| Kot Addu Power Company Ltd - 2005 |
======================================================================================= BALANCE SHEET AS AT JUNE 30, 2005 ======================================================================================= 2005 2004 Notes (Rupees in thousand) ======================================================================================= EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital 3,600,000,000 (2004: 3,600,000,000) ordinary shares of Rs 10 each 36,000,000 36,000,000 Issued, subscribed and paid up capital 880,253,228 (2004: 880,253,228) ordinary shares of Rs 10 each 3 8,802,532 8,802,532 Capital reserve 4 444,451 444,451 Unappropriated profit 13,039,645 8,772,741 22,286,628 18,019,724 NON-CURRENT LIABILITIES Long term loan-unsecured 5 8,853,836 10,956,107 Staff retirement benefits 6 258,680 216,168 9,112,516 11,172,275 CURRENT LIABILITIES Current maturities of long term loan - unsecured 5 2,102,271 2,255,096 Creditors, accrued and other liabilities 8 3,228,641 1,463, 196 5,330,912 3,718,292 Contingencies and commitments 9 36,730,056 32,910,291 ASSETS NON-CURRENT ASSETS Property, plant and equipment 10 23,679,537 24,099,547 Intangible assets 11 329 413 Capital work-in-progress 12 35,194 182,376 Long term loans and deposits 13 687,781 686,416 24,402,841 24,968,752 CURRENT ASSETS Stores and spares 14 2,432,928 2,338,037 Stock-in-trade 15 2,621,847 582,213 Trade debts 16 2,330,994 2,015,317 Loans, advances, deposits, prepayment and other receivables 17 1,178,981 1,315,869 Cash and bank balances 18 3,762,465 1,690, 103 12,327,215 7,941,539 ======================================================================================= ======================================================================================= PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2005 ======================================================================================= 2005 2004 Notes (Rupees in thousand) ======================================================================================= Sales 19 27,563,546 21,842,271 Cost of sales 20 (17,827,010) (I 3,282,309) Gross profit 9,736,536 8,559,962 Administration and general expenses 21 (183,421) (113,479) Other operating income 22 342,190 262,646 Profit from operations 9,895,305 8,709,129 Finance cost 23 (1,766,735) (2,028,032) Profit before tax 8,128,570 6,681,097 Taxation 24 (80,780) 255,328 Profit for the year 8,047,790 6,936,425 Earnings per share 31 9. 14 7.88 ======================================================================================= ======================================================================================= CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2005 ======================================================================================= 2005 2004 Notes (Rupees in thousand) ======================================================================================= CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations 30 10,479,292 10,112,052 Finance cost paid (1,772,820) (2,028,032) Taxes recovered/(paid) 24,776 (95,315) Staff retirement benefits paid (848) (17,381) Net cash from operating activities 8,730,400 7,971,324 Cash flows from investing activities Purchase of property, plant and equipment (1,108,302) (170,644) Income on bank deposits received 98,689 35,583 Net (increase)/decrease in long term loans and deposits (1,365) 7,510 Sale proceeds of property plant and equipment 1,475 5,207 Net cash used in investing activities (1,009,503) (122,344) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long term loan (2,255,096) (1,656,708) Dividend paid (3,393,439) (7,000,000) Net cash used in financing activities (5,648,535) (8,656,708) Net increase/(decrease) in cash and cash equivalents 2,072,362 (807,728) Cash and cash equivalents at beginning of the year 1,690, 103 2,497,831 Cash and cash equivalents at the end of the year 18 3,762,465 1,690, 103 ======================================================================================= ==================================================================================================== STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2005 ==================================================================================================== (Rupees in thousand) Un-appro- Share Capital priated Note capital reserve profit Total ==================================================================================================== Balance as on June 30, 2003 as previously reported 8,802,532 444,451 6,836,316 16,083,299 Profit for the year - - 6,936,425 6,936,425 Dividend 1st Interim Rs 1.14 per share - - (1,000,000) (I,000,000) 2nd Interim Rs 1.14 per share - - (1,000,000) (1,000,000) 3rd Interim Rs 1.14 per share - - (1,000,000) (1,000,000) 4th Interim Rs 1.14 per share - - (1,000,000) (1,000,000) 5th Interim Rs 1.14 per share - - (1,000,000) (1,000,000) Total Interim dividend Rs 5.70 per share - - (5,000,000) (5,000,000) Final dividend for the year ended June 30, 2004 - Rs 0.80 per share - - (700,000) (700,000) Balance as on June 30, 2004 as previously reported 8,802,532 444,451 8,072,741 17,319,724 Effect of change in accounting policy 2.3 Final dividend for the year ended June 30, 2004 declared subsequent to year end - - 700,000 700,000 Balance as on June 30, 2004 as restated 8,802,532 444,451 8,772,741 18,019,724 Final dividend for the year ended June 30, 2004 - Rs 0.80 per share - - (700,000) (700,000) Profit for the year - - 8,047,790 8,047,790 Interim dividend - Rs 3.5 per share - - (3,080,886) (3,080,886) Balance as on June 30, 2005 8,802,532 444,451 13,039,645 22,286,628 ====================================================================================================NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2005 1. LEGAL STATUS AND NATURE OF BUSINESS The company was incorporated in Pakistan on April 25, 1996 as a public limited company under the Companies Ordinance, 1984. The company was listed during the year on April 18, 2005 on the Karachi, Islamabad and Lahore Stock Exchanges. The principal activities of the company are to own, operate and maintain a multi-fuel fired power station with fifteen generating units with a nameplate capacity of 1,600 MW in Kot Addu, District Muzaffargarh, Punjab. 2. SIGNIFICANT ACCOUNTING POLICIES 2.1. BASIS OF PREPARATION These financial statements have been prepared in accordance with the requirements of the Companies Ordinance, 1984 and International Accounting Standards (IAS) as applicable in Pakistan. Approved Accounting Standards comprise of such IASs as notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan (SECP) differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives take precedence. 2.2. ACCOUNTING CONVENTION These financial statements have been prepared on the basis of historical cost convention, except for recognition of certain employee retirement benefits at present value. 2.3. CHANGE IN ACCOUNTING POLICY During the year, the SECP substituted the Fourth Schedule to the Companies Ordinance, 1984 which is effective from financial year ending on or after July 5, 2004. This has resulted in the change in accounting policy pertaining to the recognition of dividends proposed subsequent to year's end. In order to comply with the substituted Fourth Schedule to the Companies Ordinance, 1984, the company has not recognised the final dividend, proposed subsequent to the year's end as a liability. Such a change in policy has been accounted for retrospectively and comparative financial statements have been restated in accordance with the recommended benchmark treatment of IAS-8, Net profit or loss for the period, fundamental errors and changes in accounting policy. Had there been no change, the unappropriated profit and the current liabilities for the year ended June 30, 2005 would have been lower and higher respectively by Rs 3,96I million (2004: Rs 700 million) 2.4. TAXATION Current Income of the company derived from the power station up to June 27, 2006 is exempt from income tax under clause 138 of the Part- I of the Second Schedule to the Income Tax Ordinance, 2001. The company is also exempt from minimum tax under clause 13(A) of Part IV of the Second Schedule of the Income Tax Ordinance, 2001 for the period it continues to be entitled to exemption under clause 138 of the Part I of the Second Schedule i.e. up to June 27, 2006. However, full provision is made in the profit and loss account on income from sources not covered under the above clauses at current rates of taxation after taking into account tax credits and rebates available, if any. 2.5. STAFF RETIREMENT BENEFITS The main features of the schemes operated by the company for its employees are as follows: (a) The company operates an approved funded defined benefit pension scheme for all employees with a qualifying service period of ten years. Monthly contribution is made to the fund on the basis of actuarial recommendation at the rate of 18.95 percent per annum of basic salaries. The latest actuarial valuation was carried out as at June 30, 2005. The actual return on plan assets during the year were Rs 63.243 million. The actual return on plan assets represent the difference between the fair value of plan assets at beginning of the year and end of the year after adjustments for contributions made by the company as reduced by benefits paid during the year. The future contribution rate includes allowances for deficit and surplus. Projected unit credit method, using the following significant assumptions, is used for valuation of the scheme: -- Discount rate 9 percent per annum. -- Expected rate of increase in salary level 9 percent per annum. -- Expected rate of return 9 percent per annum. The company's policy with regard to actuarial gains/losses is to follow minimum recommended approach under IAS 19 (revised 2002). (b) The company also operates an approved funded contributory provident fund for all employees. Equal monthly contributions are made by both the company and the employees to the fund. (c) The company provides medical facilities to its retired employees and eligible dependent family members alongwith free electricity. Provisions are made annually to cover the obligation on the basis of actuarial valuation and are charged to income currently. The latest actuarial valuation was carried out as at June 30, 2005. Projected unit credit method, using the following significant assumptions, is used for valuation of these schemes: -- Discount rate 9 percent per annum. -- Expected rate of increase in medical cost 6 percent per annum. -- Expected rate of increase in electricity benefit 9 percent per annum. 2.6. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment except freehold land are stated at cost less accumulated depreciation and any identified impairment loss. Freehold land is stated at cost less any identified impairment loss. Cost represents the acquisition price of assets transferred to the company in accordance with the Transfer Agreement signed between Pakistan Water and Power Development Authority (WAPDA) and the company on June 26, 1996 based on a valuation by M/s Stone and Webster using depreciated replacement cost basis. Depreciation on property, plant and equipment is charged to profit on the straight line method so as to write off the cost of an asset over its estimated useful life at the annual rates mentioned in note 10. Depreciation on additions to property plant and equipment is charged from the month in which an asset is acquired or capitalized while no depreciation is charged for the month in which the asset is disposed off. Impairment loss or its reversal, if any, is also charged to income. Where an impairment loss is recognised, the depreciation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life. Major plant modifications and improvements are capitalised. Overhauls, maintenance and repairs are charged to income as and when incurred. The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognised as an income or expense. Blades for Gas Turbines are considered a separate category of assets with useful life span of 10 years. All blades are depreciated regardless of whether they are in use or not. Refurbishment costs are accrued and charged to profit and loss account. 2.7. INTANGIBLE ASSETS Expenditure incurred to acquire computer software are capitalised as intangible assets and stated at cost less accumulated amortisation and any identified impairment loss. Intangible assets are amortised using the straight line method over a period of five years. Amortisation on additions to intangible assets is charged from the month in which an asset is acquired or capitalised, while no amortisation is charged for the month in which the asset is disposed off. Impairment loss or its reversal, if any, is also charged to income. Where an impairment loss is recognised, the amortisation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life. 2.8. CAPITAL WORK-IN-PROGRESS Capital work-in-progress is stated at cost less any identified impairment loss. 2.9. STORES AND SPARES Usable stores and spares are valued at weighted average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon. Refurbishable items are valued at the lower of cost and net realizable value. Cost of refurbishment is charged to the profit and loss account as it is incurred. The item is charged to the profit and loss account when, upon inspection, it cannot be refurbished. 2.10. STOCK IN TRADE Stock in trade except for those in transit are valued at lower of cost based on FIFO and net realisable value. Materials in transit are stated at cost comprising invoice value plus other charges paid thereon. Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessarily to be incurred in order to make a sale. 2.11. FINANCIAL INSTRUMENTS Financial assets and financial liabilities are recognised when the company becomes a party to the contractual provisions of the instrument. The particular measurement methods adopted are disclosed in the individual policy statements associated with each item. 2.12. TRADE DEBTS Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified. 2.13. CASH AND CASH EQUIVALENTS Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement cash and cash equivalents comprise cash in hand, demand deposits, other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value and finances under mark up arrangements. In the balance sheet, finances under mark up arrangements are included in current liabilities. 2.14. BORROWINGS Loans and borrowings are recorded at the proceeds received. In subsequent periods, borrowings are stated at amortised cost using the effective yield method. Finance costs are accounted for on an accrual basis and are included in creditors, accrued and other liabilities to the extent of the amount remaining unpaid. 2.15. CREDITORS, ACCRUED AND OTHER LIABILITIES Liabilities for trade and other amounts payable are carried at cost, which is the fair value of the consideration to be paid in future for goods and services. 2.16. PROVISIONS Provisions are recognised when the company has a present obligation as a result of past event which it is probable will result in an outflow of economic benefits and a reliable estimate can be made of the amount of the obligation. 2.17. DERIVATIVE FINANCIAL INSTRUMENTS These are initially recorded at cost and are remeasured to fair value at subsequent reporting dates. 2.18. FOREIGN CURRENCIES All monetary assets and liabilities in foreign currencies are translated into Rupees at exchange rates prevailing at the balance sheet date. Transactions in foreign currencies are translated into Rupees at the spot rate. All non-monetary items are translated into Rupees at exchange rates prevailing on the date of transaction or on the date when fair values are determined. Exchange differences are included in profit currently. 2.19. BORROWING COSTS Mark up, interest and other charges on borrowings are charged to profit. 2.20. REVENUE RECOGNITION Revenue on account of energy is recognised on transmission of electricity to WAPDA, whereas on account of capacity is recognised when due. Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and the applicable rate of return. 3. ISSUED, SUBSCRIBED AND PAID UP CAPITAL =====================================================================================================
2005 2004 2005 2004
(Number of shares) (Rupees in thousand)
=====================================================================================================
253,000 253,000 Ordinary shares of Rs 10 each fully paid in cash 2,530 2,530
880,000,228 880,000,228 Ordinary shares of Rs 10 each issued as fully
paid for consideration other than cash 8,800,002 8,800,002
880,253,228 880,253,228 8,802,532 8,802,532
===================================================================================================== Ordinary shares of the company held by associated undertakings as at June 30, 2005 are as follows:=======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
Pakistan Water and Power Development Authority (WAPDA) 404,917,062 563,362,062
National Power (Kot Addu) Limited
(a wholly owned subsidiary of International Power plc) 316,891,159 316,891,159
721,808,221 880,253,221
=======================================================================================4. CAPITAL RESERVEThis represents the value of fuel stock taken over by the company at the time of take over of Kot Addu Gas Turbine Power Station from WAPDA. The value of stock was not included in the valuation of assets at the time of take over. 5. LONG TERM LOAN-UNSECURED =======================================================================================
2005 2004
Note (Rupees in thousand)
=======================================================================================
Long term loan 5.1 10,956, 107 13,211,203
Less: Current portion
shown under current liabilities 2, 102,271 2,255,096
8,853,836 10,956,107
=======================================================================================5.1. THIS COMPRISES OF===============================================================================================
Rate of
Amount of Interest Interest
Lender Currency loan per annum Number of instalments payable
(Rupees
in million)
===============================================================================================
WAPDA PKR 27,010.368 14% 26 semi annual instalments Semi annually
ending June 2018
===============================================================================================6. STAFF RETIREMENT BENEFITS=======================================================================================
2005 2004
Notes (Rupees in thousand)
=======================================================================================
THESE ARE COMPOSED OF:
Pension 6.1 (16,108) (30,879)
Medical 6.2 108,578 98,925
Free electricity 6.3 166,210 148,122
258,680 216,168
=======================================================================================6.1. PENSIONThe amounts recognised in the balance sheet are as follows: =======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
Present value of
defined benefit obligation 383,998 325,106
Fair value of plan assets (427,351) (366,576)
Unrecognised actuarial gains 26,3 12 7,485
Asset ceiling 933 3,106
(Asset) as at June 30 (16,108) (30,879)
(Asset)/liability as at July 1 (30,879) I ,205
Charge/(credit) to profit and loss account 14,771 (15,498)
Contribution by the company - (16,586)
(Asset) as at June 30 (16,108) (30,879)
=======================================================================================6.2. MEDICAL=======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
THE AMOUNTS RECOGNISED IN THE BALANCE SHEET ARE AS FOLLOWS:
Present value of defined benefit obligation 88,968 83,302
Unrecognised actuarial gains 19,610 15,623
Liability as at June 30 108,578 98,925
Liability as at July 1 98,925 115,974
Charge/(credit) to profit and loss account 10,253 (16,497)
Payments by the company (600) (552)
Liability as at June 30 108,578 98,925
=======================================================================================6.3. FREE ELECTRICITY=======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
THE AMOUNTS RECOGNISED IN THE
BALANCE SHEET ARE AS FOLLOWS:
Present value of defined benefit obligation 125,488 140,975
Unrecognised actuarial gains 40,722 7,147
Liability as at June 30 166,210 148,122
Liability as at July 1 148, 122 157,170
Charge/(credit) to profit and loss account 18,336 (8,805)
Payments by the company (248) (243)
Liability as at June 30 166,210 148, 122
=======================================================================================7. FINANCES UNDER MARK UP ARRANGEMENTS - SECUREDShort term running finances available from various commercial banks under mark up arrangements amount to Rs 1,900 million (2004: Rs 1,900 million). The rates of mark-up ranges from Re 0.0901 to Re 0.2671 per Rs 1,000 per diem or part thereof on the balances outstanding. In the event, the company fails to pay the balances on the expiry of the quarter, year or earlier demand, mark up is to be computed at the rate of Re 0.40 per Rs 1,000 per diem or part thereof on the balances unpaid. Of the aggregate facility of Rs 1,308 million for opening letters of credit and Rs 800 million for guarantees, the amount utilised as at June 30, 2005 was Rs 305.492 million and Rs 96.608 million respectively. The aggregate running finances, letter of credit and guarantees are secured by hypothecation of stores, spares, stock-in-trade and trade debts upto a limit of Rs 3,082 million and hypothecation on fixed assets upto a limit of Rs 1,914 million. 8. CREDITORS, ACCRUED AND OTHER LIABILITIES =======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
defined benefit obligation 125,488 140,975
Trade creditors 1,371,281 518,326
Accrued liabilities 1,443,653 912,514
Liquidated damages 5,827 6,752
Interest accrued on long term loan-unsecured 17,043 23,128
Deposits-interest free repayable on demand 839 1,572
Unclaimed dividends 387,447 -
Others 2,551 904
3,228,641 1,463,196
=======================================================================================8.1. Trade creditors include amount due to related parties Rs 3.7780 million (2004: Rs 0.605 million).9. CONTINGENCIES AND COMMITMENTS 9.1. CONTINGENCIES (i) The company has obtained legal advice in connection with the establishment of Workers Profit Participation Fund under the Companies Profit (Workers' Participation) Act, 1968 (the Act). The legal advisor is of the view that since the company does not employ any person who falls under the definition of Worker as defined in the Act of 1968, the company is not required to establish the fund under this Act. As a consequence the company is not required to make contributions to the fund established pursuant to Workers' Welfare Fund Ordinance, 1971. Furthermore, the question whether a company to which the Act of 1968 and its scheme applies but which does not employ any worker is nevertheless obliged to establish and pay contributions into the fund under the Act and thereafter transfer the same to the Fund established under the WWF Ordinance, 1971 is pending adjudication in Sindh High Court at Karachi on a constitutional petition filed by another company in June 2000. The issue of WPPF has also been taken up by the Government and a meeting look place involving Ministry of Water & Power, Private Power Infrastructure Board (PPIB), WPPO, Ministry of Labour, HUBCO and KAPCO to formally discuss the issue. A strong case was put up by PPIB, supported by WPPO, HUBCO and KAPCO. The Ministry of Water & Power supported the case and stated that they would request the Ministry of Finance to exempt Independent Power Producers (IPPs), who have no workers under the act, from the payment of WPPF. The matter was then referred to Economic Coordination Committee (ECC). ECC formed a sub committee to look into the matter and to give recommendations. In view of the foregoing, the company has not made any provision for Worker's Profit Participation Fund and interest thereon in these financial statements or in previous years. If it is established that the scheme is applicable to the company and the company is lable to pay contribution to the Worker's Welfare Fund then these amounts would be recoverable from WAPDA as a pass through item under the provisions of Power Purchase Agreement. However it is not certain presently whether or not any penalties payable in connection with this contribution would also be recoverable from WAPDA under the Power Purchase Agreement. In case this liability materializes, the cumulative amount of contributions to WPPF would be Rs 3.033 billion (2004: Rs 2.627 billion). Further, if it is established that interest is also applicable the liability for interest would amount to Rs 5.682 billion (2004: Rs 3.757 billion) as on the date of these financial statements. (ii) Claims against the company not acknowledged as debts Rs 58.576 million (2004: Rs 30.566 million). (iii) The Company has provided bank guarantee in favour of Sui Northern Gas Pipelines Limited on account of payment of dues against gas sales etc., amounting to Rs 96 million (2004: Rs 96 million). 9.2. COMMITMENTS (i) Contract for capital expenditure Rs 47.67 million (2004: Rs 246.30 million) (ii) Letters of credit other than for capital expenditure Rs 259.554 million (2004: Rs 1,068.86 million). 10. OPERATING, PLANT AND EQUIPMENT =======================================================================================================================================
(Rupees in Thousand)
Accumulated Depreciation Accumulated
Cost as at Additions/ Cost as at .depreciation charge depreciation Book value
June 30, (deletions). June 30, as at June for the year/ as at June as at June Rate
2004 (adjustment)* 2005 30, 2004 (deletions) 30, 2005 30, 2005 %
=======================================================================================================================================
Freehold land 46,285 - 46,285 - - - 46,285 -
Buildings on freehold land 672.801 2,767 675,568 205,266 27,543 232,809 442,759 4-6.22
Plant and machinery 33,130,851 730,356 33,861,207 10,759,933 1,356.598 12,116,531 21,744,676 4-6.22
Gas turbine blading 2,181,403 472,312 2,653,715 1,053,358 259,075 1,312,433 1,341,282 10
Auxiliary plant and machinery 107,222 35,625 142,847 56,404 16,638 73,042 69,805 20
Office equipment 51,230 7,502 58,185 39,433 4,611 43,497 14,688 20
(547) (547)
Fixtures and fittings 12,259 852 13,111 10,252 607 10,859 2,252 20
Vehicles 51,580 6,070 55,222 29,438 9,626 37,432 17,790 25
(2,428) (1,632)
2005 36,253,631 1,255,484 37,506,140 12,154,084 1,674,698 13,826,603 236,679,537
(2.975) (2,l79)
2004 36,267,254 563,116 36,253,631 10,557,447 1,599,579 12,154,084 24,099,547
(3,640) (2,942)
(573,099)* -
======================================================================================================================================= * This represents the loss of strategic parts at the replacement value for which a claim with the insurance company has been lodged, out of which Rs 555,764 million has been received and assets worth the same have been included in additions during the current year.10.1. DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT DETAIL OF ASSETS DISPOSED OFF DURING THE YEAR IS AS FOLLOWS: =============================================================================================================
(Rupees in thousand)
Accumulated Sales Mode of
Particulars of assets Sold to Cost Depreciation Book value proceeds Disposal
=============================================================================================================
Vehicles Employees
Mr Umair Khan I, 194 398 796 796 Company policy
Other assets with book
value less than Rs 50,000 1,781 1,781 - 679 Negotiation
2,975 2,179 796 1,475
=============================================================================================================11. INTANGIBLE ASSETS=============================================================================================================
Accumulated Accumulated
Cost as at Cost as at amortisatio Amortisation amortisation Book value
June 30, June 30, as at June charge as at June as at June
2004 Additions 2005 30, 2004 for the yea 30, 2005 30, 2005
=============================================================================================================
Computer
software
(acquired) 21,031 - 21,031 20,618 84 20,702 329
2005 21,031 - 21,031 20,618 84 20,702 329
2004 20,611 420 21,031 19,837 781 20,618 413
=============================================================================================================11.1. THE DEPRECIATION/AMORTISATION CHARGE FOR THE YEAR HAS BEEN ALLOCATED AS FOLLOWS====================================================================================================
Depreciation Amortisation Total
Notes 2005 2004
====================================================================================================
Cost of sales 20 1,636,922 84 1,637,006 1,563,757
Administration and selling expenses 21 37,776 - 37,776 36,603
1,674,698 84 1,674,782 1,600,360
====================================================================================================12. CAPITAL WORK-IN-PROGRESS=======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
Civil works 4,787 314
Plant and machinery including in transit
Rs 24.886 million (2004: Rs 120.254 million) 30,407 182,062
35,194 182,376
=======================================================================================13. LONG TERM LOANS AND DEPOSITS=======================================================================================
2005 2004
Note (Rupees in thousand)
=======================================================================================
Loans to employees - considered good 13.1 20,781 19,416
Security deposits 667,000 667,000
687,781 686,416
=======================================================================================13.1. These represent unsecured loans to non-executive employees for the purchase of plot, car, construction of house etc, and are repayable in monthly instalments over a maximum period of 120 months. These loans carry interest of 9% per annum (2004: 10% per annum).14. STORES AND SPARES =======================================================================================
2005 2004
Notes (Rupees in thousand)
=======================================================================================
Stores and spares including
in transit Rs 38.879 million 14.2 2,497,511 2,472,023
(2004: Rs 52.815 million)
Less: Provision for store obsolescence 14.3 64,583 133,986
2,432,928 2,338,037
=======================================================================================14.1. Stores and spares include items which may result in fixed capital expenditure but are not distinguishable.14.2. Included in stores are items valuing Rs 119.098 million which are being held by the following suppliers. =======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
Sermatech Power Solutions - 94,266
Siemens AG Germany 156 11,601
WAPDA Workshop, Faisalabad - 567
Middle East Engineering Company (MEELSA) 77,993 67,377
Scherzinger GmbH & Company - 2,573
Wood Group Heavy
Industrial Turbines Limited - 24,448
Elbar, BY, Netherlands 3,708 -
Allweiler AG, Germany 1,96 I -
Alstom Power Service, Germany 724 -
Siemens Pakistan Engineering Limited 16,446 -
Gas Turbine Technologies SPA, Italia 18, 110 -
119,098 200,832
=======================================================================================14.3. PROVISION FOR STORE OBSOLESCENCE=======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
Opening balance as on July 1 133,986 403,167
Add: Provision for the year 40,000 -
173,986 403,167
Less: Stores written off against provision 109,403 112,532
Provision written back - 156,649
109,403 269,181
64,583 133,986
=======================================================================================15. STOCK IN TRADE=======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
Furnace oil 2,240,723 421,551
Diesel 381, 124 160,662
2,621,847 582,213
=======================================================================================16. TRADE DEBTSThese are receivable from WAPDA and are unsecured and considered good. These are in the normal course of business and are interest free, however, a penal mark-up of SBP discount rate pIus 4% is charged in case the amounts are not paid within due dates. 17. LOANS, ADVANCES, DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES =======================================================================================
2005 2004
Notes (Rupees in thousand)
=======================================================================================
Loans to employees - considered good 5,216 4,124
Advances to suppliers - considered good 17.1 52,969 28,455
Claims recoverable from Government
- Sales tax 733,359 374,799
- Income tax 106,658 212,214
Insurance claim receivable 254,356 838,015
Prepayments 1,349 2,298
Income receivable on bank deposits 18,040 6,468
Security deposits 1,896 1,896
Other receivables 17.2 5, 138 12,023
1,178,981 1,480,292
Less: Provision agains doubtful receivables - 164,423
1,178,981 1,315,869
=======================================================================================17.1. Advances to suppliers include amount due from WAPDA Rs 1.292 million (2004: Rs 0.235 million). These are in the normal course of business and are interest free.17.2. OTHER RECEIVABLES INCLUDE FOLLOWING AMOUNTS DUE FROM RELATED PARTIES =======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
WAPDA - 2,971
International Power plc - 971
- 3,942
=======================================================================================18. CASH AND BANK BALANCES=======================================================================================
2005 2004
Note (Rupees in thousand)
=======================================================================================
AT BANKS ON:
- Current accounts 390,934 12,429
- Savings accounts 18.1 3,371,436 1,677,545
3,762,370 1,689,974
In hand 95 129
3,762,465 1,690,103
=======================================================================================18.1. Included in these are total restricted funds of Rs 99.113 million (2004: Rs 578.816 million) held by banks under lien as margin against letters of credit.The balances in saving accounts bear mark up which ranges from 0.5% to 8.0% per annum. 19. SALES =======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
Energy purchase price 15,768,931 10,696,214
Capacity purchase price 11,794,615 11,146,057
27,563,546 21,842,27 I
=======================================================================================Energy purchase price is exclusive of sales tax of Rs 2,357.241 million (2004: Rs 1,598.713 million).20. COST OF SALES =======================================================================================
2005 2004
Notes (Rupees in thousand)
=======================================================================================
Fuel cost 15,187,312 10,636,215
Salaries, wages and benefits 20.1 360,929 243,250
Severance Voluntary Separation Scheme (SVSS) 2,849 180,590
Plant maintenance 131,866 156,793
Gas turbines overhauls 351,614 218,1 78
Repair and renewals 109,607 156,748
Depreciation on property, plant and equipment 11.1 1,636,922 1,562,976
Amortisation on intangible assets 11.1 84 781
Liquidated damages 5,827 6,753
Provision against doubtful receivable - 120,025
Provision for store obsolescence 40,000 -
17,827,010 13,282,309
=======================================================================================Cost of sales include Rs 257.550 million (2004: Rs 281.772 million) for stores and spares consumed.20.1. SALARIES, WAGES AND BENEFITS =======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
IN RESPECT OF RETIREMENT BENEFITS:
PENSION
Current service cost 17,028 18,902
Interest cost for the year 26,535 20,933
Expected return on plan assets (29,725) (18,486)
Recognition of loss - 353
Recognition of curtailment (gain) - (39,399)
Proportionate share of unrecognised
(gain) in respect of curtailed employees - (907)
Asset ceiling 933 3,106
14,771 (15,498)
MEDICAL
Current service cost 3,976 5,456
Interest cost for the year 6,798 6,096
Recognition of (gain) (521) (384)
Recognition of curtailment (gain) - (23,297)
Proportionate share of unrecognised
(gain) in respect of curtailed employees - (4,368)
10,253 (16,497)
FREE ELECTRICITY
Current service cost 6,817 8,098
Interest cost for the year 11,519 9,515
Recognition of curtailment (gain) - (25,143)
Proportionate share of unrecognised
(gain) in respect of curtailed employees - (1,275)
18,336 (8,805)
=======================================================================================In addition to above, salaries, wages and benefits also include Rs 9.951 million (2004: Rs 8.913 million) in respect of provident fund contribution by the company.21. ADMINISTRATION AND GENERAL EXPENSES =======================================================================================
2005 2004
Notes (Rupees in thousand)
=======================================================================================
Travelling 10,012 7,979
Motor vehicles running 9,644 9,571
Postage, telephone and telex 7,779 4,915
Legal and professional charges 23,444 16,495
Computer charges 3,735 2,582
Auditors' remuneration 21.1 980 800
Printing, stationery and periodicals 2,876 1,505
Repairs and maintenance infrastructure 18,458 13,792
Training expenses 7,568 -
Rent, rates and taxes 10,954 6,942
Donations 21.2 6,83 I 569
Depreciation on property, plant and equipment 11.1 37,776 36,603
Bad debts written off 22,934 1,778
Advances written off 4,488 -
Other expenses 15,942 9,948
183,421 113,479
=======================================================================================21.1. AUDITORS' REMUNERATIONThe charges for auditor's remuneration include the following in respect of auditors' services for: =======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
Statutory audit 800 800
Half yearly review 100 -
Employees pension fund and provident fund audit 80 -
980 800
=======================================================================================21.2. None of the directors and their spouses had any interest in any of the donees.22. OTHER OPERATING INCOME =======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
INCOME FROM FINANCIAL ASSETS
Income on bank deposits 110,261 35,217
Interest on loans to employees 2,312 2,874
Exchange gain - 1,590
112,573 39,681
INCOME FROM NON-FINANCIAL ASSETS
Profit on disposal of property, plant and equipment 679 4,509
Colony electricity 854 880
Provisions and unclaimed balances written back 221,728 209,598
Others 6,356 7,978
229,617 222,965
342,190 262,646
=======================================================================================23. FINANCE COST=======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
INTEREST AND MARK UP INCLUDING COMMITMENT CHARGES ON:
- Long term loan from WAPDA 1,764,555 2,023,523
- Short term running finances - 340
Bank and other charges 2,180 4,169
1,766,735 2,028,032
=======================================================================================24. TAXATION=======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
CURRENT
- For the year 41,000 15,500
- Prior years 39,780 (270,828)
80,780 (255,328)
=======================================================================================For assessment years 1997-1998 through 2002-2003, the tax authorities applied tax rate applicable to private companies on the grounds that WAPDA is not government within the meaning assigned in the repealed Income Tax Ordinance, 1979.These orders were contested in appeals and the Income Tax Appellate Tribunal (ITAT) remanded the matter back to the assessing officers to determine the status in the light of directions issued in the appellate order. While finalizing the reassessment proceedings, the assessing officer has accepted the company's contention and finalized the proceedings by applying the tax rate applicable to public companies. In the financial statements for previous year, excess provision aggregating to Rs 270.828 million including Rs 190 million (approximately) representing the above issue, was reversed. The provision amounting to Rs 39.78 million represents excess reversals made during the previous year. 24.1. TAX CHARGE RECONCILIATION =======================================================================================
2005 2004
Note (Rupees in thousand)
=======================================================================================
Profit before tax 8,128,570 6,681,097
Tax calculation @ 35% (2004: 35%) 2,845,000 2,338,384
Tax effect of exempt income 2.4 (2,804,000) (2,322,884)
Effect of change in prior years' tax 39,780 (270,828)
Tax charge 80,780 (255,328)
=======================================================================================25. DIRECTORS' REMUNERATION25.l. The aggregate amount charged in the financial statements for the year for remuneration including certain benefits, to the Chief Executive, full time working. Directors including alternate directors and Executives of the company is as follows: ===============================================================================================
(Rupees in thousand)
Chief Executive Executives
2005 2004 2005 2004
===============================================================================================
Managerial remuneration including
bonus and other allowances 23,383 18, 114 25,889 12,074
Contribution to provident, pension
and other retirement benefits 1,559 1,200 3,065 1,551
Leave passage - - 626 465
24,942 19,314 29,580 14,090
Number of persons 1 1 17 9
===============================================================================================The company also provides the Chief Executive with free transport and residential telephones.25.2. REMUNERATION TO OTHER DIRECTORS Aggregate amount charged in the financial statements for the year for fee to 6 directors (2004: 6 directors) was Rs 0.243 million (2004: Rs 0.165 million). 26. TRANSACTIONS WITH RELATED PARTIES The related parties comprise associated undertakings and key management personnel. The company in the normal course of business carries out transactions with various related parties. Amounts due from related parties are shown under receivables and remuneration of the key management personnel is disclosed in note 25. Other significant transactions with related carries are as follows: =======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
DESCRIPTION
Purchase of services 2,212 16,243
Sale of electricity 27,563,546 21,842,271
Interest expense 1,764,555 2,023,523
Donation - 300
29,330,313 23,882,337
=======================================================================================Sale and purchase transactions with related parties are carried out on commercial terms and conditions. Interest is charged between associated undertakings on the basis of mutually agreed terms.27. PROPOSED DIVIDEND The Board of Directors have proposed a final dividend for the year ended June 30, 2005 of Rs 4.5 per share, amounting to Rs 3,961 million at their meeting held on September 6, 2005 for approval of the members at the Annual General Meeting to be held on October 11, 2005. These financial statements do not reflect this dividend payable, as explained in note 2.3. 28. CAPACITY AND PRODUCTION =======================================================================================
2005 2004
MWh MWh
=======================================================================================
Annual dependable capacity
(Based on 8,760 hours) 11,755,920 11,755,920
Actual energy delivered 8,134,588 5,698,261
=======================================================================================Capacity for the power plant taking into account all the planned scheduled outages is 11,039,746 MWh (2004: 10,970,830 MWh)..Actual energy delivered by the plant is dependent on the load demanded by WAPDA and the plant availability. 29. RATES OF EXCHANGE Liabilities in foreign currencies have been translated into Rupees at USD 1.6700 (2004: 1.7138), EURO 1.3810 (2004: 1.41764), GBP 0.9239 (2004: 0.94751) and YEN 184.0604 (2004: 186.0811) equal to Rs 100. 30. CASH GENERATED FROM OPERATIONS =======================================================================================
2005 2004
(Rupees in thousand)
=======================================================================================
Profit before tax 8,128,570 6,681,097
ADJUSTMENTS FOR:
- Depreciation on property, plant and equipment 1,674,698 1,599,579
- Amortisation on intangible assets 84 781
- Profit on disposal of property, plant and equipment (679) (4,509)
- Income on bank deposits (110,261) (35,217)
- Staff retirement benefits accrued 43,360 (40,800)
- Finance cost 1,766,735 2,028,032
Profit before working capital changes 11,502,507 10,228,963
EFFECT ON CASH FLOW DUE TO WORKING CAPITAL CHANGES
- (Increase) in stores and spares (94,891) (l73,385)
- (Increase)/decrease in stock-in-trade (2,039,634) 900,005
- (Increase)/decrease in trade debts (315,677) 1,076,331
- Decrease/(increase) in loans, advances, deposits
prepayments and other receivables 42,904 (203,166)
- Increase/(decrease) in creditors,
accrued and other liabilities 1,384,083 (1,716,696)
(1,023,215) (116,911)
10,479,292 10, 112,052
=======================================================================================31. EARNINGS PER SHARE31.1. BASIC EARNINGS PER SHARE =========================================================================================
2005 2004
=========================================================================================
Profit for the year Rupees in thousand 8,047,790 6,936,425
Weighted average number of ordinary shares 880,253,228 880,253,228
Earnings per share Rupees 9.14 7.88
=========================================================================================31.2. DILUTED EARNINGS PER SHAREThere is no dilution effect on the basic earnings per share of the company as the company has no such commitments. 32. FINANCIAL ASSETS AND LIABILITIES ===========================================================================================================================================================================================================================
(Rupees in thousand)
Interest/mark-up bearing Non interest bearing Total Credit risk
Maturity up Maturity Maturity up Maturity
to one year after one year Sub total to one year after one year Sub total 2005 2004 2005 2004
===========================================================================================================================================================================================================================
FINANCIAL ASSETS ON BALANCE SHEET
Loans to employees 5,216 20,781 25,997 - - - 25,997 23,540 25,997 23,540
Long term deposits - 667,000 667,000 - - - 667,000 667,000 667,000 667,000
Trade debts - - - 2,330,994 - 2,330,994 2,330,994 2,015,317 2,330,994 2,015,317
Loans, advances, deposits, prepayments and
other receivables
- Insurance claim-receivable - - - 254,356 - 254,356 254,356 673,592 254,356 673,592
- Income receivable on bank deposits 18,040 - 18,040 - - - 18,040 6,468 18,040 6,468
- Security deposits - - - 1,896 - 1,896 1,896 1,896 1,896 1,896
- Others receivables - - - 2,233 - 2,233 2,233 5,458 2,233 5,458
Cash and bank balances 3,371,436 - 3,371 .436 391,029 - 391,029 3,762,465 1,690,103 3,762,370 1,689,974
3,394,692 687,781 4,082, 473 2,980,508 - 2,980,508 7,062,981 5,083,374 7,062,886 5,083,245
Off balance sheet - - - - - - - - - -
Total 3,394,692 687,781 4,082,473 2,980,508 - 2,980,508 7,062,981 5,083,374 7,062,886 5,083,245
FINANCIAL LIABILITIES ON BALANCE SHEET
Long term loan-unsecured 2,102,271 8,853,836 10,956,107 - - - 10.956,107 13,211,203
Creditors, accrued and other liabilities - - - 3,228,641 - 3,228,641 3,228,641 1,463, 196
2,102,271 8,853,836 10,956,107 3,228,641 - 3,228,641 14,184,748 14,674,399
Off balance sheet
Guarantees - - - 96,000 - 96,000 96,000 96,000
Contracts for capital expenditure - - - 47,670 - 47,670 47,670 246,300
Letters of credit other than for capital
Expenditure - - - 259,554 - 259,554 259,554 1,068,860
- - - 403,224 - 403,224 403,224 1,411,160
Total 2,102,271 8,853,836 10,956,107 3,631,865 - 3,631,865 14,587,972 16,085,559
On balance sheet gap 1,292,421 (8,166,055) (6,873,634) (248,1 33) - (248,133) (7,121,767) (9,591,025)
Off balance sheet gap - - - (403,224) - (403,224) (403,224) (1,411,160)
===========================================================================================================================================================================================================================The effective interest/mark-up rates for the monetary financial assets and liabilities are mentioned in respective notes to the financial statements.32.1. FINANCIAL RISK MANAGEMENT OBJECTIVES The company's activities expose it to a variety of financial risks, including the effects of changes in foreign exchange rates, market interest rates such as State Bank of Pakistan's repo rate and treasury bills rate, credit and liquidity risk associated with various financial assets and liabilities respectively as referred to in note 32. The company finances its operations through equity, borrowings and management of working capital with a view to maintaining a reasonable mix between the various sources of finance to minimize risk. Taken as a whole, risk arising from the company's financial instruments is limited as there is no significant exposure to market risk in respect of such instruments. (a) Concentration of credit risk Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties failed completely to perform as contracted.. The company's credit risk is primarily attributable to its trade debts and its balances at banks. The credit risk on liquid funds is limited because the counter parties are banks with reasonably high credit ratings. The company believes that it is not exposed to major concentration of credit risk and the risk attributable to trade debts is minimal. Out of the total financial assets of Rs 7,062.981 million (2004: Rs 5,083.374 million), the financial assets that are subject to credit risk amounted to Rs 7,062.886 million (2004: Ps 5,083.245 million). (b) Interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The company usually borrows funds at fixed and market based rates and as such the risk is minimised. (c) Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises mainly where receivables and payables exist due to transactions with foreign buyers and suppliers. The company, where considered necessary, uses forward contracts against payables exposed to foreign currency risks. (d) Liquidity risk Liquidity risk reflects an enterprise's inability in raising funds to meet commitments. The company follows an effective cash management and planning policy to ensure availability of funds and to take appropriate measures for new requirements. 32.2. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES The carrying value of all financial assets and liabilities reflected in the financial statements approximate their fair values. Fair value is determined on the basis of objective evidence at each reporting date. 33. NUMBER OF EMPLOYEES The company employed 681 employees as at June 30, 2005 (2004: 716) 34. DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorised for issue on September 6, 2005 by the Board of Directors of the company. 35. CORRESPONDING FIGURES Corresponding figures have been re-arranged, wherever necessary, for the purposes of comparison. However no significant re-arrangements have been made. |