Nishat Power Limited (PSX: NPL) came forward with a surprisingly better financial performance for the first quarter of FY19 – beating the market sentiments and expectations of flat earnings. However, more than the company’s fundamentals, the growth in earnings came from high oil price environment, and slipping rupee.

Revenues for NPL grew by 28 percent, year-on-year in 1QFY19 despite a decline in electricity dispatches, due to higher furnace oil price in the quarter versus 1QFY18 (57 percent). Decline in dispatches resulted in lower load factor for NPL of around 75-78 percent in 1QFY19 versus 85 percent in 1QFY18.

Moreover, rupee depreciation lifted the earnings in the quarter; Gross profit was up by 14 percent year-on-yea; however, higher finance costs by 21 percent contained the bottom-line growth amid high interest rate environment.

NPL did not announce any cash dividend for the quarter. Recall that the IPP has not paid any dividend in the first three quarters of FY18 as well, but finally gave out a dividend in the last quarter of the year. Infrequent dividends are attributable to the liquidity issues amid the rising receivables and piling circular debt.

Moving on, no dividend is on the cards as well for the next quarter from NPL as the circular debt threat remains, and the government has not taken a position on how to address it. Earlier, a one-off clearance of the circular debt like that in FY13 was being talked about, but so far no decision has been taken. Where the rupee depreciation bodes well for the IPPs, the circular debt will continue to be a concern for the sector.