EUR 9.34 For Business Accounts Only

Pakistan Power: Strong FY20 Generation ends with a thud, (AKD Daily, Jul 30, 2020)

AKD Daily

Pakistan Power: Strong FY20 Generation ends with a thud

• CPPA-G generation numbers illustrate the lift afforded from capacity additions (3,567MW of nameplate capacity added in FY20, total at 34,157) where cumulative units generated stood at 121.77TwH slightly lower (-0.8%YoY), with 2HFY20 cumulative generation understandably soft due to COVID imposed disruptions (-4%YoY/-17% vs. 1HFY20)
• Cumulative FY20 generation mix remains FO and HSD-minus, where Hydel retains the top spot in the mix (30.3% avg.) with Coal generation rising to the second spot (22.8% share). RLNG has climbed to the top three (18.2% share) followed by natural gas (18.2%) making for a more diversified power mix, while share of renewables (ex-hydel) is now at ~4%.
• Weighted average cost of generation has clearly benefitted from lower thermal energy fuel costs coupled with diversification away from expensive HSD/FO to Coal, settling at FY20 avg of PkR5.63/KwH down 7.2%YoY, reverting back to levels seen during FY16-17 oil price crash, with 4QFY20 avg. of PkR4.75/KwH indicating near term relief for energy system debt buildups as a result
• Higher load factors for recent additions to the national grid and gaining share of RLNG/Coal are a welcome sign, while the majority of these remain in private hands, limited equity market benefit is seen. Additionally, with recent circular debt disbursement favoring CPEC projects with foreign sponsors and ongoing negotiations with IPPs over terms of long term contracts in the offing, we remain cautious in our outlook for the space.
• HUBC remains our top pick, where upcoming results (AKD Expectation of PkR4.89/sh, DPS of PkR2.0/sh) are a key checkpoint for investor expectations. We have a Buy stance on the integrated, multi-fuel IPP with our TP of PkR160/sh, where any dividend payout is likely to trigger price performance.

AKD Research