KARACHI - Kot Addu Power Company (KAPCO) posted a profit after tax (PAT) of Rs5.67 billion with earning per share of Rs6.44 in FY09; a 29 per cent decline on year-on-year basis. The decline in profits was due to the deferred taxation benefit availed in FY08, which artificially plugged up the earnings in FY08. KAPCOs normalized earnings recorded a noteworthy rise of 8pc. The company also declared a dividend of Rs6.45/share, a 100pc payout ratio, maintaining average payout record of the past 3 years. Being an IPP, KAPCOs topline comprises two components, the Energy Purchase Price (EPP) and the Capacity Purchase Price (CPP). The latter component being indexed to PKR/USD (depreciated by 27pc) and the US CPI. EPP consists of the pass-through items that the IPP passes on to WAPDA. This component increased as KAPCO increased its reliance on LSFO as fuel for generation to 80pc in the total fuel mix due to shortage of gas. KAPCOs topline rose by 24pc as the IPP passed on the increased fuel charges to WAPDA. The inflated topline along with fuel cost affecting the cost of sales (up by 18pc YoY), drove down the margins to 15.8pc in FY09 from 16.7pc in FY08. Main contribution to the increased profitability (on normalized basis) came from the other income head, which rose by a gigantic 274pc as KAPCOs receivables against WAPDA piled up to a level of Rs20b pulling up interest charges on such delayed payments being charged at discount rate +4%. The support offered by such returns resulting from delayed payments, were offset as the company had to increase its reliance on short term borrowing and delayed payments to its fuel supplier PSO (charged at 6M T-bill +6%) to manage the liquidity issues faced. The financial charges increased to a huge Rs6.4 billion, depicting a massive surge of 190pc, as average trade debts increased by a gigantic 50pc.