Pakistan Power_ Whole new world for IPPs, (AKD Daily, Aug 17, 2020)
AKD Daily
Pakistan Power: Whole new world for IPPs
- In light of recently inked MoUs between the GoP and IPPs operating under 1994 and 2002 power policies, Pakistan’s power landscape has embarked on another crucial chapter, setting it towards on a more sustainable path over the longer term. Understandably, terms of the MoUs combined with contingent cash injection similar to Energy Sukuks I & II are major fundamental events altering our forecasts and valuations.
- The 2002 PP IPPs have agreed to ROE of 17% in PkR terms as opposed to USD indexation previously. At these rates, Nishat IPPs may be sustainably able to maintain DPS of PkR2.5 at 17% PkR based ROE, going forward, implying D/Y of 10/15% for NPL/NCPL vs. 3yr PIB rate of 8.3%.
- Possibility of termination of existing plants operating at minimal levels is still under negotiation with the GoP. Middle-ground in these negotiations could be a one-time settlement of overdue receivables and termination PPA for the remaining period, which could still be a beneficial decision for both IPPs and the overall energy chain.
- We look forward to the result of GoP’s reported negotiations in a similar vein, with Chinese sponsors (mostly SOEs) of CPEC projects, proposing a reduction in ROEs (negative for IPPs’ cashflows) and extending debt repayment tenures (neutral for IPPs’ cashflows).
AKD Research
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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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