Nishat Power Limited (PSX: NPL) announced the financial performance for 1HFY21 last week. The IPPs have been facing tough times with falling utilisation levels due to position on the merit order, and rising receivables and liquidity issues leading to ballooning circular debt. NPL too has been facing lower utilisation factors because of its place on the merit order with only 3.5 percent utilisation factor, which has been driving revenue growth downward. Also, during 2QFY21 – the latest quarter- furnace oil prices fell by around 13 percent year-on-year, which lowered the revenues. And then the company has lost the debt portion in capacity payments as it retired its long-term loan. In 2QFY21, NPL, topline declined by 44 percent year-on-year, while in 1HFY21, the decline was around 26 percent year-on-year due to same reason except the lower generation and dispatches of power as 1QFY21 was better in that sense. This can also be seen in quarter-on-quarter revenue growth, which was down by 53 percent.
NPL’s bottomline was hence affected by the falling revenue growth, and despite lower expense, the IPP’s earnings fell by 52 and 41 percent in 2QFY21 and 1HFY21 year-on-year, respectively. Decline in finance cost was over 70 percent in both 2QFY21 as well as the overall 1HFY21 due to lower interest rates environment and lower short-term borrowings by the company.
NPL has been facing the same issue as the rest of the IIPPs – issue of receivables from NTDC. However, 2020 has been about renegotiating the MoUs by the governemnt with the IPPs due to another key challenge of excessive returns. In a recent development, the revised deal of converting MoUs into master agreements for IPPs has been okayed by the ECC to devise a payment mechanism for the clearance of outstanding dues, which will bode well for the companies including NPL.
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