Nishat Power earns Rs1.87 billion profit

KARACHI: Nishat Power Limited on Monday reported a profit of Rs1.879 billion for the fiscal year 2010/11, which ended last June, up from Rs47 million in the previous year, a statement said on Monday.

Profit for 2010 was low because it has just started operation. But the decision not to announce dividend with the result weighed heavily on its shares, which hit the lower cap.

Nishat fell by Re1, the maximum decrease allowed in share price in a single day, to Rs14.72 after investors fretted over the financial position of the company, analysts said.

“Everyone was expecting something will be given to shareholders. We were hoping for a payout of between Rs1.5 and Rs2 per share,” said Farhan Mehmood, analyst at the Topline Securities.

The decision of not to give dividends means the management wants to save cash for rainy days, he said. “This shows that inter-corporate circular debt is really biting energy firms now.”

Even as the companies report record profits on their books, they run short of cash to meet their expenses, pushing them to borrow from the banks. The government has delayed payments against electricity, which the state-run utilities purchase from power producers.

Under the sovereign guarantees, the government is liable to pay penalty to power companies for delaying payments, but that has not kept investors from selling the shares, said Mehmood.

“No one is sure how long this problem of non-payments will continue. Investors don’t want to take long-term approach amid so much uncertainty.”

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