EUR 4.42 For Business Accounts Only

Intermarket Pulse: Pakistan IPPs: Overall tariff on a decline; payout from smaller IPPs worth tracking

• As per NEPRA, electricity generation for May’17 clocked in at 10,880GWh, up 9%YoY/23%MoM. Contribution of hydel generation in energy mix increased substantially, leading to a decline in average tariff. With historically higher contribution of hydel based generation in May-Sep’17, the average tariffs shall remain in check near term.

• Higher oil price in 12M has evidently led to lower dispatch from major FO based players, where energy dispatched by HUBC base plant in May’17 decreased 11%YoY. However, the demand shifted to more efficient, smaller IPPs, where dispatch from NPL, NCPL and Narowal increased 10%YoY, 11%YoY and 16%YoY respectively.

• Higher dispatches may translate into higher O&M and fuel savings on a YoY basis. However, the payout of small IPPs (NPL and NCPL) remains contingent upon receivables settlement. In this backdrop, ALTN has recently surprised investors with a PkR4.0/sh interim dividend.