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Nishat Power Limited (PSX:NPL) has closed the financial year 2020 with a 31 percent year-on-year growth in its bottomline. The rise in earnings for FY20 was in line with the company’s quarterly performance, which was not driven by growth in sales revenues.

The power company has been facing lower load factors because of its place on the merit order, which has been leading to lower power generation. NPL’s revenues fell by 25 percent year-on-year in FY20, and the decline was greater in 4QFY20 (43% YoY) as compared to previous three quarters. The fourth quarter (April 2020 - June 2020) was significantly slower for power generation and dispatch levels for additional burden from Covid-19 lockdown and decline in power demand despite rising mercury levels. As per a research note by Arif Habib Limited, NPL’s furnace oil-based plant operated at a load factor of 9 percent in 4QFY20.

Despite fall in revenues, Nishat Power’s earnings benefitted from lower load factors that drove down the cost of sales (as fuel cost - a large component of the total cost remained low). Also, currency depreciation aided the growth in gross margins, which trickled all the way down to the net margins. Currency depreciation was around 16 percent in the latest quarter (4QFY20).

The same was seen in FY19 financial performance by NPL where turnover of the company came down by 8 percent year-on-year, but the gross profits improved by 18 percent year-on-year due to lower cost of sales. The only significant expense in FY20 was the finance cost, which grew by 21 percent due to higher interest rate and higher short-term borrowing. NPL continues to face the issue of receivables from NTDC as according to the company, the power purchaser continues to default on its payment obligations. As of March 31, 2020, total receivables from NTDCL stood at Rs19,437 million versus Rs16,045 million by the end of FY19, out of which overdue receivables are Rs17,307 million. Despite the liquidity crunch, NPL announced a final cash dividend of Rs1 per share in addition to an interim cash dividend of Rs1 announced earlier.