Engro Powergen Qadirpur Limited (EPQL) Earnings Call Transcript & Summary

We'll start with the present. And once we are done with the present, we'll open for questions. [Operator Instructions] [Foreign Language] first is key highlights, then financial performance and future outlook. So moving on to the next slide. So key organizational developments for the first half of 2025. We February amendment agreement signed [Foreign Language] announcement in that you guys have all read where we shifted to hybrid take and pay regime. Based on that, bullet payment received in March 2025, just before the quarter 1 closing. And based on that cash flow that we got from our customer, we were able to pay out a dividend of PKR 10 per share, partially which was in Q1 and some of it is now being paid out as part of Q2 closing. In terms of operations and commercial updates, we maintained high merit order position on permeate gas. And we also had a scheduled outage [Foreign Language] in May 2025. So that has been executed successfully. [Foreign Language] In terms of quality standards, 100% compliance on operational quality standards. And in terms of safety, 11.6 million work hours safely completed since COD to June 2025 time line. CSR initiatives continue skill develop training, healthcare facilities that we operate around the plant area, [Foreign Language] those CSR initiatives continued as is for the first half of the year also. Moving on to the operational highlights. billable availability factor remained 100% same as last year. Net electrical output went down first half 2025, it's gone down from 437 to 363. And that's basically due to the scheduled outage [Foreign Language] Similar pattern can be seen in the load factor also, which has gone down from 46% to 39%. But this is something that we planned for. So there is nothing that is unexpected here. This was a scheduled outage, which was necessary to ensure the health of the plant so that we have executed successfully. Next slide. Okay. In terms of financial performance, total revenue is around PKR 5.3 billion and versus last year to have a slightly lower, obviously, because of the hybrid take and pay and due to the lower load factor that you've just seen in the previous slide. EPS correspond PKR 1.42 per share versus last year of around PKR 5 per share. And the decline in earnings is mainly due to the lower dispatch and the hybrid take and pay model that we moved to and combined with that lower financial income also because, as you know, the DPI is no longer a big amount as we have received most of the payments from CPPA. So profit after tax [Foreign Language] PKR 1.6 billion, PKR 0.5 million, PKR 460 million to be precise. And the reasons are the same as I just discussed. Bullet payment [Foreign Language] in Q1 2025, we were around PKR 3 billion, going down from PKR 9.5 billion. And at the end of Q2, we have a receivable position of PKR 2.7 billion. So that's how the receivables have moved. And I think that's all on the financial performance. Now coming to the future outlook. [Foreign Language] since last year that we have seen in the power demand, which has slightly gone up in the first half 2025, 4% increase in demand and thanks to the inflation and interest rates going in the right direction. So this 4% increase in demand we are expecting it will stay like this in the coming months and the coming years. Alternate fuel front, [Foreign Language] PEL gas [Foreign Language] in the previous analyst briefing also. PEL gas is the main discussion point at this point in time with the government. You should have read multiple articles where we are liaising with the ministry level with the Petroleum Ministry and Power some positive updates on this. So we are hoping we will be able to close it with CPPA-G very soon. And then we can move on to getting approvals from the rest of the regulators. Other than that, obviously, we are still exploring other fuel options [Foreign Language] the profitability for the betterment of the business and the profitability. We are exploring all available fuel options as we can. And so company's management is actively working to source as much gas as we can, and we'll keep everyone updated if there is any news over here. So that's all from our side, in terms of the updates. We are open for questions. Feel free to let us know in the box -- chat box. [Foreign Language] the questions. So we'll just...

Declining trend declining trend, as I just explained in Q2 2025 is mainly due to the scheduled outage that was planned. [Foreign Language] I hope that has answered that question. That is the answer to plant utilization in lower [Foreign Language] but you know that there are some regulatory approvals pending. So we are hoping to do it ASAP, which means that we are hoping to do it this year, but fingers crossed because regulatory approvals can take some time. So all I can say is finger crossed and we are trying our best. With O&M on a floating mechanism -- on a floating mechanism, can you explain the relevant indexations? I'm not sure what exactly do you mean here? If you can please elaborate that question further. EPQS utilization has been stable at around 45%. Can we expect the company to increase utilization? We can increase utilization as soon as PEL is injected in the system, approvals pending as soon as we get that. [Foreign Language] we'll be able to increase the utilization. Okay. So the next question is, can you please elaborate how long was scheduled shutdown? And why was there no notice in the PSX alerts before, during and after the shutdown? How does the plant up time look in Q3? Okay. [Foreign Language] So it was not an unforeseen event [Foreign Language] there was no PSX alert on this. And in Q3, we have no -- so this scheduled outage that I'm talking about takes place once in 3 years, this 20 days long outage. But in Q3, there is no such thing planned. So the load factor will continue as you have seen in the previous quarters. [Foreign Language] Whatever you want to incur in terms of your capital expenditures, you have to maintain a reserve for that. That's what it is for. It's not something that's available for dividends. [Foreign Language] EPS for the first half is lower, but we have maintained a very good dividend per share ratio. So we are hopeful we will continue to do that as far as our liquidity position allows. We can take a online question. Ahmed you are unmuted, can you please ask the question.

I have 2 questions. First, you partially answered regarding the dividend. But my query is that your half year earnings were PKR 5 approximately. But in this half year, you have paid PKR 10 as dividend, which was probably the highest in your history apparently. So I just wanted to know, I mean, wouldn't it be a good idea to keep this surplus cash with the company and invest it in some other avenues to earn more revenue rather than paying the highest dividend.

So Amed, I'm guessing you're not a shareholder for sure. That's why you're asking this question. But the answer to your question is, we are managing liquidity as far as we can. And we only announce dividends when we are in a comfortable position. So [Foreign Language] EPS just explained that it's PKR 1.4 per share. But because we got a bullet payment, we had liquid cash. And we think that we -- that liquid cash, first, we need to share that with the shareholders. So that's why you see this dividend out there. If there is any liquidity concern, we will obviously reduce the dividend going forward. But for now, as I can answer for the present situation, our liquidity position allowed us to announce that dividend, and that's what we did.

Well, I have another question. In the beginning of this calendar year, when you were about to execute the agreement for sale of the plant, you arrived at a certain value. But suddenly -- later on, this deal couldn't get on with it. So my question is that, that sale consideration was lower than the amount that is being carried on in your financial statements. So what was the reason of not booking the impairment being the difference between that particular value and the carrying value of assets?

Sale transaction it's obviously something that is beyond me. It's an E Corp and EEL decision and they negotiate on the amount. But the sale did not go through, right? So just a sale was in place, there was an accounting treatment being followed. [Foreign Language] IFRS held for sale [Foreign Language] and we don't see any impairment indicator there. So that's why we have not taken any impairment.

Don't you think that the -- I mean your plant is quite an old plant and the technology has been changing pretty rapidly. So still you feel that the impairment would not be necessary in the coming years?

Yes. That's what we think. And -- there's a whole process that goes behind it, Ahmed. We do multiple valuations. [Foreign Language] so make sure that we have satisfied them at all levels to ensure that an impairment does not need to be booked right now.

My name is Abul Rehman from ARN Financial Advisors. I wanted to ask, as you mentioned that now the company has moved to the hybrid take or pay model. So what is the load factor beyond which the capacity payments start increasing? Or for easiness for everyone, if you can mention the rough capacity payment the company will be receiving if the load factor is, let's say, 50% and how much would the amount increase if we get the gas and the load factor increases to 70% to 75%?

[Foreign Language]

In the case load factor [Foreign Language]

[Foreign Language] If for any reason [Foreign Language]

And if it increases to 100%, we will go back to the amount which the company was receiving prior to the agreement.

Yes, yes, you're right.

So there's a question on receivables. Are payments happening regularly now or we see receivables building up again? -- receivable –

[Foreign Language] So the collection is not 100%, obviously, but it's better. And since the bullet payment has been received, the collection has been better than what we were seeing in the last few years. So collection not 100%, it's a good amount. It's a good percentage. Qadirpur has been on a depleting trend. [Foreign Language] not where we get the gas from. So EPQL has been on a depletion phase, not year to year, but yes over the years you gradually see a depleting trend. And this is I think knowledge that everyone has [Foreign Language] that's on a depletion phase, [Foreign Language]. It's thankfully not happening every month or every quarter. Any chance for any more bump up payouts? It depends on the Pakistani macroeconomic situation. If things are good [Foreign Language] Okay. So more questions here. Will IPP such as EPQL receive any further payments from the ongoing secular debt settlement transaction? We are not aware of it. [Foreign Language] I will not be able to answer that. But if we get more information we'll see. [Foreign Language] we don't have any further information that we received also on this. put information here. IP such as EPL receive any further payments from the ongoing circular debt settlement transaction? We are not aware of it, I will not be able to answer that. But if we have -- if we get more information, we'll see, but we don't have any further information that we received also on this. Actually, O&M has been renegotiated where the reference will be fixed for a period of 1 year, then the index amount for the year will become next year's reference. Can you please explain this indexation? [Foreign Language] We don't have the exact answer to your question. As you know, amendment agreement signed, there have been lots of changes. So we are still fine-tuning a lot of things with CPPA-G. As soon as we have that answer, we'll be able to get back to you. This is something that's still being figured out. Any more questions? I think I have missed. How much in terms of percentage is the load factor expected to improve if you get approval for PEL? How much is it? I'll just confirm shortly. Okay. if we get PEL gas available approved by the regulatory authorities, we intend to go from, say, the current load factor to somewhere around 48% to 50%. There's a question if the 35% threshold is for all CPP components or just for ROE? So it's just for ROE, ROE DC components, not for all CPP components. [Foreign Language] recently position on that, we are #9. Before that, we were #11. So we are also trying to figure out, how did that move because there have been no changes from our side in terms of the fuel cost or the variable cost. So that's something that's being investigated. There are 2 plants which are no longer appearing in the merit order, which is why we've been bumped up by 2 positions. But we are at #9 right now. So efficiency, as per the standard PPA, there has been no change, and we don't foresee any change. [Foreign Language] yes, they are take or pay. Sorry. What's the question? 50% of what total load factor? No. 50% of total load factor, not 50% increase. [Foreign Language] So that will go up to 50%. Last year was 45%, sorry. Can you share any other CCP operating at PEL gas and what are the load factors? Sorry, I don't understand the question. If you can please explain that. [Foreign Language] Not that we are aware of. Savings on O&M and fuel savings with the government. Company sharing O&M fuel savings question. So that is mandated as per MOU we signed. [Foreign Language] So we will share, obviously, because it's part of the contract. But, we in terms of timing, I'm not able to confirm exactly. [Foreign Language] Any more questions? Anyone wants to ask anything else? In case of no more questions, we are going to sign off. Thank you so much, everyone, for taking out the time and for attending this session. We don't see any more questions at the moment. So we'll sign off now. Is there a question -- sorry, there's a question. Please confirm that company will not be receiving finance income on late payment. Okay. So this is a delayed payment interest. No, we will be receiving DPI going forward. [Foreign Language] because the chunk of late payments significantly reduced. [Foreign Language] We'll receive DPI if payments are delayed. Dollar will be packed at PKR 168 per USD. That was locked in the MOU that we signed in 2022. All right. Thank you so much, guys, for joining in and for taking out the time. That's all from my side. Thank you.