%
b. Foreign -
Foreign Companies 0.08%
Others 18.55%
Totals 100%
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Source: Company accounts
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