Pakistan Energy_PkR200bn Clearance will be slow in moving stocks
Following-on from our note published when PkR200bn in circular debt payments was under consideration by the ECC on Nov 27th’18, we stand by our estimates of HUBC/KAPCO/PSO receiving PkR38/29/50bn in clearance payments, likely diverted to paying off dues and curtailing borrowing.
Taking cues from the June’13 PkR480bn clearance, we demark IPPs (HUBC, KAPCO) and OMC (PSO,SHEL,APL) price performance 15/30/45/60 days after the date of announcement (June 12th) followed by the date of disbursement (June 22nd), where both sectors are seen performing after 30-45 day window.
The mechanism for disbursement is more delicate this time, with funds being raised through GoP backed, SLR eligible Sukuks (through a consortium of Islamic Banks, term-sheets indicate floating rate of 6M KIBOR + 1%) with payments likely to be sourced through the Central Power Purchasing Authority.
The diversion of funds for new venture based CAPEX (HUBC) and retiring payables and short term borrowings is likely to keep a lid on payouts, while realization of un-booked penal income could lift profitability for PSO.
On a broader note, key concerns regarding DISCO performance and crucial transmission CAPEX need to be addressed, while policy dissonance (statement by Commerce Advisor) keep a cloud of uncertainty over the space in the long term.
AKD Research
Hub Power Company is a holding company. Through its subsidiaries, Co. is engaged as a power producer in Pakistan that focuses on developing, owning, operating and maintaining power stations. Co. supplies electricity to Water and Power Development Authority and National Transmission and Despatch Company under long term Power Purchase Agreements for its Hub and Narowal plants respectively.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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