As per media sources, ECC has approved the 2nd installment of PKR 96bn to the IPPs of the 2022 power policy, as per the agreement (60% of the outstanding amount). To recall, earlier in the year (Jan’22), the Govt. disbursed the first installment of PKR 64bn.

The payment mechanism agreed between the govt. and IPPs was as follows:

o  1st Installment: 40% of outstanding amount (breakup: 33.3% cash, 33.3% SUKUK and 33.3% floating PIBs)

o  2nd Installment: 60% of outstanding to be paid after six months (breakup: 33.3% cash, 33.3% SUKUK, and 33.3% floating PIBs)

Among the listed IPPs, Narowal Energy (100% owned subsidiary of HUBC) will receive the highest amount of PKR 9.7bn (PKR 7.48/share) followed by NPL, which will receive PKR 8.6bn (PKR 24.15/share). While SPWL and EPQL will be given PKR 5.7bn and PKR 4.9bn, respectively.

We believe in the case of NCPL, Gov’t will hold the excess profit amount (PKR 8.4bn) until the final decision.

However, if EPQL pays 48% of outstanding liabilities it will be left with zero cash for payout. In the case of SPWL, after the retirement of 50% of outstanding liabilities, PKR 5.74/share will be available for distribution. NPL has already decreased its liabilities to PKR 787mn as of Mar’22 and after retiring its 100% liabilities, the company will be left with PKR 21.9/share cash available for distribution. In the case of HUBC, the breakup of liabilities of Narowal Energy Limited is not available therefore, we have assumed the available cash as free cash which is PKR 7.5/share.

Courtesy – AHL Research