Pakistan Power_Striding towards the new normal, (AKD Daily, Nov 19, 2020)
- As per news reports, the government has finalized templates for five master agreements for turning MoUs with IPPs operating under 1994, 2002 and 2006 power policies into legal, amended power purchase agreements. Pertinently, 25-30% of outstanding receivables are expected to be disbursed at the time of signing of amended PPAs.
- With upcoming payments expected not to be biased towards operational plants, unlike Energy Sukuk II, 25-30% receivables settlement indicates LPL and PKGP likely to remain at the forefront in terms of payout (lower working capital needs and receivables likely to comprise mostly of capacity payments), preferring PKGP due to higher net receivables.
- Payables and short term borrowing are also expected to be determining factors for payout potential, with NPL seeming to be in the most comfortable position in terms of liquidity (liabilities only at 33% of the total receivables).
- We maintain our liking for HUBC as Narowal (2002 PP) comprises only 15% of FY21F EPS, while base plant (1994 PP) has only 7 years remaining before PPA expiry, thus diluting the impact of aforementioned MoUs on the IPP’s earnings.
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.
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