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Currency depreciation in 2018 and 2019 have been the key factors driving growth in the power companies that have dollar indexed capacity purchase price component. Engro Powergen Qadirpur (PSX: EPQL) has also benefitted from the same. The company’s announced its financial performance for 2019 recently with revenues seen climbing by 11 percent year-on-year, which was likely due to increase in gas prices as well as currency depreciation.

In terms of power generation, there is a likelihood that the load factors in CY19 remained lower versus CY18 due to lower demand as well as gas curtailment as the key gas field Qadirpur continues to witness depletion. While the annual production load factors are not available yet, the IPP dispatched a total Net Electrical Output (NEO) of 970 GwH to the national grid with a load factor of 69.6 percent in 9MCY19 compared to 83 percent in 9MCY18.

Restricted growth in cost of sales and decline in administrative and other operating expense lifted the gross margins and operating margins, respectively. Whereas the lift in net margins was also due to 71 percent year-on-year fall in net finance cost, which was due to higher interest income earned on receivables from the power purchaser amid rising circular debt. EPQL’s bottomline for CY19 was up by 30 percent year-on-year.

Engro Powergen Qadirpur
Rs(mn) CY19 CY18 YoY
Sales 13,201 11,874 11%
Cost of sales 9,577 8,838 8%
Gross profit 3,624 3,036 19%
Administrative expenses 87 126 -30%
Other expenses 75 88 -15%
Other income 2 2 -9%
Profit from operations 3,468 2,829 23%
Finance cost 58 196 -71%
Profit  before  taxation 3,410 2,633 30%
Taxation 3 1 212%
Profit  for  the  year 3,407 2,632 29%
EPS (Rs/share) 10.51 8.11 30%
Gross margin 27% 26%
Operating Margin 26% 24%
Net Margin 26% 22%
Source: PSX

Though profitability has seen improvement, EPQL continues to face the issue of overdue receivable from NTDC and SNGP, which stand at alarming level, impacting the company’s liquidity adversely.

As the IPP has started to face gas curtailment from Qadirpur gas field, .it has been producing electricity on mixed mode with gas and HSD since September 2018. However, HSD is an expensive fuel and EPQL has formally kick started the process of finding a long-term alternate fuel option by engaging PPIB and other stakeholders, asper its latest quarterly report (9MCY19).