Kot Addu Power Company Limited (KAPCO): PPA renewal unlikely; plant scrapping the base case; HOLD – By Alfa - Akseer Research
<ul><li><span style="font-family:Arial, Helvetica, sans-serif;font-size:medium;">We revise our recommendation on KAPCO from BUY to HOLD with
a Dec-18 price target (PT) of PKR 46/share, a downward revision of 32%. Our PT
indicates a downside of 15.8% and dividend yield of 16.4%, implying a total
return of 0.6%.</span></li></ul><ul><li><span style="font-family:Arial, Helvetica, sans-serif;font-size:medium;">The downward revision is driven by the upcoming expiry of
the Power Purchase Agreement (PPA) in FY21, which is unlikely to be renewed on
account of plants low efficiency levels of approximately 40% compared to new
RLNG based power plants offering approximately 60% efficiency. At brent oil
price of USD 75/bbl and PKR/USD of 125, KAPCO’s fuel cost disadvantage at PKR
4.5/kwh exceeds an RLNG plant’s levelized capacity ch...
