Altern Energy Limited

The primary activity of Altern Energy Limited (PSX: ALTN) is the ownership and operation of 32MW gas based thermal power plant located in Attock, Punjab. The company sells the electricity to the Water and Power Development Authority (WAPDA) under long term Power Purchase Agreement (PPA) till 2031. After expiration of ALTN's gas agreement with Sui Northern Gas Pipelines Limited (SNGPL) in June, 2013 the company signed a supplemental deed in March, 2014 with SNGPL on as-and-when available basis till the expiry of the PPA on June 06, 2031. ALTN entirely owns Power Management Company (Pvt) Limited which in turn holds almost 60 percent shares of Rousch (Pakistan) Power Limited (RPPL). Being an unlisted company, RPPL is an independent power producer having a gross capacity of 450 MWs from its gas-fired combined cycle thermal power in Khanewal, Punjab.
Historical performance: ALTN has seen an increasing profitability trend in the past five years with the bottom-line registering positive growth over the years. However, the company's revenues and gross profits have fallen in the past two years relative to exceptional performance during FY14.
The dispatches were highest in FY14 amounting to 205,398 megawatt hours (MWH) which have since then fallen to 175,069 (MWH) in FY16. A pertinent reason for the above average net profit of Rs 1,868 million and EPS of Rs 5.14 in FY14 was an inflow of high dividends from its subsidiary company, which amounted to Rs 1,666 million. Relying on WAPDA as its sole customer has caused liquidity problems for ALTN similar to many other IPPs but the company has so far been able to manage cashflows effectively.
In FY16, ALTN operations suffered from partial / complete disconnections of gas by Sui Northern Gas Pipelines Limited (SNGPL), due to acute gas shortage in winter months. Moreover, the company also undertook maintenance of engines that had reached 46000 operating hours according to the company report.
According to the agreement of gas provision to ATLN's subsidiary RPPL, the Ministry of Petroleum and Natural Resources issued an allocation of 85 MMSCFD of RLNG to RPPL on a firm basis in September, 2015 with long term gas supply agreement under process.
Snapshot 1QFY17 ATLN saw a 15 percent rise in its bottom-line for 1QFY17 as compared to the previous year on the back of increased sales and reduced financing cost. The company saw a surge of 6.5 percent in revenues as compared to the same period in the previous year. Moreover, it slashed its financing costs by almost 88 percent which registered a positive impact on the company bottom-line. ATLN paid outstanding sponsors' loan amounting to Rs 104 million including accrued mark-up.
During the quarter the company is still beleaguered by outstanding payment issues involving its sole purchaser, WAPDA. On a positive note the company received uninterrupted gas supply barring a drop-in gas pressure on some occasions. The performance statistics indicated a dispatch of 60.2 GWh electricity to WAPDA as compared to 61.9 GWh delivered 1QFY16.
Stock performance Altern Energy Limited started the year on a positive note outperforming the benchmark KSE-100 index for a short time period. By end January ALTN lagged behind the KSE-100 and continued to underperform the index till September, 2016. However, it showed an impressive surge in September which gave momentum for the next couple of months. The stock ended the year on a downward trajectory with some rebound being observed in January, 2017.
Future outlook
Although gas based power plants have been under increased pressure due to the acute gas shortage in the country, the provision of imported RLNG has been a boon for the power sector. As new RLNG terminals are being set up to increase the supply of imported RLNG in view of the Pak-Qatar gas agreement, gas based IPPs including Altern Energy seem to have a promising future.

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Altern Energy Limited

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Rs (mn)                   Q1FY17    Q1FY16      YoY

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Sales                      570.3     535.6     6.5%

Cost of Sales             -469.0    -432.6       8%

Gross Profit               101.2     102.9      -2%

Administrative cost         -8.5      -5.9      46%

Finance cost                -3.2     -27.2     -88%

Profit before taxation      89.6      77.8      15%

Taxation                     0.0      -0.2     -88%

Profit after tax            89.6      77.6      15%

Earnings per share (Rs)     0.25      0.21      19%

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Source: Company Accounts

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Altern Energy Limited: Pattern of shareholding           Percentage share held

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Directors, CEO & their spouse/minor childr                               0.001

Associated Companies and Related Parties of which                        58.17

Descon Engineering Limited (CDC)                                         58.17

Banks, DFI's, NBFIs, insurance/takaful firms, modarabas & pension Funds   1.22

Mutual funds                                                              0.09

Foreign investors of which                                                18.5

Saudi Arabian Construction and Repair Co                                 17.05

General public (Local)                                                     4.8

Joint-stock companies                                                    17.05

Others                                                                    0.15

Total                                                                      100

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