With head office in Lahore, Pakgen Power Limited (PSX: PKGP) was incorporated in 1995, while the company started commercial operations in early 1998. The principal activity of the power company is to own, operate and maintain a 365MW oil fired power station in Muzaffargarh, Punjab.
Initially, the company was known by the name of AES Pak Gen Company Limited, which changed to Pakgen Power Limited in 2010 when the company was acquired by a consortium of Pakistani businessmen comprising of Nishat Mills Limited, Adamjee Insurance Company Limited, Security General Insurance Company Limited, Mian Hassan Mansha, City School Group and Abu Dhabi Investment Council.
Major shareholders of the company as on December 31, 2018 include Nishat Mills Limited (27.55 percent), Engen (Private) Limited (17.33 percent) and Adamjee Insurance Company Limited (6.89 percent).
Past financial and operational performance
Financial performance of Pakgen Power Limited in CY15 was reflective of a spike in margins versus previous years. However, this came from plummeting revenues during CY15 - the denominator for calculating margin ratios. Revenues were down by 81 percent, and this was primarily due to lower dispatch levels of only 8 percent compared to 63 percent in CY14, and around 60 percent 5-year average.
Lower dispatch levels for PKGP came from lower electricity generation for the firm due to the technical glitch in the main station transformer, and hence were taken for repair and inspection where it was reported as non-repairable. As a result, the company had to import the new transformer, which only became operational in January 2016. Apart from this, what affected plant operations was the irregular fuel supply and hence payment issues with WAPDA.
On the flip side, WAPDA raised liquidate damages against the company because of lower dispatches. However, the firm is of the view that since technically the plant was available to deliver electricity as per WAPDA's requirement, and the failure to deliver was only to financial constrains caused by default in payments by WAPDA, WAPDA cannot claim the liquidate damages.
In CY16 Pakgen Power Limited recovered and posted an increase in revenue of 120 percent year-on-year due to increased dispatches as the plant resumed operations on January 29, 2016 after a long interruption due to Generator Stepup Transformer (GSU) failure on February 7, 2015. Cost of sales increased in tandem by about 93 percent as compared to the previous period. However, earnings dropped by 68 percent year-on-year.
PKGP operated at a capacity factor of 50 percent during CY17, while the load factor was 64 percent. The amount of electricity dispatched amounted to 1523 GWh, lower than the 1603 GWh dispatched in CY16. However, the company's revenues increased by 23 percent year-on-year due to higher prices while the gross profit improved considerably as well. As a result, the company's gross margins picked up by 180 basis points. Company's earnings saw an increase of over 150 percent as compared to CY16. However, the outstanding amount against CPPA-G grew to Rs 14 billion during the year out of which Rs 325 million was classified as overdue by PKGP.
PKGP FY18
In CY18, the Pakgen plant operated at capacity factor of 26.5 percent with load factor of 54.8 percent, lower than the previous year as the preference of fuel oil based power plants slithered amid government's plan to phase out furnace oil from the power sector. As a result, its revenues took a dive of around 18 percent. Due to lower costs of generation, the company's earnings improved by 13 percent, year-on-year.
The company continued to face payment issues with CPPA-G, and on December 31, 2018, Rs 16.94 billion was outstanding against CPPA-G as per company's annual report. Even in 1QCY19, the company operated at a capacity factor of 18.8 percent versus 34.3 percent in 1QCY18. And while earning in 1QCY19 grew to Rs 1.74 per share from Rs0.9 per share in 1QCY18, the case of lower dispatches continues to inflict the power company because of the firm's lower position on the merit order list. However, this has also helped the company reducing its fuel losses, which is the key reason for improved earnings.
Outlook
The power company continues to face payment issues with its customer due to the rising circular debt. Also, it highlights in its annual report that due to induction of new power generation plants on hydel energy, coal and RLNG at a lower price, it is expected that Pakgen will be dispatched in peak demand seasons, in case of interruption in supply of RLNG, and in low water months only.
On fuel conversion side, there has been no activity to convert the existing fuel oil based plant to coal based plant as the government has banned the use of imported coal by the power sector except a few plants.
The company also had plans to invest in 20MW solar power plant, which is now on hold for a change in financial outlook.
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PAKGEN POWER LIMITED: Pattern of shareholding (31 Dec, 2018) Percentage
share held
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Directors and their spouse (s) and minor children 3.96
Associated Companies and Related Parties 53.63
Of which
Nishat Mills Limited 27.55
Engen (Private) Limited 17.33
Adamjee Insurance Company Limited 6.89
Security General Insurance Co Limited 1.72
City Schools (Pvt) Limited 0.14
Banks, DFI's, NBFIs, insurance/takaful firms, modarabas & pension Funds 6.66
Public sector companies 1.14
Mutual Funds 8.16
Foreign companies 0.66
General public 10.6
Others 15.19
Total 100
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