KAPCO in times of change

Quite a few changes have occurred since Kot Addu Power Company Limited (PSX: KAPCO) announced its financial performance for the first quarter of FY18. First, an important development at that time was KAPCO’s bid for acquisition of a 17.4 percent stake in the Hub Power Company Limited (PSX: HUBC) where around 14.9 percent of the stake was to be divested by Dawood Hercules group while the remainder was being offered by other shareholders. However, the deal with KAPCO got suspended later.

Second change for the company in these times has been the sudden closure of RFO based power plants. The company has a multi-fuel plant, and is likely to operate mostly on RLNG going forward. In such a case, the IPP will see a change in its revenue mix as RFO based generation will continue to fall for the company, which may not adversely affect KAPCO’s profitability as such as the plant is fuel ‘inefficient’ and therefore benefits if utilisation levels fall, as highlighted by Elixir Securities.

A third change in stance for KAPCO is the minimal chances of its Power Purchase Agreement (PPA) being renewed.

Published in Business Recorder, 27th February, 2018