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

Okay. Welcome, everyone, to the second quarter analyst briefing for Engro Powergen Qadirpur. How the [Foreign Language] agenda will be, I'll take you through the presentation. And once we are done with the presentation, then you can ask your questions. [Operator Instructions]. So let's start with the presentation quickly. This was uploaded, so you guys might have already seen it. But I'm just going take a quick -- in terms of agenda, we start with the update on the economy and the power sector. This is something you guys probably know better than we do. So the GDP is [Foreign Language] growing not at the rate that was forecasted but doing better than last year. Inflation was higher for the fiscal year that just ended and the policy rate was also higher. there are certain elements of the geopolitical situation that has impact on all of these obviously. In terms of the power sector update. The power demand has slightly increased and this is thanks to the better GDP that we have some higher demand from the industrial sector. But the domestic and agricultural sector continues to be heavily -- any energy upside is heavily being sourced through solar. And so that's one thing that's impacting the demand for the power sector overall. Circular debt was slightly higher. And although for the IPPs it was kind of better if we compare June versus last year June, but overall, the circular debt was slightly higher, very, very [ small distance ] to the revenue. So moving on in terms of Qadirpur, how did the first half look for us? We had almost 12.1 million work hours completed safely [Foreign Language] without any LWI. We maintain the merit order on gas and now we have PEL also. So we have the orders were almost the same as last year. Collection was 98% for the first 6 months and scheduled outage was successfully completed. This was in the month of May. EPQL won 2 awards for safety one was RoSPA Health and Safety Gold Award and was one British Safety Council International Award. So those two achievements for EPQL in 2026. And in terms of CSR Initiatives this is something we are continuously doing. So this is just an update that it was ongoing as usual with the [indiscernible]. Moving on in terms of financial performance. The revenue versus last year was higher. And the earnings per share, however, was lower, as you can see from the profit after tax, which is slightly lesser than last year first half. And the reason behind this mainly that you must have seen from the detailed financials also is coming from finance income side, and that's mainly because of the delayed payment interest, which was less for this year as we had lower receivables compared to Q1 2025 where we received the bullet payment I think end of quarter 1 last year. There was a heavy DPI that was incurred in the first quarter of 2025. So that's essentially the difference. Moving on to operational highlights. The billable availability factor for the first half was lower for 2026. This mainly happened in quarter 1 we had certain issue in the plant generator and we had to go offline for a few days. Alot consecutively but over a period of 2 to 3 months, this accounted for a few forced outages, which went above the quota that's assigned to the IPP, which is why you see a dip in the availability factor. Our quota gets reset in April every year. So the first 3 months, we could not cover that through the available quota for [indiscernible]. This is something that is also being reflected in other financial KPIs that you might have seen in detail financial statement. In terms of Net Electrical Output, we were able to do better than last year. One major reason was that last year, we had a major scheduled outage of almost 20 days. This year, our scheduled outage was smaller. It was for almost 10 days. So we were able to catch up on the load factor there. And then other than that, we also have the [indiscernible] incremental impact coming through slowly and steadily. So it's covering up with depletion from the permeate gas and we're able to dispatch more as long as the demand sustains. Same thing that you can see in the load factor, same reason. So I'll move on to the next slide. Total receivables for this first half of 2026 are slightly higher than last year. As you are aware, we got a bullet payment last year end of, I think, March, which cleared all the pending receivables at that time. And for now, we are slightly higher because the load factor is slightly higher than the revenue is higher because the gas prices increased, I think second half of last year. So all of things are adding up to the receivables. But as I mentioned earlier, our collection is almost 98% for the first half so not too bad. Finally, in terms of the key business risks these are the ongoing risks that we highlight, I think, in every analyst briefing. Nothing new has come here. But yes, the volatile foreign currency exchange and economic liquidity risk based on the recent geopolitical situation have not yet thankfully impacted the business significantly, but we are watching out and we are ensuring that we are -- we have the necessary business continuity plan in place to ensure that there are no jumps upside and downside major on the cost that we face. In terms of circular debt, our collections are 98%. We're managing that [Foreign Language] than in terms of policies, merit order thankfully, no update on this, no -- I mean, negative outcome on this till now, thankfully and, yes, so on non-implications non-approval of GDMO we have the next slide coming up where we are talking about how we're mitigating this risk. There are multiple fuel options that we always highlight that we're working on. Most actively, we are working on the Kandhkot gas and currently the status is that this is pending with the federal government for final allocation to this sector. We need to see which sector it is finally allocated to. But from our side, we've done all kinds of engagements and alignment as federal government everything shows and this is admitted to the power sector and once that is done we continue to engage to get it for [indiscernible] from our commercial team [indiscernible] making sure that we are able to unlock this substantial [indiscernible] and we are able to see [indiscernible] in the coming years. But [indiscernible] on that as we have no major [indiscernible]. So with that we come through the end of our presentation and we would like to take a questions please feel free to raise your hand if you want to ask a question and you can also post them in the chat whatever works for you.

One question till now [indiscernible] as we look towards 2027 and the eventual end of life contract terms, what is the management's baseline financial forecast and business continuation strategy? We just mentioned that we're looking at and working actively towards setting the Kandhkot gas, which shall be able to increase our load factor to something around 70% currently which is around 42%. So hoping that, that upside will bring in the necessary earnings that the business requires and the investors are looking forward. There is a question in the chat. I take 2 more questions from [ Amin Suleman ] you mentioned that Kandhkot gas along [indiscernible] their supplies. So yes, we -- I mean, we cannot provide a time line right now because the approval from the government is not something that we are certain off that it will come. But we are looking at something, say around early 2028 or maybe end of 2027. That's what I can say at the moment, but this is a very, very tentative time line where it's high level. A lot depends on how federal government takes this forward and what -- where do they allocate these new gas potentials that are coming through. And then [ Hasan Jawed ] had a question given historical decision of Engro Energy to divest its thermal assets and taking account of finding new motivation behind the expression of interest in privatization of DISCOs. So Hasan I think you probably aware that is historical decision was -- is no longer being pursued. And you can take this up more with Engro Holdings in the upcoming analyst briefing also in terms of the strategic plan. But privatization of DISCO is a step in the right direction by the government and all the big corporates, I think, are very much interested in participating in the due diligence process. And let's see how the sector responds and what kind of reforms are available. Expression of interest at no point is anywhere a commitment, but it's an interest to see how the economy is going to move and what sector reforms are available. I think there's another question on the additional gas availability be sufficient or Dispatch Merit Order constraint become the next bottleneck? So see, dispatch is a bottleneck for the whole energy sector. I mean if the demand declines, then all the IPPs fight to meet that demand. So that's a different factor completely. It's not EPQL specific. [indiscernible] gas is something that we can talk about. But whenever we pitch for gas, we pitch for gas that is somewhere around the price of Permeate gas or PEL on which we have historical sufficient evidence available that we will get the dispatch. So that's something that we're looking at. And I mean getting gas at something around $8 or $10 will be something that we will not be interested in because there will be no dispatch coming through. So whatever I'm talking about, I'm talking about the range that we will be able to get dispatch. Obviously, a lot needs to be seen how these things pan out in the future, but this is currently the forecast. I think PPA related question, which is more [indiscernible]. There is a question I'm not a [indiscernible] question. So there is a question from [ Abdul Rehman Najam ] giving the completion [indiscernible] specific working capital buffer or [indiscernible] [Technical Difficulty]. Okay. So any other question you have.

I see the question from [ Pathan ] [indiscernible].

I think I already explained this [ Dhanish ] just now. I'm not sure if you joined now. But I just explained that there are multiple gas avenues potential that we're working on, which should be able to increase the load factor [Foreign Language] to somewhere around 70% to 80%. And our dividend payout ratio is very clear. We always match dividends to the EPS as long as the collections are doing well. So if those gas options are something that are successful, we should be able to have higher earnings and higher dividend payout. So as of [indiscernible] position has improved despite the broader circular debt elevated. So for IPP the circular debt was more or less the same or slightly on the lower side and or the IPP kind of benefited from this EPQL was one of them. So when the circular debt for IPPs equally increase because probably also be on the lower end of the collection. Then the circular debt improves, we will also get higher collections. So there's nothing specific to EPQL here. Yes, we do try to get more than other companies more than our industry, but trends will always be similar, either it will go up or it will go down. So we are trying our best to sustain this and the government is also trying their best to reduce circular debt as much as possible. So we are hoping that it continues to move in the right direction. Any other question. I just wait for another 2 minutes to see there is a question and if Abdul Rehman you can hear me I hope you can unmute and ask me this question because we need to clarify for the question you want to ask. There is a question coming now that from could management elaborate on the current status of the GDMO and what is the implication for EPQL load factor if approval is delayed. I am not sure what exactly you want to ask GDMO is separate thing, load factor is a separate thing. Probably you're trying to say that what happens to GDMO with the current load factor or if the additional gas options don't come to that's what I understand. If you want to unmute and ask this question please go ahead. Let me just clarify from what I understood that -- I mean this is something that we've been talking about that we've got this additional [ style guide ] which has kind of improved our load factor for this year compared to last year. If we did not have -- even with the operational constraints that we had in Q1, we were able to secure a high load factor, and that's thanks to the additional gas that we've got now. We will continue to maximize its potential and look forward to increasing that load factor further. On the other hand, the other gas options that we have in the outer years will also add to that load factor situation. And we continue to work on that also. But GDMO is a completely different thing that something under the contract that you need to get more gas and sustain a significant load factor. So we are very much complaint in that at the moment is that up all your question. And your model has been changed to take-and-pay what do you think that how can it affect your revenue. The model has already been changed to take-and-pay. It's not being changed. And in financial [indiscernible] you can already see in the financials. Nothing new is happening. So we got the clarification Abdul Rehman what cash or capital threshold does management need to see before opening up regular dividend payout again? So Abdul Rehman, the current disclosure of the [indiscernible] we have announced [ 1 PKR ] per share dividend for this quarter. And as I mentioned earlier, our dividend payout ratio is very much aligned with the earnings per share ratio. So that was the EPS and that was dividend. So we are already paying all dividends. I'm not sure how would you define opening of regular dividend [ warehouse ]. So no more questions that I can see at the moment. Thank you, everyone, for joining in, and we look forward to see you in the next quarter [Foreign Language].