| KOHINOOR ENERGY LIMITED |
|
|
|
|
|
|
| ANNUAL
REPORT 1997 |
|
|
| Contents |
|
| Company Information |
|
| Notice of Annual General
Meeting |
|
| Directors Report |
|
| Auditors' Report to the
Members |
|
| Balance Sheet |
|
| Profit and Loss Account |
|
| Cash Flow Statement |
|
| Notes to the Accounts |
|
| Pattern of Share Holding of
Shares |
|
|
|
|
| COMPANY
INFORMATION |
|
|
| Board
of Directors |
|
| Mr. M. Azam Saigol |
Chairman |
|
| Mr.
M. Naseem Saigol |
|
| Mrs.
Amber Saigol |
|
| Mr.
Pervez Malik |
Chief Executive |
|
| Mr.
Haruyoshi Murakami |
(Nominee Tomen
Corporation) Japan |
|
| Mr.
Koichi Atsuta |
(Nominee Tomen
Corporation) Japan |
|
| Mr.
Lars-Ake J. Kjell |
(Nominee Wartsila Diesel
Oy) Finland |
|
|
| Corporate
Secretary |
|
| Mr.
Haroon Ahmad Khan |
|
|
| Management |
|
| Mr.
Pervez Malik |
Chief Executive |
|
| Mr.
Seppo Tarvainen |
Plant Manager |
|
| Mr.
Mehboob A. Mirza |
Project Manager |
|
| Mr.
Ahmed Zia Haider |
Finance Manager |
|
|
| Auditors |
|
| A.
F. Ferguson & Co., |
|
| Chartered
Accountants |
|
|
| Bankers |
|
| Off-Shore
Trustee |
|
| First
Trust, New York |
|
|
| On-Shore
Trustee |
|
| Bank
of America NT&SA, Lahore |
|
|
| Others |
|
| ABN
AMRO Bank N.V |
|
| Al
Faysal Investment Bank Limited |
|
| Faysal
Bank Limited |
|
| Union
Bank Limited |
|
|
| Registered
Office |
|
| 2nd Floor, Rashid Plaza |
|
| 24
D, Blue Area, Mamabad |
|
| Tel:
+92-51-824273 |
|
|
| Head
Office/Share Department |
|
| 06-Egerton
Road, Lahore |
|
| Tel:
+92-42-6306131-5 |
|
|
| Project |
|
| 35
Km, Link Manga Raiwind Road, Lahore |
|
| Tel:
+92-4951-392317-8 |
|
| Fax:
+92-4951-391285 |
|
|
| NOTICE
OF ANNUAL GENERAL MEETING |
|
|
| Notice
is hereby given that the fourth Annual General Meeting of Shareholders of
Kohinoor Energy Limited |
|
| will
be held on Tuesday 30 December, 1997 at 11:00 A.M. at Registered Office,
Rashid Plaza, 2nd Floor |
|
| 24-D,
Blue Area, Islamabad to transact the following business:- |
|
|
| 1.
To confirm the minutes of third Annual General Meeting held on 15 October
1996. |
|
|
| 2.
To receive and adopt the Audited Accounts for the year ended June 30, 1997
alongwith Directors' |
|
| and
Auditors' Reports thereon. |
|
|
| 3.
To appoint Auditors to hold office till the conclusion of the next Annual
General Meeting and to fix |
|
| their
remuneration. |
|
|
| 4.
Any other business with the permission of the Chair. |
|
|
| Notes: |
|
|
| 1.
The Share Transfer Books of the Company will remain closed from 30 December
1997 to 05 |
|
| January
1998 (both days inclusive). |
|
|
| 2.
A member entitled to attend and vote at this Meeting may appoint a proxy.
Proxies, in order to |
|
| be
effective, must be received at 06-Egerton Road, Lahore, the I-lead Office of
the Company not |
|
| less
than forty-eight hours before the time for holding the meeting and must be
duly stamped, |
|
| signed
and witnessed. |
|
|
| 3.
Members are requested to notify the Company for any change in their
addresses. |
|
|
| DIRECTORS'
REPORT |
|
|
| Your
Directors are pleased to submit their Report together with the Audited
Accounts of the |
|
| Company
for the year ended June 30, 1997. During the year 1996-97 your Company has
gone |
|
| through
various challenges firstly because of being the first power project to reach
completion |
|
| under
the new Private Power Policy and secondly due to changing political climates
in the country. |
|
| By
the grace of God your Company has met all these challenges very successfully. |
|
|
| Principal
Activities |
|
| The
main activities of the Company are to design, finance, construct, own and
operate a 120 |
|
| MW,
net capacity power plant based on furnace oil fired diesel engines. |
|
|
| The
Company commenced full commercial operations on June 20, 1997, when the
Commercial |
|
| Operation
Date (COD) of the Complex was declared. |
|
|
| Operating
Results |
|
| During
the Fiscal Year 1996-97 Company had its commercial operation for only 11
days, i.e. from |
|
| June
20, 1997 to June 30, 1997. The plant despatched for only three days during
this period |
|
| resulting
into a turnover of Rs 43.052 million and Operating Cost of Rs 20.663 million.
Net Profit |
|
| for
the period amounted to Rs 13.677 million with EPS of Rs 0.10. |
|
|
| Construction
and Commissioning |
|
| In
accordance with the commissioning deadlines agreed with WAPDA under Power
Purchase |
|
| Agreement
(PPA), first phase of the complex was completed exactly on the target date.
15 days |
|
| reliability
test for the first four units started on November 27 targeting completion on
December |
|
| 12
with partial COD on December 13, 1996. Similarly full completion of the
complex was |
|
| achieved
before target date and the plant was ready to undergo full commissioning
tests. |
|
|
| Due
to various differences with WAPDA including appointment of independent
engineers and |
|
| interpretation
of testing requirements under PPA the tests were not accepted by WAPDA.
Finally |
|
| the
reliability test which completed on June 19, 1997 was declared successful by
the independent |
|
| engineers
and June 20, 1997 was declared as the COD of the complex. |
|
|
| The
initial dependable capacity test was not only successful but an additional
capacity of 7 MWs |
|
| was
also demonstrated. Our Capacity payments will therefore be based at a 5%
higher level i.e., |
|
|
| The
Company received a formal demand for despatch from June 27th but due to
failure of |
|
| WAPDA
to establish Stand-by Letter of Credit required under PPA, the Company
stopped |
|
| despatch
on July 19th. A default notice was therefore issued to WAPDA and Government
of |
|
| Pakistan's
support was sought under Implementation Agreement (IA). GOP in accordance
with its |
|
| obligation
under IA directed WAPDA to cure the default. In response to the GOP's support
the |
|
| Company
offered three years deferral of early completion premium of 0.25 cents per
KWh which |
|
| the
Company is entitled to by virtue of completion before December 31, 1997. |
|
|
| On
November 06, 1997 WAPDA finally issued a letter confirming the COD of June
20, 1997 and |
|
| its
obligation to pay the Capacity Price therefrom. The plant started despatch on
November 11 |
|
| and
upto December 5, 1997, 54960 MWh (75% plant factor) have been delivered to
the |
|
| National
Grid. |
|
|
| The
decision of COD was formally approved in the authority meeting of WAPDA on
November |
|
| 18th
and first payment of Rs 100 million has been received on December 3rd.
Balance amount of |
|
| outstanding
payments and establishment of standby letter of credit are also expected very
shortly. |
|
| The
Company expects WAPDA to clear all outstandings and become current on its
payment |
|
| obligations
to the Company during December. |
|
|
| Financing
and Project Completion Cost |
|
| Due
to delay in COD the Company incurred additional financial cost and lost
revenues from sale |
|
| of
power. Despite these the Company managed to achieve COD out of the available
resources. |
|
|
| Liquidated
damages were claimed from EPC Contractors and have been mutually agreed and |
|
| settled
with them. Due to increase in fuel cost from Rs 2,843 in 1994 to Rs 6,297 per
ton, the |
|
| Company's
working capital requirements have also increased. A credit line equivalent to
US$3.0 |
|
| million
has also been arranged and is available to the Company for this purpose. |
|
|
| Auditors |
|
| The
present auditors Messrs. A. F. Ferguson & Co., Chartered Accountants
retire and being |
|
| eligible,
offer themselves 'for re-appointment. |
|
|
| Appreciation |
|
| Your
Directors are pleased to record their appreciation of the services rendered
by the officers |
|
| and
workers of the Company and hope that the same spirit of devotion and
co-operation will |
|
| continue
in future. |
|
|
| Your
Directors wish to place on record their thanks to the Bankers of the Company
who had |
|
| played
a vital role in the progress of the Company. |
|
|
| Pattern
of Shareholding |
|
| A
statement showing the pattern of holding of shares as at June 30, 1997 is
attached. |
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of Kohinoor Energy Limited as at June
30, 1997 and profit |
|
| and
loss account for the period June 20 to June 30, 1997 and cash flow statement
for the year then ended |
|
| together
with the notes forming part thereof 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 |
|
| and,
after due verification thereof, 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; |
|
|
| (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 and profit and loss account and the cash flow statement, together with
the notes |
|
| forming
part thereof, 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
company's affairs as |
|
| at
June 30, 1997, and of the profit for the period June 20, 1997 to June 30,
1997 and the cash flow |
|
| for
the year then ended; and |
|
|
| (d)
in our opinion no Zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
|
|
|
|
| BALANCE
SHEET As AT JUNE 30, 1997 |
|
|
|
|
1997 |
1996 |
|
|
Note |
Rupees |
Rupees |
|
|
| CAPITAL |
|
|
| Authorised |
|
| 140,000,000
ordinary shares of Rs. 10 each |
|
1,400,000,000 |
1,400,000,000 |
|
|
|
|
| Issued,
subscribed and paid up capital |
|
|
|
| 130,352,780
(1996: 130,352,780) ordinary |
|
|
|
| shares
of Rs. 10 each issued for cash |
|
1,303,527,800 |
1,303,527,800 |
|
|
|
|
| Reserves
- Share premium |
|
140,348,169 |
140,348,169 |
|
|
|
|
| Unappropriated
profit |
|
13,676,503 |
- |
|
|
---------- |
---------- |
|
|
1,457,552,472 |
1,443,875,969 |
|
|
| LONG
TERM LOANS - SECURED |
|
3 |
3,706,668,320 |
2,175,132,960 |
|
|
|
|
|
|
|
| CURRENT
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
| Current
maturity of long term loans - secured |
3 |
225,222,160 |
- |
|
| Short
term running finance - secured |
|
4 |
- |
- |
|
| Creditors,
accrued and other liabilities |
|
5 |
326,822,515 |
404,984,623 |
|
|
|
|
|
---------- |
---------- |
|
|
|
|
|
552,044,675 |
404,984,623 |
|
| CONTINGENCIES
AND COMMITMENTS |
|
6 |
|
|
|
---------- |
---------- |
|
|
|
5,716,265,467 |
4,023,993,552 |
|
|
========== |
========== |
|
|
| FIXED
CAPITAL EXPENDITURE |
|
|
| Operating
fixed assets |
|
7 |
5,165,718,743 |
21,369,653 |
|
| Capital
work in progress |
|
8 |
- |
3,803,784,178 |
|
|
|
---------- |
---------- |
|
|
|
5,165,718,743 |
3,825,153,831 |
|
| DEFERRED
COSTS |
|
9 |
3,848,558 |
7,661,126 |
|
|
|
|
| CURRENT
ASSETS |
|
|
|
|
|
|
| Stores,
spares and loose tools |
|
10 |
175,804,172 |
- |
|
| Stock
in trade |
|
11 |
29,544,130 |
- |
|
| Trade debts |
|
12 |
123,550,422 |
- |
|
| Advances,
deposits, prepayments |
|
|
|
|
| and
other receivable |
|
13 |
129,453,177 |
11,245,847 |
|
| Cash
and bank balances |
|
14 |
88,346,265 |
179,932,748 |
|
|
|
---------- |
---------- |
|
|
|
546,698,166 |
191,178,595 |
|
|
---------- |
---------- |
|
|
5,716,265,467 |
4,023,993,552 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
| PROFIT
AND LOSS ACCOUNT FOR THE PERIOD JUNE 20 TO JUNE 30, 1997 |
|
|
|
1997 |
1996 |
|
|
Note |
Rupees |
Rupees |
|
|
| Sales |
|
15 |
43,052,029 |
- |
|
| Cost of sales |
|
16 |
20,663,556 |
- |
|
|
|
---------- |
---------- |
|
| Gross profit |
|
|
22,388,473 |
- |
|
| Administration
and general expenses |
|
17 |
911,194 |
- |
|
|
|
---------- |
---------- |
|
| Operating
profit |
|
|
21,477,279 |
- |
|
| Other income |
|
18 |
2,870,044 |
- |
|
|
|
---------- |
---------- |
|
|
|
24,348,223 |
- |
|
| Financial
charges |
|
19 |
10,671,720 |
- |
|
|
|
---------- |
---------- |
|
| Unappropriated
profit carried forward |
|
|
13,676,503 |
- |
|
|
=========== |
=========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Chief Executive |
Director |
|
|
|
| CASH
FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 1997 |
|
|
|
|
1997 |
1996 |
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| Cash
flow from operating activities |
|
|
|
| Cash
generated from operations |
|
20 |
(419,631,039) |
- |
|
| Financial
charges paid |
|
|
(175,542) |
- |
|
| Taxes paid |
|
|
(441,717) |
- |
|
|
|
---------- |
---------- |
|
| Net
cash outflow from operations |
|
|
(420,248,298) |
- |
|
|
|
|
| Cash
flow from investing activities |
|
|
|
| Fixed
capital expenditure |
|
(1,183,539,573) |
(3,031,807,188) |
|
| Financial
charges paid |
|
(265,004,800) |
(329,243,426) |
|
| Interest/mark-up
income received |
|
20,538,668 |
16,490,092 |
|
| Deferred
costs |
|
(90,000) |
(6,183,286) |
|
|
|
---------- |
---------- |
|
| Net
cash outflow from investing activities |
|
|
(1,428,095,705) |
(3,350,743,808) |
|
| Cash
flow from financing activities |
|
|
|
| Increase in share capital |
|
|
- |
1,222,861,367 |
|
| Long
term loans |
|
|
1,756,757,520 |
2,175,132,960 |
|
|
|
---------- |
---------- |
|
| Net
cash inflow from financing activities |
|
|
1,756,757,520 |
3,397,994,327 |
|
|
|
|
|
|
| Net
(decrease)/increase in cash and |
|
|
|
| cash
equivalents |
|
|
(91,586,483) |
47,250,519 |
|
|
|
|
| Cash
and cash equivalents at |
|
|
|
| beginning
of the year |
|
|
179,932,748 |
132,682,229 |
|
|
|
|
| Cash
and cash equivalents |
|
|
---------- |
---------- |
|
| at
the end of the year |
|
14 |
88,346,265 |
179,932,748 |
|
|
========== |
========== |
|
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED JUNE 30, 1997 |
|
|
| 1.
The Company And Its Operations |
|
|
| The
company was incorporated on April 26, 1994 and received Certificate for
Commencement of |
|
| Business
on September 14, 1994. The company is listed on all Stock Exchanges in
Pakistan and its |
|
| principal
activity is power generation and supply to WAPDA. The company commenced its
commer- |
|
| cial
operations from June 20, 1997. |
|
|
| 2.
Significant Accounting Policies |
|
|
| 2.1
Accounting convention |
|
|
| The
accounts have been prepared under the historical cost convention, modified by
capitali- |
|
| sation
of exchange differences referred to in note 2.8. |
|
|
| 2.2 Taxation |
|
|
| Profit
and gains derived by the company are exempt from tax under clause 176 of the |
|
| Second
Schedule of the Income Tax Ordinance, 1979. |
|
|
| The
company is also exempt from minimum tax on turn over under clause 20 of the
Part IV |
|
| of
Second Schedule of the Income Tax Ordinance, 1979. |
|
|
| 2.3
Retirement Benefits |
|
|
| The
company operates an approved contributory Provident Fund Scheme for all its
perma- |
|
| nent
employees. Equal monthly contributions are made by the employer and employees
to the |
|
| fund. |
|
|
| 2.4
Fixed Assets |
|
|
| Operating
fixed assets except land are stated at cost less accumulated depreciation.
Land |
|
| and
capital work in progress are stated at cost. Cost of certain fixed assets
comprise of |
|
| historical
cost, exchange differences referred to in note 2.8 and interest etc. in note
2.9. |
|
|
| Depreciation
on operating fixed assets is charged to profit on the straight line method so
as |
|
| to
write off the historical cost of an asset over its estimated useful life at
the annual rates |
|
| mentioned
in note 7. The net exchange differences relating to an asset, at the end of
each |
|
| year
is amortised in equal instalments over its remaining useful life.
Depreciation on additions |
|
| is
charged from the month in which the asset is put to use and no depreciation
is charged |
|
| on
assets deleted during the year. |
|
|
| Maintenance
and normal repairs are charged to income as and when incurred. Major |
|
| renewals
and improvements are capitalised. Gains and losses on disposal of assets are
taken |
|
| to
profit and loss account. |
|
|
| 2.5
Deferred Costs |
|
|
| These
costs are to be amortised in equal instalments over five years by 1998. |
|
|
| 2.6
Stores, Spares and Loose Tools |
|
|
| Stores,
spare and loose tools are valued principally at moving average cost. Items in
transit |
|
| are
valued at cost comprising invoice values plus other charges incurred thereon. |
|
|
| 2.7
Stock in Trade |
|
|
| Raw
materials except furnace oil are valued at lower of moving average cost and
net |
|
| realisable
value. Furnace oil is valued at lower of FIFO cost and net realisable value. |
|
|
| 2.8
Foreign Currencies |
|
|
| Assets
and liabilities in foreign currencies are translated into Pak Rupees at
exchange rates |
|
| prevailing
at the balance sheet date. Exchange differences on loans utilised for the
acquisi- |
|
| tion
of plant and machinery are capitalised. |
|
|
| 2.9
Financial and Other Charges |
|
|
| Financial
and other charges on long term loans are capitalised upto the date of
commission- |
|
| ing
of the respective plant and machinery, acquired out of the proceeds of such
long-term |
|
| loans.
All other financial and other charges are charged to income. |
|
|
| 2.10
Revenue Recognition |
|
|
| Revenue
on account of energy is recognised on transmission of electricity to WAPDA, |
|
| whereas
on account of capacity is recognised when due. |
|
|
| 3.
Long Term Loans - Secured |
|
| These
are composed of: |
|
|
|
Foreign Currency balance |
Rupees equivalent |
Rate of |
No. of equal |
Interest |
|
1997 |
1996 |
1997 |
1996 |
interest |
half year |
pay- |
| Lender |
Currency |
(Dollars in thousand) |
Rupees in thousand) |
per annum |
instalments |
able |
|
| International |
|
| Finance |
|
| Corporation |
|
| - Loan A |
US$ |
25,000 |
25,000 |
1,017,570 |
882,765 |
11.25% |
20 Commencing |
Half |
|
|
|
|
March, 1999 |
yearly |
| - Loan B |
US$ |
36,600 |
36,600 |
1,489,722 |
1,292,368 |
Libor+ |
18 Commencing |
Half |
|
|
|
|
2.50% |
March, 1998 |
yearly |
| ABN AMRO |
|
|
|
Libor + |
20 Commencing |
Half |
| - Loan C |
US$ |
35,000 |
- |
1,424,598 |
- |
1.50% |
September, 1997 |
yearly |
| ---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
96,600 |
61,600 |
3,931,890 |
2,175,133 |
|
| less:
Current maturity |
5,533 |
- |
225,222 |
- |
|
| ---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
|
91,067 |
61,600 |
3,706,668 |
2,175,133 |
|
| ========== |
========== |
========== |
========== |
========== |
========== |
========== |
========== |
========== |
|
|
| Security |
|
|
| These
loans are secured by a registered mortgage on the company's freehold land and
building, a |
|
| first
charge on present and future moveable assets including plant and machinery,
equipment and |
|
| motor
vehicles and a floating charge on the company's present and future current
assets including |
|
| stock
in trade, stores and spares, trade debts and other receivables. |
|
|
| 4.
Short Term Running Finance - Secured |
|
| The
company signed an arrangement for short term running finance of Rs. 120
million with a |
|
| financial
institution. No draw-downs have been made against the facility to June 30,
1997. The |
|
| mark-up
is payable at 0.52 per Rs. 1,000 per diem or State Bank of Pakistan discount
rate + 0.06 |
|
| per
Rs 1,000 per diem whichever is higher. The facility is secured by a second
charge on fixed and |
|
| current
assets of the company and assignment on sale proceeds of electricity or any
other payments |
|
| receivable
from WAPDA. |
|
|
| Of
the aggregate facility of Rs 240 million for stand by letter of credit, the
amount utilised as at |
|
| June
30, 1997 was Rs. 167 million (1996: Rs Nil). |
|
|
|
1997 |
1996 |
|
|
Rupees |
Rupees |
|
| 5.
Creditors, Accrued and Other Liabilities |
|
|
| Creditors |
|
107,029,692 |
292,066,218 |
|
| Retention
money |
|
50,730,249 |
28,847,208 |
|
| Accrued
liabilities |
|
40,913,002 |
37,607,707 |
|
| Due
to associated undertakings |
|
31,440 |
107,090 |
|
| Income
tax deducted at source |
|
1,485 |
1,747 |
|
| Interest
on long term loans - secured |
|
114,503,760 |
46,354,653 |
|
| Workers'
profit participation fund |
(Note 5.1) |
|
686,325 |
- |
|
| Other
payables |
|
12,926,562 |
- |
|
|
---------- |
---------- |
|
|
326,822,515 |
404,984,623 |
|
|
========== |
========== |
|
|
|
|
| 5.1
Workers' profit participation fund |
|
| Opening
balance as on July 1 |
|
- |
- |
|
| Provision
for the year |
|
686,325 |
- |
|
| Interest
for the year |
|
- |
- |
|
|
---------- |
---------- |
|
|
686,325 |
- |
|
| Less:
Payment made during the year |
|
- |
- |
|
|
---------- |
---------- |
|
|
686,325 |
- |
|
|
========== |
========== |
|
| 6.
Contigencies and Commitments |
|
| 6.1
Contingencies |
