Engro Powergen Qadirpur Limited (EPQL), the only plant in the country running at permeate gas is set for listing at the bourse in Oct’14 with the general public offering is scheduled on Sep 22‐24’14, while trading in future contracts will start from Sep17’14 (Today) as KSE has approved the provisional listing and quotation of the company. The said public offering is arriving in an environment when incumbent government is keen to resolve energy crisis as number of encouraging steps has been taken on the
generation and distribution front. At current offering price of PkR30.02/share scrip is offering CY14E dividend yield of 10% and offering forward P/E of 4.6x only. Subscribe!
Dynamics of upcoming public issue:
Engro Corporation (ENGRO) and Engro Powergen limited (100% subsidiary of ENGRO) are jointly offering their 12.5% stake in EPQL. The current offer constitutes 40.48mn ordinary shares at a strike price of PkR30.02/share. ENGRO is divesting its 100% shareholding in the company (32mn shares,
constituting 9.88% of total offering size) while Engro Powergen Limited is offering 8.4mn shares (2.62% of offer size). To recall, Engro Powergen Limited has already divested its 12.5% (40.5mn shares) stake through Pre‐IPO private placement.
Company to benefit from Rupee devaluation and boosting inflation:
The government has guaranteed US$ IRR of 15% under the Power Purchase Agreement (PPA). The Company wouldcontinue to enjoy capacity payments as long as its plant is available irrespective of dispatches. Aforementioned tariff provides immunity against inflation, interest rate, exchange rate and fuel price for different heads of tariff. Moreover, fueling to bottomline is to arrive from tax exempt status of the company.
Comparison to peer group:
Since its inception plant has been operating at an average billable availability factor of 95% which is
one of the highest among its peer group. At offer price scrip is offering CY14E dividend yield of 10%
against peer group average of 12.6% and industry average of 10.8%and offering forward P/E of 4.6x
only.
