The IFC and Tomen have also provided long term loans to the company which had 137 employees as at June 30, 2005 (2004: 149).
KEL is one of the Independent Power Producers (IPPs) in Pakistan. Its principal activity is to own, operate, generate and maintain a furnace oil power station with the net capacity of 120 MW (gross capacity 131.44MW). It sells all electric power generated to Wapda in bulk. KEL power plant is situated at 35-KM Link Manga Raiwind Road Lahore.
The main equipment at power complex includes three ABB 63 MVA Step-Up Transformers, Eight Wartsila Diesel 18V46 Type Diesel Generators having rated capacity of 15.68 MW each and a Combined Cycle Heat Recovery System capable of delivering an output of 8 MW through Peter Brotherhood Steam Turbine.
The demand of dispatch from Wapda during the year was higher than the last year.
The load factor for FY05 stood at 42% as compared with 32% of FY04. During the year 440,051 MMH of electricity was dispatched to Wapda while in the previous the company could dispatch 339,024 MMH. Five engines have been overhauled under the major maintenance programme and the rest of the engines are due to be dealt in FY06.
The prime maintenance has reportedly bestowed the power complex with a new life for smooth and constant running in future.
KEL has successfully qualified the Annual Dependable Capacity Test (ADC), conducted by Wapda, the sloe customer. The power plant demonstrated 128.52 MW capacity besides the net capacity requirement of 120 MW.
According to the Directors' Report, the company has asserted to have 4MW additional capacity over and above the already committed Dependable Capacity of 120 MW and has offered to sell it to Wapda. After due consideration reportedly WAPDA has agreed to purchase this additional capacity. At present the levellised tariff for 120 MW is 5.1994 Cents for the whole life of 30 years while for the capacity of 4 MW, KEL has agreed levellised tariff of 3.2865 US Cents (which comprises of fuel, variable O&M and escalateable components) for the remaining 23 years of project life.
In terms of the provisions of the Power Policy, the IPPs including KEL enjoy a number of incentives and are subject to a number of rights and obligations, some of which include: (i) Profit and gains derived from electric power generation are exempt from income tax. The IPPs are also exempt from minimum tax on turnover; (ii) Energy Fee or Energy Purchase Price is recognised on transmission of electricity to Wapda, whereas Capacity Fee or Capacity Purchase Price (CPP) is billed and recognised on monthly basis.
CPP is linked to contractual net capacity of the power plant and mostly covers all fixed charges including return on equity as well as debt servicing in respect of the debt raised for implementation of the power generation facility. CPP is payable in full as per contract even tough demand for electricity is low from Wapda.
This feature is the main attraction of the IPPs; and (iii) The IPPs are required to post Letters of Credit from a bank in favour of Wapda to cover liquidated damages in case they fail to provide electricity when asked by Wapda.
The lending institutions have covered various risks through a number of arrangements. KEL bank accounts are governed by Trust and Retention Agreement with lenders, whereby, the company is required to keep its entire funds with the Trustees in Offshore and Onshore Escrow accounts in foreign and local currencies respectively.
These funds are released by the Trustees out of Escrow accounts in accordance with annual budgets approved by the lenders. Special permission for operating and maintaining these accounts has reportedly been obtained from the State Bank of Pakistan.
KEL has been maintaining satisfactory financial position throughout the period under review. Both the current ratio and debt/equity ratio are reasonable. With regular payment of long term loans, debt/equity ratio will improve further. Profitability is also attractive with ROE at 17% for the year under review (2004: 18%).
Dividend payout in FY05 was 74% as against 52% for FY04. Once the agreement for sale of additional 4MW capacity is in place, revenue will further increase and profitability is also expected to improve. Performance statistics are given below.
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Performance Statistics (Rs in 000)
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Balance Sheet Audited Audited
As on June 30, 2005 2004
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Capital-Paid-up: 1,694,586 1,694,586
Reserves: 3,124,194 2,911,890
Equity: 4,818,780 4,606,476
Surplus on Revalue of FA: 0 0
Shareholders Equity: 4,818,780 4,606,476
L.T. and deferred liabilities: 809,404 1,433,456
Capitalisation: 5,628,184 6,039,932
Current Liabilities: 1,143,316 814,611
Total Liabilities and Equity: 6,771,500 6,854,543
Tangible Fixed Assets: 4,823,628 4,992,485
L.T. Advances: 4,350 4,476
Current Assets: 1,943,522 1,857,582
Total Assets: 6,771,500 6,854,543
Contingencies & Commitments: 625,341 237,889
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Ratios:
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Current Ratio: 1.70 2.28
Debt-Equity Ratio: 14: 86 24: 76
Book Value per share - Rs: 28.44 27.18
Price per Share (26-10-05)- Rs: 23.25 -
Price/Book Value Ratio: 0.82 -
Conting. & Commit/Equity: 0.13 0.05
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Income Statement
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Year Ended June 30, 2005 2004
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Sales (net of sales tax): 2,918,583 2,335,476
Gross Profit: 1,039,574 1,071,306
Operating Profit: 932,454 962,822
Profit before Taxation: 813,309 828,021
Profit after Taxation: 805,409 821,729
Cash Dividends %: 35% 25%
Cash Dividend -amount: 593,105 423,647
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Ratios:
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Gross Profit/Sales: 36% 46%
Operating Profit/Sales: 32% 41%
Profit after Tax/Sales: 28% 35%
Net profit/Equity 17% 18%
ROA: 12% 12%
ROCE: 14% 14%
Dividend Payout Ratio: 74% 52%
Earnings Per Share - (Rs): 4.75 4.85
Inventory Turnover (times): 22.33 19.29
Receivable Turnover (times): 7.41 8.32
Price/Earning Ratio: 4.89 -
Asset Turnover (times): 0.43 0.34
Days Inventory: 16 19
Days Receivable: 49 44
Debt Service Cover (times): 1.10 1.44
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Cash flow Summary (12 M) 2005 2004
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Net Cash flow, Operations: 706,230 974,043
Net Cash flow, Investing: 4,276 -13,310
Net Cash flow, Financing: -903,904 -1,127,134
Net Cash flow Position for Period: -193,398 -166,401
Cash and bank at beginning: 1,066,764 1,233,165
Cash and bank at end of period: 873,366 1,066,764
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Capacity:
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Plant capacity - Gross- MW: 128.52 128.52
Contractual net capacity- MW: 120 120
Net capacity- MWH: 1,051,200 1,051,200
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Actual Production
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Actual energy delivered in MWH: 440,051 339,024
Load Factor: 42% 32%
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COMPANY INFORMATION: Chairman: M. Naseem Saigol; Chief Executive: Haruyoshi Murakami; Director: Umer Masood Tariq; Chief Financial Officer: Ahmed Zia Haider; Company Secretary: Muhammad Asif; General Manager Technical: Ghazanfar Ali Zaidi; General Manager Operations: Muhammad Saleem Akhtar; Auditors: A.F. Ferguson & Co, Chartered Accountants; Off Shore Trustee Bank: US Bank, New York; On shore Trustee Bank: Union Bank Limited; Registered Office: 2nd Floor, Rashid Plaza, 24-D, Blue Area, Islamabad, Pakistan; Web Address: www.kel.com.pk