Engro Powergen Qadirpur Limited: performance and outlook

Engro Powergen Qadirpur Limited (PSX: EPQL) is an independent power producer with 217 megawatts (MW) combined cycle power plant near Qadirpur, District Ghotki. It was incorporated in 2006 and is headquartered in Karachi.

The plant is a combined cycle plant, with 1+1+1 configuration including one gas turbine, one heat recovery system generator (HRSG), and one steam turbine. It uses permeate gas as its primary fuel source and high-speed diesel (HSD) as backup fuel to produce electricity. EPQL achieved commercial operation in March 2010 and was listed on the Karachi Stock Exchange in October 2014.

Historical Performance (2014-2020)

Overall, 2014 was a better year for EPQL after a weak 2013 due to a fault in the gas turbine generator rotor. With the plant back online in 2014, better operations translated into higher profitability for EPQL. In 2014, EPQL’s sales grew by around 29 percent, while the earnings were up by 39 percent, year-on-year.

During 2015, EPQL’s billable available capacity factor dropped slightly, and revenues depicted a moderate growth of 11 percent year-on-year mainly on account of retrospective billing of GIDC pertaining to prior years. However, EPQL’s earnings slipped by 11 percent year-on-year, which the company believes was due to lower demand owing to grid issues at power purchaser’s end and a higher planned outage for a major inspection activity; this dragged EPQL’s load factor from 92.6 percent in 2014 to 76.7 percent in 2015.

2016 marked the improvement in EPQL’s billable availability factor, but the load factor dropped further to 67.2 percent compared to 76.7 percent in 2015. This was due to NTDC’s transformer catching fire. However, the plant remained on standby mode until the completion of transformer repair and was entitled to full capacity payments throughout the period. Revenues for 2016 were down by over 14 percent, year-on-year due to lower load factor. However, earnings remained stable due to improvement in working capital position, lower running finance costs and timely payments to the fuel supplier.

In 2017, EPQL was able to raise its electricity output and hence, load factor improved from 67.2 percent to 92.9 percent in 2017. EPQL’s topline growth was due to improvement in load factors; and reduction in finance cost and higher absorption of O&M costs on account of increased demand in 2017 resulted in the bottomline showing an increase of 34 percent, year-on-year.

The power company’s revenues in CY18 remained almost the same as for the last two years. The company faced supply disruptions again in 2018 on account of gas supplier’s compressor issues, which resulted in lower load factors for the company. The firm’s bottomline was up by 10 percent due to significant decline in finance cost and no growth in cost of sales during CY18. Gross margins of the company saw an improvement in 2018 versus 2017 due to higher tariff indexation as a result of steep depreciation of the Rupee versus the US dollar.

Currency depreciation in 2018 and 2019 were key factors driving growth for Engro Powergen Qadirpur. company with revenues climbing by 11 percent year-on-year in CY19, which was due to increase in gas prices as well as currency depreciation.

In terms of power generation, the load factors in CY19 remained lower versus CY18 due to lower demand as well as gas curtailment as the key gas field Qadirpur continued to witness depletion. 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.

In CY20, Engro Powergen Qadirpur Limited’s earnings for 2020 were weaker than 2019; the IPP’s bottomline contracted by 39 percent year-on-year, which emanated from an equal percentage decline in the topline (39% YoY). The decrease in sales revenue was partially attributable to lower power dispatch in CY20, which was due to lower electrical output as demand remained constrained during the year.

Decline in offtake from the power purchaser came on the back of lower demand for power due to COVID-19 lockdown as well as the merit order position. Despite no significant increase in cost pressure as well as notable growth in other income and finance income earned on receivables in 2020 versus finance cost in 2019, EPQL’s earnings remained lower.

EPQL in recent years (2021-2024)

In CY21, sales revenue for EPQL increased by 26 percent year-on-year. The increase in sales revenue was attributable to higher dispatch during the year and was partly offset by lower capacity payments due to debt servicing component no longer being applicable. Consequently, gross profit for the year was lower, and the company’s earnings were down by 24 percent year-on-year.

In CY22, EPQL’s revenues witnessed a dip of 2 percent year-on-year. The slight decline in revenues was due to weaker utilization primarily on account of maintenance outage. A key factor for a drop in profits for CY22 was the rise in administrative costs amid rising inflation – and also a decrease in net finance income for the year by around 69 percent year-on-year.

In CY23, Engro Powergen Qadirpur Limited delivered a strong recovery in earnings despite a still-challenging power demand environment. Revenues increased by 32 percent year-on-year, supported by improved dispatch and a higher average load factor of 46 percent, up from 41 percent in CY22, primarily due to better gas availability from SNGPL.

Cost discipline remained intact, allowing gross profit to rise 56 percent year-on-year, while operating profit grew 61 percent. A key driver of bottom-line performance was a sharp 71 percent year-on-year decline in net finance costs, reflecting improved collections from the power purchaser. As a result, profit after tax rose 71 percent year-on-year.

In CY24, EPQL’s financial performance moderated as sector-wide demand pressures persisted and regulatory changes weighed on earnings. Net sales remained largely flat, while profit after tax declined 15 percent year-on-year.

The earnings contraction was largely attributable to one-off tariff amendments implemented in 4QCY24, alongside a sharp rise in other expenses, including provisioning related to late payment surcharge (LPS). Operationally, total generation edged down to 847 GWh, with the load factor easing marginally to 45 percent from 46 percent in CY23, reflecting subdued electricity demand amid high inflation and economic slowdown. On the liquidity front, receivables from CPPA-G declined, underscoring continued improvement in collections

EPQL in 1HCY25

In 1HCY25, Engro Powergen Qadirpur Limited’s performance weakened sharply, reflecting both planned operational downtime and the lingering impact of sector-wide demand softness. Net sales declined 20 percent year-on-year, while profit after tax fell 71 percent year-on-year.

The primary drag came from a scheduled 20-day major outage in May 2025—a once-every-three-years event—which materially reduced net electrical output and pulled the average load factor down to 39 percent, compared to 46 percent in the same period last year. Lower dispatch compressed gross profit by 52 percent year-on-year, while operating profit declined 62 percent despite relatively contained administrative costs.

On the balance-sheet front, however, liquidity improved meaningfully. EPQL received a bullet payment from the power purchaser during the period, reducing receivables sharply to Rs2.65 billion, from Rs9.47 billion at end-CY24. This cash inflow enabled the company to declare an exceptionally high interim cash dividend of Rs10 per share, despite muted earnings.

During the half year, EPQL also formally transitioned to a hybrid take-and-pay power purchase structure, under which a 35 percent floor load factor applies to ROE-related capacity payments, while other capacity components continue on a take-or-pay basis. Management also highlighted a modest 4 percent improvement in overall power generation during 1HCY25, indicating early signs of demand stabilization.

Outlook

Looking ahead, EPQL’s near-term outlook hinges on utilization recovery and fuel supply diversification, rather than tariff-driven upside. With the scheduled outage now behind it, the company expects load factors to normalize in 2HCY25, supported by gradually improving macroeconomic conditions, easing inflation, and a lower interest-rate environment that should lift electricity demand. A key medium-term catalyst is the expected commencement of gas supply from the Badar gas field (PEL), subject to final regulatory approvals - partially offsetting the natural decline in Qadirpur field reserves.

Using the higher-cost Badar gas is expected to move EPQL slightly down the merit order—from about 11th to 13th—but management does not expect this to meaningfully reduce electricity offtake, as the plant remains relatively cost-competitive.

The shift to a hybrid take-and-pay contract also improves earnings visibility by protecting the company during periods of low dispatch, even though it reduces guaranteed capacity payments. With receivables largely settled and balance-sheet risks under control, EPQL is now focused on steady operations and cash payouts, while future earnings will depend mainly on a recovery in demand.