Nishat Chunian Power Limited (PSX: NCPL), a Nishat Group IPP announced financial performance for FY20 recently, touting a bottomline growth of 35 percent year-on-year. The growth in the independent power plant’s earnings, however, did not stem from the top as NCPL’s turnover declined by 13 percent year-on-year during the year. this was mainly due to decline in dispatches in FY20, that were significantly low is 4QFY20 – load factor of only 10 percent in the last quarter year-on-year. lower load factor throughout the year was due to lower uptake of furnace oil by the plant amid lower demand as well as alternate supply of resources for power generation like hydel and coal.
Decline utilization levels as well as currency depreciation particularly in the last quarter however, benefitted the gross profits due to decline in cost of sales, where gross margins were seen increasing from 34 percent in FY19 to 52 percent in FY20. Gross profit also reflects operations and maintenance savings as the plant is relatively new (COD in 2010). And along with lower administrative and other operating expenses, profit from operations increased by 40 percent in FY20.
Over 50 percent growth in finance cost due to increase in short term borrowing weighed heavy on the bottomline; NCPL’s receivables have been mounting due to circular debt. Though NCPL’s profitability has stayed buoyed; the company’ faces the threat of decline in earnings in FY21as its 10-year long-term loan will be fully paid by July 2020.