Report
Ali Asghar Poonawala
EUR 8.86 For Business Accounts Only

Pakistan Energy :An uneven recovery for cracks post COVID-19 , (AKD Daily, Jun 02, 2020)

Pakistan Energy: An uneven recovery for cracks post COVID-19

  • POL product cracks moved erratically during May’20, aided by limited upsides priced into the demand scenario and underlying crude benchmarks recovering (May’20/FY20TD Arab light Average of US$26.3/54.1/bbl), as May’20 HSD/MS crack to Arab Light for the month averaged US$+1.9/-1.7/bbl standing below FY20TD average of US$+8.3/+US$1.1/bbl, where HSD cracks slipped drastically (-74%MoM) during the month
  • HSFO cracks retraced back to 3QCY19 levels falling 7.8xMoM to US$-5.5/bbl, where global industrial demand (April’20 PMIs at all-time lows), container traffic (falling despite Chinese ports restarting operations) are likely to keep margin recoveries short-lived, while amongst major product spreads, MS crack to Arab Light rose 70%MoM
  • As global economic activity shows initial signs of recovery and economic priorities drive long term policy responses to COVID-19 pandemics (particularly developing and low income economies), Asian POL product demand is expected to drive refined fuel demand higher, where recovery in HSD margins is much needed for rescuing refining margins (HSD constitutes 43% of 8MFY20 refining output)
  • With about 48% of cumulative refining output at gross loss (MS/FO constitute 22/26% of 8MFY20 output), refinery output is expected to remain limited. A comparison of recent correlations between international POL benchmarks and ex-refinery pricing for HSFO/HSD/MS shows rising correlations over FY20TD vs. 3YR hist. avg., implying US$ stability as the key lever for keeping domestic POL prices low.
Underlying
Kot Addu Power

Kot Addu Power Co Ltd. Kot Addu Power Company Limited is a Pakistan-based power generation company. The Company's principal activities are to own, operate and maintain a multi-fuel fired power station with approximately 15 generating units with a nameplate capacity of 1,600 megawatts (MW) in Kot Addu, District Muzaffargarh, Punjab, Pakistan. The Company also sells the electricity produced therefrom to a single customer, the Pakistan water and power development authority. The power plant is a multi-fuel gas-turbine power plant using three fuels to generate electricity: gas, light sulfur furnace oil and high speed diesel. The plant's combined cycle technology enables it to use the waste heat from the gas turbine exhaust to produce steam in the heat recovery steam generator, which in turn is used to run the steam turbines.

Provider
AKD Securities Limited
AKD Securities Limited

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.

Analysts
Ali Asghar Poonawala

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