Engro Powergen Qadirpur Limited

Engro Powergen Qadirpur Limited (PSX: EPQL) is engaged in the business of generation and sale of power. The company is a 217 megawatts (MW) combined cycle power plant near Qadirpur, District Ghotki. The plant is a combined cycle plant, with 1+1+1 configuration; which includes one gas turbine, one heat recovery system generator (HRSG), and one steam turbine. It uses permeate gas as its primary fuel source and high speed diesel (HSD) as backup fuel to convert into electricity.

The company was incorporated in 2006 and is headquartered in Karachi. It achieved commercial operation in March 2010. EPQL was listed on the Karachi Stock Exchange in October 2014 where 25 percent of the shares were offered. It is the first power plant to be commissioned under the 2002 power policy and was completed in record time after the letter of intent (LOI) application. The electricity generated is transmitted to the National Transmission and Dispatch Company (NTDC) under the Power Purchase Agreement (PPA) dated October 26, 2007, which is valid for a period of 25 years from the date of commercial operations commencement.

The company was previously named Engro Energy (Private) Limited and was renamed as Engro Powergen Qadirpur Limited (EPQL) in October 2010.

Shareholding at EPQL

During 2014, Engro Powergen Limited and Engro Corp, respectively divested 18 percent and 100 percent of their shareholdings in EPQL. The offer aggregated to 80.95 million shares and represented 25 percent of the total shareholding of the company. It was in 2014 that Engro Powergen Qadirpur was listed in on the stock exchange.

As at December 31, 2017, the major shareholder of EPQL is Engro Energy Ltd. (formerly Engro Powergen Limited) with a shareholding of around 69 percent, while 22 percent of the shares of the power company are held by local general public. A breakup of the shareholding category-wise is given in the table.

EPQL Past performance

In 2014, the company improved upon its operational performance with an increase in net electrical output by 29 percent and billable available capacity factor of 99.9 percent versus 83.1 percent in 2013. The year was better for EPQL as in 2013; the plant went into a forced outage due to a fault in the gas turbine generator rotor. With the plant back online in 2014, better operations translated into higher profitability for EPQL. Sales revenue grew by around 29 percent, while the bottom-line was up by 39 percent, on a year-on-year basis.

During 2015, EPQL’s revenue increased by 11 percent year-on-year mainly on account of retrospective billing of GIDC pertaining to prior years. The plant demonstrated a billable availability factor of 99.7 percent vs 99.9 percent in 2014. However, the bottom-line of the company slipped by 11 percent year-on-year, which the company believes was due to lower demand owing to grid issues at power purchaser’s end and a higher planned outage for a major inspection activity; and because of this, EPQL’s load factor was 76.7 percent compared to 92.6 percent in 2014.

In 2016, EPQL’s billable availability factor improved to 100.3 percent, but the load factor dropped to 67.2 percent compared to 76.7 percent in 2015. The decline in load factor was attributed by the firm to NTDC’s transformer catching fire. However, the plant remained on standby mode until the completion of transformer repair and was entitled to full Capacity Purchase Payments (CPP) throughout the period. Revenues for 2016 were down by 14.24 percent, year-on-year due to lower load factor. Improvement in working capital position, lower running finance costs and timely payments to the fuel supplier all helped to reduce financing cost during the year, and as such kept the earnings stable.

EPQL in 2017

Keeping up the billable availability factor, 2017 was a year where EPQL improved significantly on its net electrical output with load factors rising to 92.9 percent from 67.2 percent, an increase of 25.7 percent over last year performance.

EPQL’s top-line that showed a declining trend in 2016 was up by a little over one percent, year-on-year due to improvement in load factors. Reduction in finance cost and higher absorption of operation & maintenance costs on account of increased demand in 2017 resulted in the bottom-line showing an increase of 34 percent, year-on-year.

Market and outlook

The power sector is changing rapidly in terms of energy mix, government policy and demand. Amid changing energy mix, circular debt continues to haunt the power sector. In the current situation, the company believes that relatively lower gas prices for IPPs along with higher global oil prices will help gas based power plants to rise in the merit order because of their comparatively lower input costs, higher efficiencies and better environmental parameters.

EPQL has a Gas Supply Agreement (GSA) with Sui Northern Gas Pipelines Limited (SNGPL), for supply of 75 MMCFD permeate gas from the Qadirpur gas field. Although this supply of gas is expected to deplete over time, EPQL is protected from the effects of gas depletion as its agreements allow it to commingle fuel i.e. operate the Plant on both gas and High Speed Diesel (HSD). It must also be noted that under the terms of Implementation Agreement (IA), the government is required to reimburse for fuel conversion costs and subsequent operations on alternate fuel. According to the firm, it has commenced work on finding a long term alternate fuel option.