AKD Securities Limited Equity Research - Daily Report.

Karachi -- September 20, 2022 (PPI-OT)

Pakistan Power: Generation sustains its level in August

AA* CPPA-G released its Energy Purchase Data for the month of August. Power generation has remained flat in August to clock in at 14,053GWh, while decreasing by 13%YoY from the 16,078GWh recorded in Aug'21.

AA* The significant increases in power generation have been seen from Coal and RFO plants, with generation up 20%MoM and 16%MoM. Generation from Gas and RLNG has decreased by 10%/17%MoM as the market operator chose to give preference to other thermal sources amid the gas shortage in the country.

AA* Average cost of generation for the month has dropped down by 6%MoM to reach PkR10.1/kWh owing to the higher weight of Hydel in the generation mix along with reduced contribution from the costly RLNG. Moving forward, we can expect the cost of generation to dip slightly in September.

AA* HUBC has seen a decline in generation, with 15% less power purchased compared to July and down 38%YoY. KAPCO has also experienced a dip in utilization, decreasing to 15% vs. 30% in July as the usage of both gas and RLNG decreased in August, leading to a 49% decrease in generation.

AA* As winters approach, global prices of thermal fuels are likely to skyrocket, as Europe scrambles to generate power from other thermal sources after the shutdown of the Nord-1 pipeline by Russia. Coal, Oil and RLNG prices are expected to surge, and it remains to be seen how the country and its market operator manage the generation mix, as Hydel generation evaporates.

Power Generation data for Aug'22:

CPPA-G released its Energy Purchase Data for August. Power generation has remained flat in August to clock in at 14,053GWh, while decreasing by 13%YoY from the 16,078GWh recorded in Aug'21. Shortfall in the demand-supply gap in August was estimated to be ~5900MW, slightly decreasing than last month as demand lessens, while worsening from the same period last year. We expect generation in September to decrease as demand declines after the peak in the summer, in-line with its historical pattern.

Sources of Generation:

The significant increases in power generation have been seen from Coal and RFO plants, with generation up 20%MoM and 16%MoM respectively owing to low- base effects, as generation from both significantly dipped last month. Hydel generation has also likely reached its peak in August with 5,354GWh generated, up by 8%MoM but down 4% YoY. Generation from Gas and RLNG has decreased by...