AKD Securities Limited Equity Research – Daily Report (12-11-2019)

Karachi, November 12, 2019 (PPI-OT): Pakistan Energy: Another day, Another debt settlement Part II

Apropos our previously published note (Another day, Another debt settlement) we layout a comprehensive framework for another Energy Sukuk issue, reportedly at PkR250bn, requiring clearance from the IMF for raising sovereign guarantees threshold from current PkR1.6trn.

As opposed to Energy Sukuk I, we expect a higher amount i.e. PkR65-70bn to be routed towards IPPs in the second tranche of Sukuk. Payout potential is dependent on capacity payments received by each IPP, as energy payments will likely be directed towards PSO and SNGP, where we highlight KAPCO (low payables to PSO and SNGP) and NPL (least leveraged) as more likely to resume payout.

With a higher current liabilities, HUBC can be expected to divert the settlement amount towards retiring short term debt and CAPEX, leaving little room for payouts, in our view. Despite high D/A of KAPCO, low payables to PSO/SNGP leave some space for payouts.

We expect PSO, sole beneficiary from OMC sector, to receive PkR45bn from the next tranche of circular debt clearance, aiding the company in repaying the FE-25 borrowing while also providing room to move forward with planned capital expenditures.

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