Altern Energy Limited

Altern Energy Limited (PSX: ALTN) operates a gas based thermal power plant located in Attock, Punjab. The company's sole customer is the Water and Power Development Authority (WAPDA) under a 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 MW from its gas-fired combined cycle thermal power in Khanewal, Punjab.
Historical performance
ALTN has registered stable gross profit margins in the past five years with the bottom-line registering positive growth over the years. However, the company's revenues and bottom-line have fallen in the past three years relative to exceptional performance during FY14
The despatches were highest in FY14 amounting to 205,398 megawatt hours (MWH,) which have since fallen to 187,884 (MWH) in FY17. 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. The dependence of ALTN on WAPDA as the sole power purchaser has resulted in some liquidity problems, but so far it has managed its cash flows effectively.
FY16 saw company 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 46,000 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.
ALTN witnessed decent growth in sales on account of higher despatches during FY17. The company also reduced its financing cost by paying off Rs 104 million including accrued mark-up during the period. The provision of gas also improved resulting in better performance for FY17. During the period when gas was not available the company undertook major annual maintenance activities on its plant.
Similar to other IPPs, Altern is also facing liquidity constraints due to delay in payment by the Central Power Purchasing Agency (CPPA-G). The company notes in its recent quarterly performance for 1QFY18 that the total amount of receivables as of 30 September, 2017 stood at Rs 812 million.
Stock performance
ALTN lagged behind the KSE-100 and continued to underperform the index till August, 2017. However, it has since moved in tandem with the benchmark index and during recent times has actually outperformed it by a narrow margin.
Future outlook
As this column has discussed before, the government is keen to make R-LNG the fuel of choice and is intent on increasing its proportion in the overall fuel mix of the country. The construction of new RLNG terminals and the provision of uninterrupted and cost effective gas supply is a key factor in the future profitability of ALTN. As new RLNG terminals are being set up to increase the supply of imported RLNG, gas based IPPs including Altern Energy seem to have a promising future.

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Altern Energy Limited: Pattern of shareholding    Percentage share held
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Directors, CEO & their spouse/minor children                      0.001
Associated Companies and Related Parties                          58.17
Of which Descon Engineering Limited (CDC)                         58.17
Banks, DFI's, NBFIs, insurance/takaful firms,
modarabas & pension Funds                                          1.22
Mutual funds                                                       0.09
Foreign investors                                                  18.5
Of which Saudi Arabian Construction and Repair Co Ltd             17.05
General public (Local)                                              4.8
Joint-stock companies                                             17.05
Others                                                             0.15
Total                                                               100
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