Pakistan Energy: HSFO cracks tank HSD MS make a comeback
- Oct’19 rounds out the culmination of a watershed mark for international refining margins, with MS/HSD/HSFO crack to Arab Light for the month averaging US$+3.90/+11.39/-18.82/bbl below vs. 1QFY20 averages +3.2/+11.5/-6.5/bbl where HSFO shows a clear break downward as IMO 2020 rules and slowing demand from marine bunkering worsen cracks
- FY20TD average cracks of light distillates HSD/MS averaging at US$+11.5/+3.5/bbl firming their spreads (vs. 4QFY19 average of +8.9/+1.7/bbl) and HSFO cracks worsening to average -9.56/bbl (vs. 4QFY20 average of -9.4/bbl) tanking to US$-18.8/bbl below Arab Light crude during Oct’19, contrasting the significant divergence between light vs. heavy distillate prices
- Crude prices have remained tethered to a narrow threshold of US$55-65/bbl while recovering sharply from any supply shocks as excess capacity in OPEC markets, heightened trade tensions and soft demand from emerging markets keep oil markets slightly over supplied
- Monitoring the impact of IMO 2020 through HSFO 180 CST commodity futures contracts we highlight the significant downtrend indicated by lower HSFO futures prices for delivery contracts during 1QFY20 (lower by US$101.3/mt on average) extending to CY20, indicating a period of extended decline in soon to be phased out, high Sulphur variant of FO still used for power generation domestically (see: IMO-2020 can be a 'lucky break' for FO IPPs, Mar 28, 2019)
- While refiners remain on the firing block (downtrend in GRMs for FO), based on its slow and steady operational performance (holding on to market share), we believe APL can capitalize on a possible revival in private sector (captive power) and IPP bulk sales.
AKD Research
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.
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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