Power Generation & Distribution: JAPAN POWER GENERATION LIMITED - Nine Months Ended March 31, 2005 (Un-audited)
Japan Power Generation Limited (JPGL) is a public limited company, incorporated on September 29, 1994 under the Companies Ordinance, 1984 and its shares are quoted on Lahore and Karachi Stock Exchange. The principal business of the company is to generate and supply electric power to Wapda. The company commenced actual commercial operations w.e.f. March 14, 2000.
The company's power plant is built on a site of approx. 20 acres in the vicinity of Jia Bagga Railway Station, off Raiwind Road, District Lahore in the province of the Punjab. It has an installed capacity of 135.6 MW (dependable capacity of 107 MW), comprising of 24 medium speed-four stroke diesel power generator sets of 5.65 MW each and are designed for operation using heavy furnace oil (HFO) while startup, low load operation and shutdown operations are on high speed diesel oil (HSD).
There are talks of converting some of the machines to operate on natural gas in addition to use of furnace oil. Initially, it would require capital outlay by the company though in the long run it may prove economical.
JPGL started commercial operations from March 14, 2000 and has been experiencing net loss every year. The accumulated losses have eaten up major portion of the Equity and the company's financial position is also on the decline. As on March 31, 2005, Total Liabilities as compared to Total Assets are 94 % and the Equity which has been reduced to only 6 % of Total Assets. Debt/ Equity Ratio are 97:7.
The company sells energy to Wapda. On the basis of energy supplied during the nine months period ended March 31, 2005, the company earned Average Total Price per KWH at Rs 5.42 (2004: Rs 5.01).
This included Energy Payment of Rs 3.22 per KWH during the nine months under review as against Rs 2.81 per KWH during the previous nine months. Capacity payment worked on per KWH comes to Rs 2.20 on average. The company was able to have gross margin at 18 % and operating margin at 15 %, but high financial charges pushed it into losses. Cash generation from operations has been inadequate to fully service the debt. Performance statistics are given below.
The notes to the un-audited financial statements for the nine month period under review, state that majority of the lending banks' syndicate (75.54 %) have approved the reduction in the rate of mark up on the funded borrowings @ 7 % from July 1, 2003 and onward and the company has paid/provided for mark up at this rate to all the members of the syndicate.
The company is pursuing the remaining members to accord their approval at an early date. According to these notes, Faisal Bank Limited (FBL) has not given its consent for reduction in the rate of mark up from 12 % to 7 % for which now FBL has sent its invoice to the Trustee Bank for the differential amount of mark up to the tune of Rs 60 million. The differential mark up amount invoiced by FBL has not been provided for in these financial statements as the company has contested the validity of this claim.
The Directors in their Report to the Members, have mentioned that keeping in view the poor cash flow resulting from lowest levellized tariff among the IPPs located in the same vicinity, fuel consumption payment for furnace oil made @ 211 gm per KWH instead of actual average consumption of 222-224 gm per KWH and liquidated damages levied by Wapda; JPGL may face difficulties to repay the financial obligations under SAF-II agreement to commence from March 2006.
It has been added that during the last couple of years, JPGL has persistently pursued with Wapda for increasing of the levellized tariff, payment for fuel on actual average consumption basis, waiver of liquidated damages levied and reimbursement of liquidated damages deducted till March 31, 2005.
JPGL is a public limited company and lot of money has been invested into it by both the sponsors and the general public. The syndicate of banks also has large exposure in the company. Wapda receiving energy supply from JPGL, though in a small quantity, has long term relationship with the company as per the terms of the Power Purchase Agreement. JPGL is considered to be at critical juncture. The stakeholders are urged to resolve the issues amicably and equitably. It is felt that loss of further time in finding solution to the company's issues will only complicate matters, particularly for the small investors.
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Performance Statistics Un-audited Audited
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Balance Sheet (Rs in 000) March 31, June 30,
2005 2004
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Share Capital-Paid-up: 1,332,000 1,332,000
Accumulated (Loss): -957,519 -905,677
Equity: 374,481 426,323
Surplus on Revalue of FA: 0 0
Shareholders Equity: 374,481 426,323
LT and Deferred Liabilities: 5,316,644 5,542,083
Capitalisation: 5,691,125 5,968,406
Current Liabilities: 532,212 354,479
Total Liabilities and Equity: 6,223,337 6,322,885
Tangible Fixed Assets: 5,762,069 5,927,461
L.T. Advances: 10,608 19,516
Current Assets: 450,660 375,908
Total Assets: 6,223,337 6,322,885
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Ratios:
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Current Ratio: 0.85 1.06
Debt-Equity Ratio: 93:7 93:7
Book Val./Share - Rs: 2.81 3.20
Quoted Price (27-5-05)- Rs: 4.30 -
Price/Book Value Ratio: 1.53 -
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Income Statement (Rs in 000)
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Nine Months, March 31, 2005 2004
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Net Sales: 1,671,734 1,487,270
Gross Profit: 294,522 298,213
Operating Profit: 254,451 256,772
Profit Before Taxation/(Loss): -51,672 -55,230
Profit After Taxation /(Loss): -51,842 -58,429
Cash Dividends %: 0% 0%
Cash Dividend - Amount: 0 0
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Ratios:
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Gross Profit to Sales: 18% 20%
Operating Profit to Sales: 15% 17%
Profit After Tax to Sales: -3% -4%
Net Profit to Equity-%: -14% -14%
R.O.A.: -1% -1%
R.O.C.E: -1% -1%
Dividend Payout Ratio: 0% 0%
Earnings Per Share (Rs): -0.39 -0.44
Inventory Turnover (Times): 55.19 26.58
Receivable Turnover (Times): 8.56 9.74
Price/Earning Ratio: -11.05 -
Asset Turnover (Times): 0.27 0.24
Days Inventory: 7 14
Days Receivable: 43 37
Debt Service Coverage- X: 0.26 0.13
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Capacity
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Plant Capacity Dependable: 107 MW 107 MW
Annual Capacity in MWH: 937,320 937,320
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Actual Production
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Energy Delivered-MWH: 308,396 296,931
Capacity (9 Months Basis): 33% 32%
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COMPANY INFORMATION: Chairman: Sheikh Nazaz Ali; Chief Executive: Liaqat Khan; Director: Zafar Mahmood; Chief Financial Officer: Abdul Rashid; Company Secretary: Syed Zafar Haider; Auditors: 1- Hyder Bhimji & Co., Chartered Accountants; 2- Javaid Jalal Amjad & Co., Chartered Accountants; Legal Advisors: Walker Martineau Saleem; Registered Office: 79-Bridge Colony, Lahore Cantt. Plant: Off Raiwind Road, Near Jia Bagga Railway Station, District Lahore; Web Address: www.jpglpk.com
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