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Power generation sector revenues grow by 9 percent

The electricity generation sector posted nine percent growth in revenues for the first nine months (July-March) of the current fiscal year mainly because of steep depreciation in the value of the rupee against the greenback.

Fuel prices rose by three percent in the third quarter, also contributing to growth. Additionally, successive discount rate cuts by 250bps to 9.5 percent from the beginning of FY13 along with frequent cash injections from the government helped ease the sector’s finance cost by 26 percent.

“The sectors’ average dividend yield works out to 14 percent, better than any other investment avenue,” said Zoya Ahmed at BMA Capital Management.

Furthermore, increased demand from NTDC in the election year resulted in improved utilisation levels; nine-month average utilisation level stood at 77percent also bolstered revenues.

HUBCO secured the top position with a hefty 49 percent jump in earnings due to the inclusion of profits from Narowal project. Nishat Power (NPL) came out to be the second best following an increase of 45 percent in earnings.

The current fiscal year has so far been the year of the power sector as almost all the factors impacting profitability have proved favourable for the companies.

The power sector has been the silent performer, outdoing the market by a substantial 10 percent.

The sector’s rising profitability and eye-catching dividend yields are the prime reasons behind the out-performance as investors remained heavily tilted towards safer stocks.

Analysts expect the entire power sector to be the prime beneficiary post-election season. Negotiating a new IMF programme and resultant power structure reforms along with resolution of power crisis will help solve the liquidity issues of the sector subsequently increasing payouts across the board.

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