The incumbent government is planning to repay overdue circular debt receivables of ~PKR 450bn in three phases (first tranche of PKR ~150bn will be paid immediately while second and third tranche will be paid in Jun’21 and Dec’21, respectively). This development will ease off liquidity position of Independent Power Producers (IPPs) significantly and might result in dividend payment to shareholders.

We have identified major indirect beneficiaries post resolution of overdue receivables position of IPPs.

Nishat Mills Limited (NML) owns significant shareholding in three IPPs namely Nishat Power Limited (51%), Pakgen Power Limited (27.6%) and Lalpir Power Limited (28.8%). If these IPPs receive the entire outstanding amount, it might result in dividend income for NML (please read ahead for sensitivity). If we assume 100% payout then this will increase NML’s earnings by PKR 31.79/share, if 75% payout is assumed then earnings will augment by PKR 23.85/share, 50% payout will aid profitability by PKR 15.90/share while 25% payout will cushion the bottom-line by PKR 7.95/share.

Similarly, Nishat Chunian Limited (NCL) has a significant holding in Nishat Chunian Power Limited (NCPL). NCPL’s net receivable position per share stands at PKR 9,489mn translating into net per share of PKR 25.83. At 100% dividend payout earnings of NCL will go up by PKR 18.64/share, at 75% by PKR 13.98/share, at 50% by PKR 9.32/share and at 25% by PKR 4.66/share.

Credit to AHL Research