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JAPAN POWER GENERATION LIMITED                
Annual Reports 2002  
 
Contents  
   
Company Information    
Notice of the Meeting    
Directors 'Report    
Auditors 'Report    
Balance Sheet    
Profit and Loss Account    
Cash Flow Statement    
Statement of Changes in Equity    
Notes to the Accounts    
Pattern of Shareholdings    
Categories of Share Holders    
Form of Proxy  
   
COMPANY INFORMATION  
   
BOARD OF DIRECTORS  
Mr. ZAFAR MAHMOOD                (Chief Executive)  
SHEIKH NAZAZALI      (Chairman)  
Mr. HASEEB KHAN  
Mr. ASAD ALI UPPAL  
Mr.AKHTARALI UPPAL  
Mr. FAISAL QAMAR UPPAL  
Mr.SAITOYOSHIHIRO  
Mr. TAKASHI KABURAGI  
Mr. MUHAMMAD ALI  
Mr. KHALID IMRAN  
Mr. MAHMOOD AHMED  
SYED MAJEEDULLAH HUSAINI  
SHEIKH MAHMOOD ALI  
Mrs. SAMINA ZAFAR  
COMPANY SECRETARY SYED ZAFAR HAIDER  
   
COMPANY'S AUDIT    
COMMITTEE  
   
Mr. HASEEB KHAN (Chairman)    
SHEIKH MAHMOOD ALI    
Mr. FAISAL QAMAR UPPAL    
Mrs. SAMINA ZAFAR  
   
AUDITORS  
HYDERBHIMJI&CO.,  
CHARTERED ACCOUNTANTS  
&  
JAVAID JALAL AMJAD & CO.,  
CHARTERED ACCOUNTANTS  
   
LEGAL ADVISORS  
WALKER MARTINEAU    
SALEEM  
   
BANKERS  
PRIME COMMERCIAL BANK LTD.    
ASKARI COMMERCIAL BANK LTD.    
ALLIED BANK OF PAKISTAN LTD.  
   
REGISTERED OFFICE  
26, PESHAWAR BLOCK, FORTRESS STADIUM,  
LAHORE CANTT.  
TEL: +92-42-6668156-57  FAX: +92-42-6664625  
   
PLANT LOCATION  
JIA BAGGA RAILWAY STATION  
RAIWIND ROAD, DISTRICT LAHORE.  
TEL: +92-42-5835864-68 FAX: +92-42-5835860  
   
NOTICE OF ANNUAL GENERAL MEETING  
Notice is hereby given that the 8"'Annual General Meeting of the members of Japan Power Generation Limited    
will be held on Wednesday, the 30"' October 2002 at 11:00 a.m. at plant site located at Khan-e-Nepal Road, Near Jia    
Bagga Railway Station, Raiwind Road, District Lahore to transact the following business:  
   
1.     To confirm the minutes of the lastAnnual General Meeting held on December 31,2001.  
   
2.      To receive, consider and adopt the audited accounts of the company for the financial year ended June    
30,2002 together with the Auditors' and Directors' Reports thereon.  
   
3.      To appoint Auditors of the company for the year ending June 30, 2003 and fix their remuneration.  
   
4.      To transact any other business that may be placed before the meeting with the permission of the chair.  
   
For and on behalf of    
the Board of Director  
   
Lahore:          SYEDZAFARHAIDER    
Dated: October 08,2002.     (Company Secretary)  
   
NOTES:  
1.      The Share Transfer Book of the Company will remain closed from October 20,2002 to October 30.    
(Both days inclusive)  
   
2.      A member entitled to attend and vote at the above meeting may appoint another person as proxy.    
Proxies, in order to be effective, must be received at 26-Peshawar Block, Fortress Stadium, Lahore    
Cantt, to the Registered Office of the Company not later than 48 hours before the time of the meeting    
and must be duly stamped, signed and witnessed.  
   
3.      Members are requested to immediately notify the change in address, if any.  
   
DIRECTORS' REPORT TO THE MEMBERS  
The Directors of your company take pleasure in presenting the 8"' Annual Report and the Audited Accounts of the  
   
company for the year ended June 30,2002.  
   
PRINCIPALACTIVITIES  
The principal activities of the company are to own, operate and maintain a thermal power house with an installed    
capacity of 135 MW at Raiwind Road, Lahore and to generate power for onward supply to WAPDA.  
   
PRESENT STATUS  
The complex (plant) was operated to a high standard of technical efficiency which was achieved after regular    
supervision and preventive maintenance. WAPDA recently conducted Annual Dependable Capacity Test from August    
27, 2002 to August 30, 2002 and your Directors feel pleasure in informing the shareholders that the complex    
successfully qualified the test by generating 116.094 MW against the net capacity requirement of 107 MW i.e. an    
excess generating capacity of 9 MW.  
   
FINANCIAL RESULTS  
Turnover for the year was Rs. 1,960 million (2001:Rs. 1,508 million) and operating costs were Rs. 1,484 million (2001:  
   
Rs. 1,087 million) resulting in a gross profit of Rs. 476 million (2001: Rs. 421 million). The average dispatch to    
WAPDA in term of percentage of dependable capacity was 45.88% (2001: 30%). However, inspite of increase in    
turnover during the year, the company suffered a net loss ofRs. 257 million (as compared to Rs. 187 million last year)    
after deducting administrative and financial expenses.  
   
Major reasons for continuous losses are as follows:  
   
1.      Your company's levellized tariff was reduced to US cents 4.3 perkWh in July, 1999 against US cents 5.56 per    
kWh as per original Power Purchase Agreement (PPA). Other IPPs in the same vicinity with almost the same    
capacity are paid a levellized tariff of US cents 5.19 perkWh. This reduction was reluctantly agreed by your    
company in the larger interest of the shareholders and lenders for the revival of the complex because WAPDA    
had already issued a notice of intent to terminate the PPA. The management is soliciting a request to WAPDA    
to increase the agreed tariff to a reasonable level in order to improve the operational results of the company.  
   
2.      Presently the company is paid by WAPDA for consumption of furnace oil @ 211 gm per kWh in fuel    
component of energy payment against actual consumption ranging between 218 - 222 gm per kWh. Your    
directors also plan to take up this issue with WAPDA and are confident to convince WAPDA to increase the    
consumption factor on merit. Positive response from WAPDA will significantly improve the operating results    
and financial liquidity of the company.  
   
1.      Similar to last year, liquidated damages ofRs 74 million invoiced by WAPDA and charged in these    
accounts have also contributed to loss for the year. The management is vigorously making efforts to    
arrange funds for timely purchase of HFO to avoid the levy of such damages in the future.  
   
2.      Heavy financial cost is another factor for continuing losses. The financial expenses for the current year are Rs.    
603.603 million as compared to Rs. 541.267 million for the previous year. The company is making payments    
regularly to reduce its debts and financial charges will start decreasing after payment of last installment of    
supplier's credit which is due on March 26,2004.  
   
3.      Loss of revenue ofRs. 26.667 million resulted from short receipt of capacity payments from WAPDA due to    
the depressing effect of the decrease in US $ exchange rate during the period from January to June 2002. This    
loss may further increase ifUS$ continues to fall in the future.  
   
4.      After the mishap of September 11, 2001 the insurance premium has almost doubled to secure the complex    
under a proper insurance cover.  
   
The above facts highlight the urgent need for improving the financial position of the company and your    
management is sincerely trying to mobilize all its resources to overcome this adverse situation, and thereby    
converting your company into a profitable unit in the years to come. In this regard the management is taking    
the following steps to improve the overall profitability and financial health of the company.  
   
i)      It is planned to approach WAPDA for sale of additional 9 MW, the extra generating capacity    
demonstrated during annual dependable capacity test as mentioned above. In case of successful    
negotiations it will increase revenues and reduce the accumulated loss resulting from decrease in    
tariff rate.  
   
ii)     The company is in the process of reconciling its balances with WAPDA on account of liquidated    
damages charged by WAPDA in the First Agreement Year and your Directors are confident to    
claim a refund of about Rs. 66 million, which will also reduce the accumulated loss.  
   
iii)     The sponsoring directors are also injecting a sum of Rs.60 million in due course of time which will    
improve the overall liquidity and the working capital position of the company.  
   
By the grace of Allah and Prophet's blessing (pbuh), and with the untiring efforts of the management, your    
company is expected to show much better results in the future.  
   
CORPORATE AND FINANCIAL REPORTING FRAMEWORK  
We are pleased to report that your company has taken necessary steps to comply with the provisions of the    
Code of Corporate Governance issued by Securities and Exchange Commission of Pakistan.  
   
We give below Statements on Corporate and Financial Reporting Framework.  
   
       The financial statements, prepared by the management of the company, present fairly its state of affairs, the    
result of its operations, cash flows and changes in equity.  
   
       The financial statements for the year ended June 30, 2002 were presented before the Board after duly signed    
by the CEO and CFO. The Board after due consideration and approved, authorized the signing of the financial    
statements for issuance and circulation.  
   
      Proper books of account of the company have been maintained.  
   
       Appropriate accounting policies have been consistently applied in preparation of the financial statements and    
accounting estimates are based on reasonable and prudent judgment.  
   
•'      International Accounting Standards, as applicable in Pakistan, have been followed in preparation of the    
financial statements.  
   
      A sound system of internal control is being effectively implemented and continuously reviewed and    
monitored.  
   
       For the reasons stated in the relevant paras of this report, there are no significant doubt upon the company's    
abi 1 ity to continue as a going concern.  
   
       There has been no material departure from the best practices of corporate governance, as detailed in the listing    
regulations.  
   
       Note 9 of the annexed audited accounts relate to outstanding taxes and levies.  
   
       In compliance with the requirements of the Securities and Exchange Commission of Pakistan, the company    
has been issuing the quarterly financial statements within the prescribed time limits.  
   
      The key operating and financial data of the company is as under:  
   
Financial year ended June 30, 2002 2001 2000  
   
Turnover Rs. in million                             1,960                             1,508                                374  
Net loss Rs. in million                              (257)                              (187)                                (67)  
Total assets Rs. in million                             6,895                             6,961                             7,058  
Generation (MWH)                         430,058                         281,544                           70,507  
Load factor %                                  46                                  30                                  26  
   
* (Operating results for the year 2000 are for the period of three and a half months only)  
   
BOARD MEETINGS  
During the year, four meetings of the Board of Directors were held. Attendance by each director was as follows:  
   
  Attendance  
Mr. Zafar Mahmood (Chief Executive)   4  
Sheikh Nazaz Ali   4  
Mr. Haseeb Khan   4  
Mr. Akhtar Ali Uppal   4  
Mr. Asad Ali Uppal   4  
Mr. Faisal Qamar Uppal   4  
Mr. Mahmood Ahmed (Crescent Investment Bank Ltd) 0  
Sheikh Mahmood Ali   4  
Mr. Muhammad Ali   2  
Mr. Saito Yoshihiro   0  
Mr. Takashi Kaburagi   0  
Mrs. Samina Zafar   2  
Mr. Khalid Imran (Nominee Prime Commercial Bank Ltd) 4  
Mr. Majeed Ullah Hussaini (Nominee National Bank of Pakistan) 0  
   
Leave of absence was granted to directors including Japanese directors who could not attend the Board meetings.    
 
SHAREHOLDING PATTERN  
A statement indicating the distribution of shareholding is attached with this report.    
 
AUDITORS  
The present Auditors' M/s. Hyder Bhimji & Company, Chartered Accountants & Javaid Jalal Amjad & Company,    
Chartered Accountants retire and being eligible, offer themselves for re-appointment.  
   
GENERAL  
During the year, there were a number of changes in the Banking Sector which also affected the lending syndicate of our    
project. Effective November 1,2001 National Development Finance Corporation (NDFC), a Syndicate Member and a    
Lender, amalgamated with the National Bank of Pakistan (NBP) under a scheme notified by the Federal Government    
Similarly Gulf Commercial Bank Ltd. another member of the lending syndicate, was taken over by PICIC and its name    
changed to PICIC Commercial Bank Ltd. Similarly another lender. Prudential Commercial Bank Ltd. was taken    
over by Saudi Pak Investment Co. and is now knows as Saudi Pak Commercial Bank Ltd. AL-Faysal Investment Bank    
Ltd. Merged with Faysal Bank Ltd. Beside this, the share of the Indus Bank Ltd. (under liquidation) in the lender's    
syndicate has been taken over by Allied Bank of Pakistan Ltd.  
   
Your Directors are pleased to report that during the year all payments to the lenders have been made on time and in  
   
accordance with the SFA-I and SFA-II.  
   
ACKNOWLEDGEMENT  
All the employees of the company have put in a real team work. The directors wish to thank the members, staff and    
management of the company for their hard and dedicated efforts.  
   
on behalf of    
the Board of Director  
 
Lahore: September 30,2002  CHIEFEXECUTIVE  
   
AUDITORS' REPORT TO THE MEMBERS  
We have audited the annexed balance sheet of Japan Power Generation Limited as at June 30, 2002 and the related    
profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part    
thereof, for the year then ended and we state that we have obtained all the information and explanations which, to    
the best of our knowledge and belief, were necessary for the purpose of our audit.  
   
It is the responsibility of the company's management to establish and maintain a system of internal control, and prepare    
and present the above said statements in conformity with the approved accounting standards and the requirements of    
the Companies Ordinance 1984. Our responsibi lity is to express an opinion on these statements based on our audit.  
   
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require    
that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of    
any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and    
disclosures in the above said statements. An audit also includes assessing the accounting policies and significant    
estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe    
that our audit provides a reasonable basis for our opinion and, after due verification, we report that:  
   
a)      in our opinion, proper books of account have been kept by the company as required by the Companies    
Ordinance, 1984;  
   
b)      in our opinion:  
   
i.      the balance sheet and profit and loss account together with the notes thereon have been drawn up    
in conformity with the Companies Ordinance, 1984, and are in agreement with the books of    
account and are further in accordance with accounting policies consistently applied except for the    
change as mentioned in note 2.3 with which we concur;  
   
ii.      The expenditure incurred during the year was for the purpose of the company's business; and  
   
iii.     the business conducted, investments made and the expenditure incurred during the year were in    
accordance with the objects of the company;  
   
c)      in our opinion and to the best of our information and according to the explanations given to us, the balance    
sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes    
forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the    
information required by the Companies Ordinance, 1984, in the manner so required and respectively give a    
true and fair view of the state of the company's affairs as at June 30, 2002 and of the loss, its cash flows and    
changes in equity for the year then ended; and  
   
d)      in our opinion, no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.  
   
Lahore: September 30, 2002   
   
Javaid Jalal Amjad & Co.    
Chartered Accountants   
   
Hyder Bhimji & Co    
Chartered Accountants  
   
REVIEW REPORT TO THE MEMBERS ON STATEMENT OF    
COMPLIANCE WITH BEST PRACTICES OF CODE OF CORPORATE    
GOVERNANCE  
   
We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance    
prepared by the Board of Directors of Japan Power Generation Limited to comply with the Listing Regulation No. 37    
(Chapter XI) and No. 40 (Chapter XIIT) of the Karachi and Lahore Stock Exchanges respectively where the Company is    
listed.  
   
The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the    
Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the    
Statement of Compliance reflects the status of the company's compliance with the provisions of the Code of Corporate    
Governance and report if it does not. A review is limited primarily to inquiries of the Company personnel and review of    
various documents prepared by the company to comply with the Code.  
   
As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal    
control system sufficient to plan the audit and develop an effective audit approach. We have not carried out any special    
review of the internal control system to enable us to express an opinion as to whether the Board's statement on internal    
control covers all controls and the effectiveness of such internal controls.  
   
Based on our review nothing has come to our attention which causes us to believe that the Statement of Compliance    
does not appropriately reflects the Company's compliance, in all material respects, with the best practices contained in    
the Code of Corporate Governance effective for the period from May 2,2002 to June 30,2002.  
   
Lahore: September 30, 2002   
   
Javaid Jalal Amjad & Co.    
Chartered Accountants   
   
Hyder Bhimji & Co    
Chartered Accountants  
   
BALANCE SHEET AS AT JUNE 30, 2002  
   
    2002 2001  
  Note Rupees Rupees  
Capital and reserves  
Authorized capital  
150,000,000 ordinary shares of Rs. 10 each             1,500,000,000           1,500,000,000  
Issued, subscribed and paid-up capital      
133,200,000 ordinary shares ofRs.10 each,      
fully paid-up in cash                 1,332,000,000               1,332,000,000  
Accumulated loss                  (512,181,100)                (255,131,474)  
Shareholders' equity                    819,818,900               1,076,868,526  
Non current liabilities      
Sponsors' interest free loan - unsecured                    168,375,918                  168,375,918  
Long term loans / finances   3               5,407,941,950               4,221,590,446  
Liabilities against assets      
subject to finance lease   4                    11,495,382  -   
Deferred liabilities   5                      4,405,620                      3,812,900  
                5,592,218,870               4,393,779,264  
Current liabilities      
Short term borrowings   6                  146,040,486                    76,607,678  
Current portion of long term liabilities   7                    86,091,023                  820,166,402  
Creditors, accrued and other liabilities   8                  251,101,903                  593,136,412  
                   483,233,412               1,489,910,492  
Contingencies and commitments   9    
Total equity and liabilities             6,895,271,182           6,960,558,282  
   
The annexed notes form an integral part of these financial statements.  
   
CHIEF FINANCIAL OFFICER  
   
  2002 2001  
  Note Rupees Rupees  
Non Current Assets  
Tangible fixed assets  
Operating fixed assets   10               6,342,732,047               6,575,065,767  
Capital work-in-progress   11                    24,723,272                    26,785,070  
            6,367,455,319           6,601,850,837  
     
Long term deposits   12                      3,477,170                         800,000  
Deferred cost   13                    35,118,788                    48,105,980  
            6,406,051,277           6,650,756,817  
Current assets      
Stores and spares   14                      8,966,388                      7,997,450  
Stock in trade   15                    47,946,433                    48,702,941  
Trade debts   16               350,631,710               155,666,753  
     
Advances, deposits, prepayments      
and other receivables   17                    78,515,479                    48,476,435  
Cash and bank balances   18                      3,159,895                    48,957,886  
                   489,219,905                  309,801,465