The Master Group is all set to have Pakistan’s first ever listing of a wind power plant on the local bourse. And as far as firsts go, Master Wind Energy Limited (MWEL) will also be the first company from the group to get publicly listed on the Pakistan Stock Exchange (PSX).
Best known for its success in the foam business with its brand Master Molty Foam, the company has become a conglomerate in its own right having diversified interests in fields such as bedding, home and office furniture, automotives, chemical, textile and power generation.
MWEL owns and operates a 52.8MW power plant in the wind corridor at Jhimpir, Sindh and started commercial operations in October, 2016. The company has a 20 year “take or pay” energy purchase agreement (EPA) with the National Transmission and Dispatch Company (NTDC).
Even though renewable energy tariffs have come down quite a bit over the past few years, MWEL enjoys the lucrative upfront tariff regime announced in 2013. With a 50:50 ratio of foreign and local financing, the levelised tariff awarded to the project was 14.74 Rs/kWh. Moreover, as per the standardized nature of IPP contracts in Pakistan, the tariff components are dollar and inflation indexed along with a sovereign guarantee given by the government.
According to MWEL’s Initial Public Offering (IPO) prospectus, the company plans to offer 84.3 million shares which represent 25 percent of its total post-OFS paid-up capital. The entire offer will be done through book building at a floor price of Rs20.75 per share.
Pakistan’s renewable sector has seen a flurry of investment in the past few years given the lucrative tariffs along with sovereign guarantees by the government. In FY16, the total wind based power capacity in the system was 306MW while energy generated by these plants clocked in at 732 GWh. Another 1200MW are set to be inducted in the system by 2020.
The company’s profitability ratios have been impressive with an EBITDA margin of 91 percent and net margin of 35 percent in FY17. As a guideline average dividend yields for IPPs have remained in the range of 10 percent over the years, making them attractive for value stock investors looking for decent income streams. The dividend payout ratio for MWEL has been 92.4% in FY17 and 36.5% for 1HFY18 and the offering is likely to entice investors looking for a stable project giving a good dividend yield.
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