Pakistan Power_Generation climbs unabated – Reforms are WIP,(AKD Daily, Oct 16, 2020)
- CPPA-G data indicated power generation in Aug’20 increased 4% YoY to 14,630GWh. For 2MFY21, FO based generation, while up 28%YoY, contributed 5.6% to the generation mix with RLNG/coal based generation rising to the fore, contributing c. ~40% to the power mix.
- Company wise, HUBC base plant remained in-operational in 2MFY21. While less severely affected, Nishat IPPs and Narowal also operated at 20-40% utilization levels, with NCPL lagging the rest, depicting a decline of 31ppt YoY in terms of load factors. KAPCO, being multi fueled, operated at 50% in 2MFY21 vs. 64% in the same period last year.
- If Take and Pay becomes effective, as per the recent MoUs signed with 2002 IPPs, the linkage of capacity payments with load factors vs. availability, will be materially negative for profitability. We highlight HUBC as our top pick, due to multi-project exposure through its diverse power portfolio.
- Assessing the impact of recently signed MoUs by HUBC, our back of the envelop calculations suggest potential downward revision in TP by PkR10.0/sh, for fixing RoE/PCE component of Narowal/Base plant at US$/PkR rates of 168/148. Even if Narowal plant switches to ‘Take and Pay’ agreement, this would result in another downward revision of PkR7.0/sh in our valuation, still keeping us Bullish on the scrip (TP: PkR160/sh).
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.
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