Power_Debt clearance plan sugar-coats arrears
News flows of a mechanism for re-profiling debt arrears in the power chain have pushed circular debt back to the limelight, where noteworthy developments include: 1) power sector arrears climbing to PkR472.7bn (PkR922bn including PkR450bn parked in Government Power Holdings Pvt Ltd) a rise of PkR79.7bn during CY17, 2) possible retirement of PkR514bn (with PkR140bn in the short run) in debt as of Dec'17 with a mix of commercial financing (for GPHL and DISCOs) and TFC's issued against payables due to IPPs (similar to circular debt resolution plan entered into by PSO in July'12 for PkR43.8bn at coupon of 11.5%) and 3) continuation of previously imposed surcharges being enacted through NEPRA, resulting in additional annual collections of PkR~59.05bn in FY18 with the majority of funds going towards rationalization surcharge to collect operational cost of DISCOs and tariff setting not covered in the tariff itself, varying across consumer categories and DISCOs. On all these fronts, we look at likely factors impacting the country's energy chain, where we believe a thorough, verified enactment of TFCs against receivables to IPPs is a given, largely re-profiling debt in the sector and formalizing arrears to IPPs, in our view. At the same time, formalization of debts due in the sector with additional liquidity from periodic coupon payments, and a FO-lite future make PSO a key beneficiary of this reform. At a June'18 TP of PkR382/sh current price levels offer 25% upside.
Pakistan State Oil is a petroleum group based in Pakistan. Co.'s principal activities are the procurement, storage and marketing of petroleum and related products. Co. also blends and markets various kinds of lubricating oils.
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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