Balance Sheet: As at June 30, 2012

Balance Sheet
as at June 30, 2012
Note
2012
2011
(Rupees in thousand)
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
Authorised capital
3,600,000,000 (2011: 3,600,000,000) ordinary
shares of Rs 10 each
36,000,000
36,000,000
5
6
8,802,532
444,451
14,402,413
23,649,396
8,802,532
444,451
14,712,962
23,959,945
7
8
9
4,270,905
61,454
3,918,411
8,250,770
4,209,628
45,648
3,362,859
7,618,135
Current portion of long term liabilities

Finances under mark-up arrangements - secured
Trade and other payables
10
11
12
1,677,142
20,049,549
45,718,500
67,445,191
857,502
23,512,168
39,389,473
63,759,143
CONTINGENCIES AND COMMITMENTS
13
99,345,357
95,337,223
Issued, subscribed and paid up capital

880,253,228 (2011: 880,253,228) ordinary
shares of Rs 10 each
Capital reserve
Unappropriated profit
NON-CURRENT LIABILITIES
Long term finances
Liabilities against assets subject to finance lease
Deferred liabilities
CURRENT LIABILITIES
The annexed notes 1 to 41 form an integral part of these financial statements.
Aftab Mahmood Butt

(Chief Executive)
24
KOT ADDU POWER COMPANY LIMITED
Note
2012
2011
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
14
18,264,486
16,958,177
Intangible assets
15
7,388
5,791
Assets subject to finance lease
16
40,914
52,908
Capital work-in-progress
17
130,768
362,005
Long term loans and deposits
18
53,198
18,496,754
42,496
17,421,377
Stores and spares
19
3,726,404
3,400,571
Stock-in-trade
20
4,239,457
3,341,020
Trade debts
21
69,332,911
67,120,940
Loans, advances, deposits, prepayments

and other receivables
22
3,243,061
3,777,202
Cash and bank balances
23
306,770
276,113
80,848,603
77,915,846
99,345,357
95,337,223
CURRENT ASSETS
Malcolm P. Clampin
(Director)
Annual Report 2012
25
Profit and Loss Account

for the year ended June 30, 2012
Note
2012
2011
Sales
24
100,504,304
74,350,745
Cost of sales
25
(89,252,443)
(63,652,527)
11,251,861
10,698,218
Gross profit
Administrative expenses
26
(496,057)
(452,349)
Other operating expenses
27
(600)
(16,150)
Other operating income
28
7,662,456
8,381,420
18,417,660
18,611,139
(9,782,214)
(8,704,178)
8,635,446
9,906,961
(2,564,159)
(3,380,288)
6,071,287
6,526,673
6.90
7.41
Profit from operations

Finance cost
29
Profit before tax

Taxation
30
Profit for the year

Earnings per share
Rupees
38
Appropriations have been reflected in the statement of changes in equity.

Aftab Mahmood Butt

(Chief Executive)
26
Malcolm P. Clampin
(Director)
Statement of Comprehensive Income

Note
2012
2011
Profit for the period
Other comprehensive income
Total comprehensive income for the year
6,071,287
6,526,673
6,071,287
6,526,673
Aftab Mahmood Butt

(Chief Executive)
Malcolm P. Clampin
(Director)
Annual Report 2012
27
Cash Flow Statement

Note
2012
2011
Cash flows from operating activities
Cash generated from operations
Finance cost paid
Taxes paid
Staff retirement benefits paid
36
18,988,865
(4,672,337)
(2,393,685)
(35,114)
8,430,441
(4,860,095)
(3,577,900)
(31,370)
11,887,729
(38,924)
Fixed capital expenditure

Income on bank deposits received
Net increase in long term loans and deposits
Proceeds from sale of property, plant and equipment
(2,906,955)
2,529
(10,702)
1,184
(1,063,729)
1,834
(10,981)
3,851
Net cash used in investing activities
(2,913,944)
(1,069,025)
Repayment of liabilities against assets subject to finance lease

Repayment of long term loan - unsecured
Proceeds from long term loan - secured
Dividend paid
(20,438)
(838,133)
1,716,305
(6,338,243)
(14,304)
(899,716)
800,000
(5,027,372)
Net cash used in financing activities
(5,480,509)
(5,141,392)
Net increase/(decrease) in cash and cash equivalents
3,493,276
(6,249,341)
(23,236,055)
(16,986,714)
(19,742,779)
(23,236,055)
Net cash generated from/(used) in operating activities

Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents at beginning of the year

Cash and cash equivalents at the end of the year
37
Aftab Mahmood Butt

(Chief Executive)
28
Malcolm P. Clampin
(Director)
Statement of Changes in Equity

Share
capital
Balance as on June 30, 2010
8,802,532
Capital
Un-appropriated
reserve
profit
444,451
Total
13,247,745
22,494,728
Final dividend for the year ended

June 30, 2010 - Rs 2.75 per share
(2,420,696)
(2,420,696)
6,526,673
6,526,673
Interim dividend - Rs 3.00 per share
(2,640,760)
(2,640,760)
14,712,962
23,959,945
8,802,532
444,451
Final dividend for the year ended

June 30, 2011 - Rs 3.50 per share
(3,080,886)
(3,080,886)
6,071,287
6,071,287
Interim dividend - Rs 3.75 per share
(3,300,950)
(3,300,950)
14,402,413
23,649,396
8,802,532
444,451
Aftab Mahmood Butt

(Chief Executive)
Malcolm P. Clampin
(Director)
Annual Report 2012
29
Notes to and Forming Part of the Financial Statements

1.
Legal status and nature of business

Kot Addu Power Company Limited ('The Company'), was incorporated in Pakistan on April 25, 1996 as a
public limited company under the Companies Ordinance, 1984. The Company was listed on April 18, 2005
on the Karachi, Islamabad and Lahore Stock Exchanges. The principal activities of the Company are to
own, operate and maintain a multi-fuel fired power station with fifteen generating units with a nameplate
capacity of 1,600 MW in Kot Addu, District Muzaffargarh, Punjab, Pakistan and to sell the electricity
produced therefrom to a single customer, the Pakistan Water and Power Development Authority (WAPDA)
under a Power Purchase Agreement (PPA). This agreement is for a term of 25 years which commenced
from June 1996.
2.
Basis of preparation
2.1
These financial statements have been prepared in accordance with approved accounting standards as
applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board and Islamic Financial Accounting
Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan (ICAP) as are notified under
the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance,
1984. Wherever the requirements of the Companies Ordinance, 1984 or directives issued by Securities and
Exchange Commission of Pakistan (SECP) differ with the requirements of IFRS or IFAS, the requirements
of the Companies Ordinance, 1984 or the requirements of the said directives prevail.
2.2
Standards, amendments and interpretations to published approved accounting standards

The following amendments to existing standards have been published that are applicable to the Company's
financial statements covering annual periods, beginning on or after the following dates:
2.2.1 Standards, amendments to published standards and interpretations effective in current year
-
International Accounting Standard (IAS) 1 (amendment), Presentation of financial statements, is

effective for annual periods beginning on or after January 1, 2011. The amendment clarifies that an entity
may choose to present the required analysis of items of other comprehensive income either in the
statement of changes in equity or in the notes to the financial statements. This amendment does not
have any impact on the Company's financial statements.
IAS 24 (revised), 'Related Party Disclosures', is effective for annual periods beginning on or after January
1, 2011. The definition of a related party has been clarified to simplify the identification of related party
relationships, particularly in relation to significant influence and joint control. This revision does not have
a material impact on the Company's financial statements.
- IAS 34 (amendment), 'Interim Financial Reporting', is effective for annual periods beginning on or after
January 1, 2011. The amendment provides guidance as to application of disclosure principles in IAS 34
and add disclosure requirements around the circumstances likely to affect fair values of financial
instruments and their classification, transfers of financial instruments between different levels of the fair
value hierarchy, changes in classification of financial assets and changes in contingent liabilities and
assets. This amendment does not have a material impact on the Company's financial statements.
-
30
IFRS 7 (amendment), 'Financial Instruments: Disclosures', is effective for annual periods beginning on or
after January 1, 2011. The amendment emphasizes the interaction between quantitative and qualitative
disclosures and the nature and extent of risks associated with financial instruments. The amendment
does not have any impact on the Company's financial statements.

IFRS 7 (amendment), 'Financial Instruments: Disclosures', is effective for annual periods beginning on or
after July 1, 2011. The amendment requires additional quantitative and qualitative disclosures relating to
transfers of financial assets, where financial assets are derecognised in their entirety, but where the entity
has a continuing involvement in them (e.g., options or guarantees on the transferred assets) or where
financial assets are not derecognised in their entirety. This amendment does not have a material impact
on the Company's financial statements.
2.2.2 Standards, amendments and interpretations to existing standards effective in current year but not
applicable/relevant to the Company's operations
Standards or Interpretation
Effective date (accounting periods

beginning on or after)
IFRS 1 (amendment), 'First time adoption of International

Financial Reporting Standards'
IFRS 3 (revised), Business Combinations'
IAS 27 (amendment), 'Separate Financial Statements'
IFRIC 13 (amendment), 'Customer loyalty programmes'
IFRIC 14 (amendment), 'Prepayments of a minimum funding requirement'
IFRS 1 (amendment), 'First time adoption of International Financial
Reporting Standards - Severe hyperinflation and removal of fixed
dates for first-time adopters'
January 1, 2011
January 1, 2011
January 1, 2011
January 1, 2011
January 1, 2011
July 1, 2011
2.2.3 Standards, amendments and interpretation to existing standards that are not yet effective
-
IFRIC 4, 'Determining Whether an Arrangement Contains a Lease' is applicable for periods beginning on
or after January 1, 2006, however, Independent Power Producers (IPPs), whose letter of intent has been
signed on or before June 30, 2010, have been exempted from its application by Securities and Exchange
Commission of Pakistan (SECP). This interpretation provides guidance on determining whether
arrangements that do not take the legal form of a lease should, nonetheless, be accounted for as a lease
in accordance with IAS 17, 'Leases'.
Consequently, the Company is not required to account for a portion of its Power Purchase Agreement (PPA)
as a lease under IAS 17. If the Company were to follow IFRIC 4 and IAS 17, the effect on the financial
statements would be as follows:
2012
2011
De-recognition of property, plant and equipment
Recognition of lease debtor
Decrease in unappropriated profit at the beginning of the year
(Decrease)/increase in profit for the year
Decrease in unappropriated profit at the end of the year
(18,228,406)
9,114,079
(16,926,474)
9,945,357
(3,855,533)
(1,790,259)
(5,645,792)
(4,223,527)
367,994
(3,855,533)
Annual Report 2012
31

IFRS 2 (amendment), Share-based Payment-Group Cash-settled Share-based Payment Transactions

effective for annual periods beginning on or after January 1, 2010
The International Accounting Standards Board (IASB) amended IFRS 2 whereby an entity receiving goods
or services is to apply this IFRS in accounting for group cash settled share based payment transactions in
its financial statements when that entity has no obligation to settle the share-based payment transaction.
On August 14, 2009, the Government of Pakistan (GOP) launched Benazir Employees' Stock Option
Scheme ('the Scheme') for employees of certain State Owned Enterprises (SOEs) and non-State Owned
Enterprises where GOP holds significant investment (non-SOEs). The Scheme is applicable to permanent
and contractual employees who were in employment of these entities, on the date of launch of the scheme,
subject to completion of five years vesting period by all contractual employees and by permanent employees
in certain instances.
The Scheme provides for a cash payment to employees on retirement or termination based on the price of
shares of respective entities. To administer this scheme, GOP shall transfer 12% of its investment in such
SOEs and non-SOEs to a Trust Fund to be created for the purpose by each of such entities. The eligible
employees would be allotted units by each Trust Fund in proportion to their respective length of service on
retirement or termination such employees would be entitled to receive such amounts from Trust Fund in
exchange for the surrendered units as would be determined based on market price for listed entities or
breakup value for non-listed entities. The shares relating to the surrendered units would be transferred back
to GOP.
The Scheme also provides that 50% of dividend related to shares transferred to the respective Trust Fund
would be distributed amongst the unit-holder employee. The balance 50% dividend would be transferred
by the respective Trust Fund to Central Revolving Fund Managed by the Privatization Commission of
Pakistan for payment to employees against surrendered units. The deficit, if any, in Trust Fund to meet the
re-purchase commitments would be met by GOP.
The Scheme, developed in compliance with stated GOP Policy of empowerment of employees of SOEs
need to be accounted for by the covered entities, including the Company, under the provisions of amended
IFRS 2. However, keeping in the view the difficulties that may be faced by entities covered under the
scheme, the SECP on receiving representations from some of entities covered under the Scheme and after
having consulted ICAP, has granted exemption to such entities from the application of IFRS 2 to the
Scheme.
Had the exemption not been granted the staff costs of the Company for the year would have been higher
by Rs 823.359 million (2011: Rs 589.207 million), profit after taxation would have been lower by Rs 535.183
million (2011: Rs 382.985 million), retained earnings would have been lower by Rs 535.183 million (2011:
Rs 382.985 million), earning per share would have been lower by Rs 0.61 per share (2011: Rs 0.44 per
share) and reserves would have been higher by Rs 823.359 million (2011: Rs 589.207 million).
2.2.4 Standards, amendments and interpretations to existing standards that are not relevant to the Company's
operations and not yet effective
32

Standards or Interpretations
IAS 1 (amendment), Presentation of Financial Statements
IAS 19, 'Employee Benefit'
IFRS 1 (amendment), 'First-time Adoption of International
Financial Reporting Standards'
IFRS 1, 'First time adoption, on government loans
IFRS 10, Consolidated financial statements
IFRS 11, Joint arrangements
IFRS 12, Disclosure of interests in other entities
IFRS 13, Fair value measurement
IAS 27, Separate financial statements
IAS 28, Associates and joint ventures
IAS 32, Financial instruments : Presentation
IFRS 9, Financial instruments
3.
Effective date (accounting periods

beginning on or after)
July 1, 2012
July 1, 2012
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2015
Basis of measurement
These financial statements have been prepared under the historical cost convention except for recognition
of certain employee retirement benefits at present value.
The Company's significant accounting policies are stated in note 4. Not all of these significant policies
require the management to make difficult, subjective or complex judgments or estimates. The following is
intended to provide an understanding of the policies the management considers critical because of their
complexity, judgment of estimation involved in their application and their impact on these financial
statements. Estimates and judgments are continually evaluated and are based on historical experience,
including expectations of future events that are believed to be reasonable under the circumstances. These
judgments involve assumptions or estimates in respect of future events and the actual results may differ
from these estimates. The areas involving a higher degree of judgments or complexity or areas where
assumptions and estimates are significant to the financial statements are as follows:
a)
Staff retirement benefits

The Company uses the valuation performed by an independent actuary as the present value of its
retirement benefit obligations. The valuation is based on assumptions as mentioned in note 4.2.
b)
Provision for taxation

The Company takes into account the current income tax law and the decisions taken by appellate
authorities. Instances where the Company's view differs from the view taken by the income tax
department at the assessment and appellate stage and where the Company considers that its views
on items of material nature is in accordance with law, the amounts are shown as contingent liabilities.
c)
Useful life and residual values of property, plant and equipment

The Company reviews the useful lives of property, plant and equipment on regular basis. Any change
in estimates in future years might affect the carrying amounts of the respective items of property, plant
and equipment with a corresponding effect on the depreciation charge and impairment.
Annual Report 2012
33

4.
Significant accounting policies

The significant accounting policies adopted in the preparation of these financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
4.1
Taxation
Current
Provision of current tax is based on the taxable income for the year determined in accordance with the
prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or
tax rates expected to apply to the profit for the year if enacted. The charge for current tax also includes
adjustments, where considered necessary, to provision for tax made in previous years arising from
assessments framed during the year for such years.
Previously, income of the Company derived from the power station upto June 27, 2006 was exempt from
income tax under clause 138 of the Part-I of the Second Schedule to the Income Tax Ordinance, 2001. The
Company was also exempt from minimum tax under clause 13(A) of Part IV of the Second Schedule to the
Income Tax Ordinance, 2001 for the period it continued to be entitled to exemption under clause 138 of the
Part I of the Second Schedule i.e. upto June 27, 2006.
Deferred
Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences
arising from differences between the carrying amount of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of the taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences, unused tax losses and tax credits can be utilised.
Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse
based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred
tax is charged or credited in the income statement, except in the case of items credited or charged to equity
in which case it is included in equity.
4.2

The main features of the schemes operated by the Company for its employees are as follows:
(a)
The Company operates an approved funded defined benefit pension scheme for all employees with a
qualifying service period of ten years. Monthly contribution is made to the fund on the basis of actuarial
recommendation. The latest actuarial valuation was carried out as at June 30, 2012. The actual return
on plan assets during the year was Rs 147.381 million (2011: Rs 129.258 million). The actual return
on plan assets represents the difference between the fair value of plan assets at beginning of the year
and end of the year after adjustments for contributions made by the Company as reduced by benefits
paid during the year.
The future contribution rate includes allowances for deficit and surplus. Projected unit credit method,
using the following significant assumptions, is used for valuation of the scheme:
34

Discount rate 13.50 percent per annum (2011: 14.50 percent per annum).
Expected rate of increase in salary level 13.50 percent per annum (2011: 14.50 percent per annum).
Expected rate of increase in pension 8.50 percent per annum (2011: 9.50 percent per annum).
Expected rate of return on plan assets 13.50 percent per annum (2011: 14.50 percent per annum).
Plan assets include long-term Government bonds, term finance certificates of financial institutions and
term deposits with banks. Return on Government bonds and debt is at fixed and floating rates.
The Company is expected to contribute Rs 63.009 million to the pension fund in the next year ending
June 30, 2013.
The Company's policy with regard to actuarial gains/losses is to follow minimum recommended
approach under IAS 19 'Employee Benefits'.
(b)
The Company also operates an approved funded contributory provident fund for all employees. Equal
monthly contributions are made by both the Company and the employees to the fund.
(c)
The Company provides medical facilities to its retired employees and eligible dependant family
members along with free electricity. Provisions are made annually to cover the obligation on the basis
of actuarial valuation and are charged to income currently. The latest actuarial valuation was carried
out as at June 30, 2012.
Projected unit credit method, using the following significant assumptions, is used for valuation of these
schemes:
- Discount rate 13.50 percent per annum (2011: 14.50 percent per annum).
- Expected rate of increase in medical cost 10.50 percent per annum (2011: 11.50 percent per
annum).
- Expected rate of increase in electricity benefit 13.50 percent per annum (2011: 14.50 percent per
annum).
Retirement benefits are payable to all regular employees on completion of prescribed qualifying period
of service under these schemes.
4.3

Property, plant and equipment except freehold land are stated at cost less accumulated depreciation and
any identified impairment loss. Freehold land is stated at cost less any identified impairment loss. Cost
represents the acquisition price of assets transferred to the Company in accordance with the Transfer
Agreement signed between Pakistan Water and Power Development Authority (WAPDA) and the Company
on June 26, 1996 based on a valuation by M/s Stone and Webster using depreciated replacement cost
basis.
Depreciation on all property, plant and equipment is charged to profit on the straight line method so as to
write off the depreciable amount of an asset over its estimated useful life at the annual rates mentioned in
note 14.
The assets' residual values and estimated useful lives are reviewed at each financial year end and adjusted
if impact on depreciation is significant.
Annual Report 2012
35

Depreciation on additions to property, plant and equipment is charged from the month in which an asset is
acquired or capitalised while no depreciation is charged for the month in which the asset is disposed off.
The Company assesses at each balance sheet date whether there is any indication that property, plant and
equipment may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to
assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the
respective recoverable amount, assets are written down to their recoverable amounts and the resulting
impairment loss is recognised in income currently. The recoverable amount is the higher of an asset's fair
value less costs to sell and value in use. Where an impairment loss is recognised, the depreciation charge
is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life.
Major plant modifications and improvements are capitalised. Overhauls, maintenance and repairs are
charged to income as and when incurred. The gain or loss on disposal or retirement of an asset, represented
by the difference between the sale proceeds and the carrying amount of the asset, is recognised as an
income or expense.
Blades for Gas Turbines are considered a separate category of assets. All blades are depreciated at the
annual rate as mentioned in note 14 regardless of whether they are in use or not. Refurbishment costs are
accrued and charged to profit and loss account.
4.4
Intangible assets
Expenditure incurred to acquire computer software are capitalised as intangible assets and stated at cost
less accumulated amortisation and any identified impairment loss. Intangible assets are amortised using the
straight line method so as to write off the depreciable amount of an asset over its estimated useful life at
the annual rates mentioned in note 15.
Amortisation on additions to intangible assets is charged from the month in which an asset is acquired or
capitalised, while no amortisation is charged for the month in which the asset is disposed off.
The Company assesses at each balance sheet date whether there is any indication that intangible asset
may be impaired. If such indication exists, the carrying amount of such assets are reviewed to assess
whether they are recorded in excess of their recoverable amount. Where carrying values exceed the
respective recoverable amount, assets are written down to their recoverable amounts and the resulting
impairment loss is recognised in income currently. The recoverable amount is the higher of an asset's fair
value less costs to sell and value in use. Where an impairment loss is recognised, the amortisation charge
is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life.
4.5
Capital work-in-progress is stated at cost less any identified impairment loss.
4.6
Leases
The Company is the lessee:
Finance leases
Leases where the Company has substantially all the risks and rewards of ownership are classified as finance
leases. At inception finance leases are capitalised at the lower of present value of minimum lease payments
under the lease agreements and the fair value of the assets.
36

The related rental obligations, net of finance charges, are included in liabilities against assets subject to
finance lease. The liabilities are classified as current and long term depending upon the timing of the
payment.
Assets acquired under a finance lease are depreciated over the useful life of the asset on a straight line
method so as to write off the depreciable amount of an asset over its estimated useful life at the annual
rates mentioned in note 16. Depreciation of leased assets is charged to profit and loss account.
Depreciation on additions to leased assets is charged from the month in which an asset is acquired while
no depreciation is charged for the month in which the asset is disposed off.
Operating leases
Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases (net of any incentives received from
the lessor) are charged to profit on a straight line basis over the lease term.
4.7
Stores and spares

Usable stores and spares are valued principally at weighted average cost, while items considered obsolete
are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid
thereon.
Refurbishable items are valued at the lower of cost and net realisable value. Cost of refurbishment is charged
to the profit and loss account as it is incurred. The item is charged to the profit and loss account when,
upon inspection, it cannot be refurbished.
4.8
Stock in trade
Stock in trade except for those in transit are valued at lower of cost based on First In First Out (FIFO) and
net realisable value.
Materials in transit are stated at cost comprising invoice value plus other charges paid thereon.
Net realisable value signifies the estimated selling price in the ordinary course of business less costs
necessarily to be incurred in order to make a sale. Provision is made in the financial statements for obsolete
and slow moving stock in trade based on management estimate.
4.9
Financial instruments
4.9.1 Financial assets

The Company classifies its financial assets in the following categories: at fair value through profit or loss,
loans and receivables, available for sale and held to maturity. The classification depends on the purpose for
which the financial assets were acquired. Management determines the classification of its financial assets
at the time of initial recognition.
a)
Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading and financial
assets designated upon initial recognition as at fair value through profit or loss. A financial asset is
classified as held for trading if acquired principally for the purpose of selling in the short term. Assets
in this category are classified as current assets.
Annual Report 2012
37

b)
Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for maturities greater than
twelve months after the balance sheet date, which are classified as non-current assets. Loans and
receivables comprise advances, deposits and other receivables and cash and cash equivalents in the
balance sheet.
c)
Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not
classified in any of the other categories. They are included in non-current assets unless management
intends to dispose of the investments within twelve months from the balance sheet date.
d)
Held to maturity
Financial assets with fixed or determinable payments and fixed maturity, where management has the
intention and ability to hold till maturity are classified as held to maturity and are stated at amortised
cost.
All financial assets are recognised at the time when the Company becomes a party to the contractual
provisions of the instrument. Regular purchases and sales of investments are recognised on trade date
the date on which the Company commits to purchase or sell the asset. Financial assets are initially
recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit
or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and
transaction costs are expensed in the profit and loss account. Financial assets are derecognised when the
rights to receive cash flows from the assets have expired or have been transferred and the Company has
transferred substantially all the risks and rewards of ownership. Available-for-sale financial assets and
financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and
receivables and held to maturity investments are carried at amortised cost using the effective interest rate
method.
Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or
loss' category are presented in the profit and loss account in the period in which they arise. Dividend income
from financial assets at fair value through profit or loss is recognised in the profit and loss account as part
of other income when the Company's right to receive payments is established.
Changes in the fair value of securities classified as available-for-sale are recognised in equity. When
securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments
recognised in equity are included in the profit and loss account as gains and losses from investment
securities. Interest on available-for-sale securities calculated using the effective interest method is
recognised in the profit and loss account. Dividends on available-for-sale equity instruments are recognised
in the profit and loss account when the Companys right to receive payments is established.
The fair values of quoted investments are based on current prices. If the market for a financial asset is not
active (and for unlisted securities), the Company measures the investments at cost less impairment in value,
if any.
The Company assesses at each balance sheet date whether there is objective evidence that a financial
asset or a group of financial assets is impaired. If any such evidence exists for available-for-sale financial
assets, the cumulative loss is removed from equity and recognised in the profit and loss account.
38

Impairment losses recognised in the profit and loss account on equity instruments are not reversed through
the profit and loss account.
4.9.2 Financial liabilities
All financial liabilities are recognised at the time when the Company becomes a party to the contractual
provisions of the instrument.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expired. Where an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new liability and the
difference in respective carrying amounts is recognised in the profit and loss account.
4.10 Offsetting of financial assets and liabilities
Financial assets and liabilities are offset and the net amount is reported in the financial statements only when
there is a legally enforceable right to set off the recognised amount and the Company intends either to settle
on a net basis or to realise the assets and to settle the liabilities simultaneously.
4.11 Long term loans and deposits
Loans and deposits are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are included in non-current assets for having maturities greater than 12
months after the balance sheet date. Initially they are recognised at fair value and subsequently stated at
amortised cost.
4.12 Trade debts
Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a
review of all outstanding amounts at the year end. Bad debts are written off when identified.
4.13 Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement,
cash and cash equivalents comprise cash in hand, demand deposits, other short term highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of change in value and finances under mark-up arrangements. In the balance sheet, finances under
mark-up arrangements are included in current liabilities.
4.14 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost, any difference between the proceeds (net of transaction costs) and
the redemption value is recognised in the profit and loss account over the period of the borrowings using
the effective interest method. Finance costs are accounted for on an accrual basis and are reported under
accrued finance costs to the extent of the amount remaining unpaid.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer
settlement of the liability for at least twelve months after the balance sheet date.
Annual Report 2012
39

4.15 Trade and other payables

Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the
consideration to be paid in the future for the goods and/or services received, whether or not billed to the
Company.
Provisions are recognised when the Company has a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation and reliable estimate of the amount can be made. Provisions are reviewed at each
balance sheet date and adjusted to reflect the current best estimate.
4.16 Derivative financial instruments
These are initially recorded at fair value on the date a derivative contract is entered into and are remeasured
to fair value at subsequent reporting dates.
4.17 Foreign currencies
a)
Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the
primary economic environment in which the Company operates (the functional currency). The financial
statements are presented in Pak Rupees (PKR), which is the Companys functional and presentation
currency.
b)
Transactions and balances

Foreign currency transactions are translated into Pak Rupees using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the profit and loss account.
4.18 Borrowing costs

Mark-up, interest and other charges on borrowings are capitalised upto the date of commissioning of the
related property, plant and equipment, acquired out of the proceeds of such borrowings. All other markup, interest and other charges are charged to income.
4.19 Revenue recognition
Revenue on account of energy is recognised on transmission of electricity to WAPDA, whereas on account
of capacity is recognised when due. Return on deposits is accrued on a time proportion basis by reference
to the principal outstanding and the applicable rate of return.
4.20 Dividend
Dividend distribution to the Company's shareholders is recognised as a liability in the period in which the
dividends are approved.
40

5.
Issued, subscribed and paid up capital

2012
2011
Note
(Number of shares)
253,000
253,000
880,000,228
880,000,228
880,253,228
880,253,228
2012
2011
Ordinary shares of Rs 10 each
fully paid in cash
Ordinary shares of Rs 10 each
issued as fully paid for
consideration other than cash
2,530
2,530
8,800,002
8,802,532
8,800,002
8,802,532
Ordinary shares of the Company held by associated undertakings are as follows:

2012
2011
(Number of shares)
Pakistan Water and Power Development Authority (WAPDA)
National Power (Kot Addu) Limited
(a wholly owned subsidiary of International Power plc)
KAPCO Employees Empowerment Trust
(Formed under Benazir Employees' Stock Option Scheme (BESOS))
6.
354,255,935
402,563,562
316,891,159
316,891,159
48,307,627
719,454,721
719,454,721
Capital reserve
This represents the value of fuel stock taken over by the Company at the time of take over of Kot Addu Gas
Turbine Power Station from WAPDA. The value of stock was not included in the valuation of assets at the
time of take over.
2012
2011
7.
Long term finances

These are composed of:
- Loan from related party - unsecured
- Other bank finances - secured
Less: Current maturity
- note 7.1
- note 7.2
3,409,627
2,516,305
5,925,932
1,655,027
4,270,905
4,247,760
800,000
5,047,760
838,132
4,209,628
Annual Report 2012
41

7.1
Loan from related party - unsecured

Lender
Currency
WAPDA
7.2
Loan Outstanding
(Rupees in
thousands)
PKR
3,409,627
Rate of
interest/
mark-up
per annum
No. of
semi annual
installments
Interest/
mark-up
payable
14%
12, ending
June 2018.
Semi
annually
Rate of
interest/
mark-up
per annum
No. of
installments
Interest/
mark-up
payable
4, ending
April, 2014
Semi
annually
Other bank finances - secured

Lender
Currency
Loan Outstanding
(Rupees in
thousands)
Allied Bank Limited
PKR
800,000
6 month KIBOR
plus 2.75%
MCB Bank Limited
PKR
996,370
6 month KIBOR 8, ending

plus 2.75%
August, 2014
Quarterly
Habib Bank Limited
PKR
719,935
3 month KIBOR 4, ending

plus 2.50%
August, 2014
Semi
annually
These finances have been obtained from banks in order to meet working capital requirements and to retire
letter of credits opened for Balancing, Modernization and Replacement (BMR) projects of the Company. It
is secured by a joint pari passu hypothecation charge to the extent of Rs 3,400 million (2011: 1,067 million)
on current assets and present and future plant and machinery of the Company. The effective mark-up
charged during the year was 13.55 percent per annum.
2012
2011
8.

Present value of minimum lease payments
Less:Current portion shown under current liabilities
83,569
22,115
61,454
65,018
19,370
45,648
Minimum lease payments have been discounted at an implicit interest rate ranging from 12.95 percent
(2011: 13.35 percent) per annum to 16.30 percent (2011: 16.27 percent) per annum to arrive at their present
value. The lessee has the option to purchase the assets after expiry of the lease term.
Taxes, repairs, replacements and insurance costs are to be borne by the lessee.
42

The amount of future payments of the lease and the period in which these payments will become due are
as follows:
Minimum
Future
Present value
lease
finance
of lease
payment
charge
liability
Year
Not later than one year
Later than one year and not later than five years
31,228
75,272
106,500
9,113
13,818
22,931
Minimum
lease
payment
Year
Not later than one year

Later than one year and not later than five years
Future
finance
charge
27,073
54,293
81,366
7,703
8,645
16,348
2012
2012
22,115
61,454
83,569
Present value
of lease
liability
2011
19,370
45,648
65,018
2011
9.
Deferred Liabilities
Deferred taxation
9.1
- note 9.1
- note 9.2
3,270,425
647,986
3,918,411
2,846,210
516,649
3,362,859
3,373,403
(49,825)
(23,904)
(29,249)
3,270,425
2,947,397
(40,018)
(38,413)
(22,756)
2,846,210
Deferred taxation
The liability for deferred taxation comprises of timing differences relating to:
Accelerated tax depreciation
Provision for store obsolescence
Provision for doubtful debts
Annual Report 2012
43

2012
9.2

These are composed of:
Pension
Medical
Free electricity
2011
- note 9.2.1
- note 9.2.2
- note 9.2.2
140,468
178,061
329,457
647,986
66,447
170,058
280,144
516,649
1,400,795
(1,192,195)
(68,132)
140,468
1,355,828
(1,043,050)
(246,331)
66,447
66,447
106,504
(32,483)
140,468
8,427
87,053
(5,610)
(23,423)
66,447
1,355,828
50,517
197,491
(30,719)
(172,322)
1,400,795
981,216
47,279
155,810
(23,398)
194,921
1,355,828
1,043,050
150,733
32,483
(30,719)
(3,352)
1,192,195
908,157
116,036
23,423
(23,398)
18,832
1,043,050
5%
91%
4%
100%
5%
91%
4%
100%
9.2.1 Pension
The amounts recognised in the balance sheet are as follows:
Present value of defined benefit obligation
Fair value of plan assets
Unrecognised actuarial losses
Liability as at June 30
Liability as at July 1
Charge to profit and loss account
Adjustment to opening book reserve
Contribution paid by the Company
The movement in the present value of defined benefit
obligation is as follows:
Present value of defined benefit obligation as at July 1
Current service cost
Interest cost for the year
Benefits paid during the year
Experience (gain)/loss on liability
Present value of defined benefit obligation as at June 30
The movement in fair value of plan assets is as follows:
Fair value as at July 1
Expected return on plan assets
Company contribution
Experience (loss)/gain on plan assets
Fair value as at June 30
Plan assets are comprised as follows:
Mutual funds
Interest bearing instruments
Cash
44

The present value of defined benefit obligation, the fair value of plan assets and the surplus or deficit of
pension fund is as follows:
2012
2011
2010
2009
2008
As at June 30
Present value of defined
benefit obligations
Deficit/(Surplus)
1,400,795
(1,192,195)
208,600
1,355,828
(1,043,050)
312,778
981,216
(908,157)
73,059
823,819
(805,960)
17,859
658,959
(694,732)
(35,773)
12%
-14%
-6%
-9%
-13%
0%
2%
1%
2%
8%
Experience adjustment
on obligation gain/(loss)
on plan assets
Post retirement
Medical
9.2.2
2012
2011
Post retirement
Free electricity
2012
2011
The amounts recognised in the balance

sheet are as follows:
Present value of defined benefit obligation
Unrecognised actuarial gains
90,731
87,330
178,061
86,263
83,795
170,058
296,546
32,911
329,457
279,689
455
280,144
Liability as at July 1
Charge to profit and loss account
Contribution paid by the Company
170,058
9,175
(1,172)
178,061
160,892
10,284
(1,118)
170,058
280,144
50,772
(1,459)
329,457
243,532
37,830
(1,218)
280,144
86,263
2,812
12,627
(1,172)
(9,799)
91,440
3,136
11,787
(1,118)
(18,982)
279,689
9,643
41,129
(1,459)
(32,456)
239,075
6,984
30,846
(1,218)
4,002
90,731
86,263
296,546
279,689
The movement in the present value of defined

benefit obligation is as follows:
Present value of defined benefit
obligation as at July 1
Experience (gain)/loss on liability
obligation as at June 30
Annual Report 2012
45

The present value of defined benefit obligation, the fair value of plan assets and the surplus or deficit of post
retirement medical is as follows:
2012
As at June 30
obligation
Deficit
on obligation gain/(loss)
2011
2010
2009
2008
Post Retirement Medical

90,731
90,731
86,263
86,263
91,440
91,440
102,280
102,280
116,906
116,906
10%
14%
0%
9%
-2%
The present value of defined benefit obligation, the fair value of plan assets and the surplus or deficit of post
retirement electricity is as follows:
2012
2011
2010
2009
2008
Post Retirement Free Electricity

As at June 30
obligation
Deficit
2012
2011
2012
2011
Experience
adjustment
on obligation (loss)/gain
296,546
296,546
279,689
279,689
239,075
239,075
190,619
190,619
153,849
153,849
-12%
-2%
-11%
-8%
-1%
A one percentage point change in medical cost trend assumption would have the following effects:
One percent
point increase
One percent
point decrease
Effect on the aggregate of the service cost and interest cost
Effect on the defined benefit obligation
2,916
16,966
2012
(2,334)
(13,623)
2011
10.
Current portion of long term liabilities

Long term finances
46
- note 7
- note 8
1,655,027
22,115
1,677,142
838,132
19,370
857,502

2012
11.
Finances under mark up arrangements - secured

Running finances - secured
Short term finances - secured
2011
- note 11.1
- note 11.2
20,049,549
20,049,549
22,012,168
1,500,000
23,512,168
11.1 Running finances - secured

Short term running finances available from various commercial banks under mark-up arrangements amount
to Rs 26,600 million (2011: Rs 23,600 million) including murabaha facilities of Rs 6,150 million (2011: Rs
6,150 million). The rate of mark-up ranges from 12.93 percent to 16.04 percent (2011: 13.42 percent to
15.26 percent) per annum on the balances outstanding. In the event, the Company fails to pay the balances
on the expiry of the quarter, year or earlier demand, mark-up is to be computed at the rate of 20 percent
to 24 percent (2011: 20 percent to 24 percent) per annum on the balances unpaid.
11.2 Short term finances - secured
The finances were repaid during the year. The effective mark-up charged on this facility during the year was
14.01 percent (2011: 15.24 percent) per annum.
11.3 Letter of credit and bank guarantees
Of the aggregate facility of Rs 3,498.551 million (2011: 2,773.688 million) for opening letters of credit and
Rs 71.449 million (2011: Rs 576.312 million) for guarantees, the amount utilised as at June 30, 2012 was
Rs 641.241 million (2011: Rs 1,640.903 million) and Rs 71.449 million (2011: Rs 576.312 million)
respectively.
The aggregate running finances, short term finances and letters of credit and guarantees are secured by
charge on stores, spares, stock-in-trade and trade debts upto a limit of Rs 43,093 million (2011: Rs 41,427
million) and charge on property, plant and equipment upto a limit of Rs 39,400 million (2011: Rs 37,067 million).
2012
2011
12.

Trade creditors
Accrued liabilities
Liquidated damages
Markup accrued on:
- Long term loan - unsecured
- Long term finances - secured
- Finances under markup arrangements - secured
- Liabilities against assets subject to finance lease
- Credit supplies of raw material
Deposits - interest free repayable on demand
Workers' Welfare Fund
Differential payable to WAPDA
Unclaimed dividends
Others
- note 12.1
- note 26.2
31,315,545
171,981
172,478
29,578,561
651,331
171,451
5,231
77,194
277,826
944
13,120,838
1,211
147,843
113,600
300,376
13,433
45,718,500
6,517
23,061
284,055
927
8,057,596
175
198,139
148,982
256,783
11,895
39,389,473
Annual Report 2012
47

12.1 Trade creditors include amount due to related parties Rs 0.782 million (2011: Rs 0.782 million) and payable
to Pakistan State Oil (PSO) amounting to Rs 30,776 million (2011: Rs 29,551 million).
13.
Contingencies and commitments
13.1 Contingencies
(i)
The management, on the strength of a favourable judgment by Sindh High Court, revised the income
tax returns of the Company for tax years 2003 through 2007 to the effect that:
(a)
depreciation and initial allowance earlier claimed in respect of assets in the original income tax
returns for tax periods upto June 27, 2006 were not claimed being the date upto which
Company was exempt from levy of income tax; and
(b)
the respective taxable incomes of the tax periods subsequent to June 27, 2006 were reduced
by significant amounts given to the position that in such tax periods, Company became entitled
to an enhanced claim of depreciation and initial allowance attributable to an increased written
down value of assets at commencement of such periods.
The overall impact of such revisions in income tax returns was a reversal of current and deferred tax
provisions by Rs 1,621.164 million and Rs 1,105.092 million respectively. The relevant income tax
authorities disputing Companys contentions mitigated the effect of revisions of returns by amending
such revised returns and restoring the earlier position.
The Company filed an appeal before the Commissioner Inland Revenue (Appeals) ['CIR(A)'] against
the foregoing amended assessments, which was rejected by maintaining the tax department's
position. Aggrieved with the decision, Company has filed appeal before Appellate Tribunal Inland
Revenue ('ATIR') contesting such amendments.
The return for tax year 2008 was also filed on the basis of written down values of assets brought
forward from tax year 2007, as computed in the revised return of income in accordance with position
explained above. Such return has also been amended by tax authorities in line with the action taken
in respect of revised returns for tax year 2003 through 2007 and has also been endorsed by CIR(A).
The Company preferred appeal before ATIR against the decision of CIR(A).
Both the above appeals have now been decided in favour of the Company by ATIR declaring the
orders passed by the tax authorities for amended assessments as null and void. The Tax Department
has a right to file an appeal before the High Court against the ATIR decision.
In view of the above fact, the income tax liabilities determined by tax authorities have not been
accounted for in these financial statements. Had such liabilities been recognized, the profit for the
period would have been lower by Rs 2,784.356 million (June 30, 2011: Rs 2,705.081 million).
During the year, Tax department carried out assessment for the Tax Years 2009, 2010 and 2011.
Based on these assessments they created a demand of Rs 1,027 million which mainly pertains to
the matters connected with the revised depreciation case which has now been decided in
Company's favour by ATIR. The tax department has also filed an appeal before ATIR against CIR(A)
decision. Based on the foregoing the company has not made any provision against this demand.
48

(ii)
The Company had obtained legal advice in connection with the establishment of Workers' Profit
Participation Fund under the Companies Profit (Workers' Participation) Act, 1968 (the Act). The legal
advisor advised the Company that since it did not employ any person who fell under the definition of
Worker as defined in the Act of 1968, the Company was not required to establish the Fund under the
Act. As a consequence the Company was not required to make contributions to the Fund established
pursuant to Workers' Welfare Fund Ordinance, 1971.
Furthermore, the question whether a company to which the Act and its scheme applies but which
does not employ any Worker is nevertheless obliged to establish and pay contributions into the Fund
under the Act and thereafter transfer the same to the Fund established under the WWF Ordinance,
1971 is sub-judice before the Sindh High Court as the Supreme Court of Pakistan accepted the
petition of another company and remanded the case to the Sindh High Court for fresh decision in
accordance with its order.
If it is established that the scheme is applicable to the Company and the Company is liable to pay
contribution to the Workers' Welfare Fund then these amounts would be recoverable from WAPDA
as a pass through item under the provisions of Power Purchase Agreement.
Certain amendments have been introduced in Finance Act 2006, to relax the conditions of payment
of interest and penalty for companies defaulting in creating Fund under the Act. If it is established that
Workers' Profit Participation Fund (WPPF) is applicable to the Company and Company makes the
principal payment on or before the date which is to be decided by the Federal Government, no such
penalty may be imposed and the Company may not be liable to pay interest.
Furthermore, the Company has obtained opinion from its legal advisors who have confirmed that in
case WPPF becomes payable as a consequence of the decision by the Sindh High Court, the
Company will not be required to pay any interest, as interest is payable to workers only. It is an
established fact that the Company did not have any worker as per the applicable definition upto June
30, 2006.
In case this liability materializes, the cumulative amount of contributions to WPPF would be Rs 3.463
billion (2011: Rs 3.463 billion). However, it is not certain at the moment that any penalties will be levied
on non-payment of WPPF as the relaxation provided under the Finance Act 2006 is still applicable.
In view of the foregoing, the Company did not make any provision for Workers' Profit Participation
Fund and interest thereon in the financial statements upto June 30, 2006.
(iii)
The Company has a 'Long Term Supply Agreement' (LTSA) with one of the Original Equipment
Manufacturers (OEM) for the supply of spares to the Company. According to the terms of LTSA, the
Company has availed discount amounting to Rs 1,270.852 million upto June 30, 2012 (2011: Rs
954.442 million). This discount is contingent upon the Company procuring at least a specified amount
of spares from the OEM during the tenure of LTSA. Inability of the Company to achieve the desired
level of purchases would result in payment of compensation fee amounting to Rs 190.628 million
(2011: Rs 143.166 million) to the OEM out of the discount recognised upto June 30, 2012. The
management of the Company feels that the minimum specified level of purchases will be achieved
during the contractual period and no compensation fee would be payable to the OEM, consequently
no provision for compensation fee as referred above has been made in these financial statements.
Annual Report 2012
49

(iv)
WAPDA may impose liquidated damages (after taking into account forced outage allowance
stipulated under the terms of Power Purchase Agreement) on account of short supply of electricity
by the Company, which was due to cash flow constraints of the Company as a result of default by
WAPDA in making timely payments. Currently, liquidated damages cannot be estimated reliably,
however, these are not expected to increase upto June 30, 2012 beyond Rs 10.101 billion (2011: Rs
4.032 billion) approximately based on the best available estimate to the management.
The Company disputes and rejects any claim on account of liquidated damages that may be raised
by WAPDA on the premise that its failure to dispatch electricity was due to WAPDA's non-payment
of dues on timely basis to the Company and consequential inability of the Company to make timely
payments to its fuel supplier (PSO) that resulted in inadequate level of electricity production owing to
shortage of fuel.
According to legal advice available with the Company, there are adequate grounds to defend any
claim by WAPDA for such liquidated damages since these conditions were imposed on the Company
due to circumstances beyond its control. The ultimate outcome of the matter cannot presently be
determined, and consequently, no provision for such liquidated damages has been made in these
financial statements.
(v)
Claims against the Company not acknowledged as debts Rs 88.111 million (2011: Rs 88.111 million).
(vi)
The Company had provided following bank guarantees in favour of:

Sui Northern Gas Pipelines Limited on account of payment of dues against gas sales etc., amounting
to Rs 71.449 million (2011: Rs 576.197 million).
Custom Authorities for import of professional equipment, tools etc., amounting to Rs Nil (2011: Rs
0.115 million).
13.2 Commitments
50
(i)
Contracts for capital expenditure Rs 333.318 million (2011: Rs 1,125.377 million).
(ii)
Letters of credit other than for capital expenditure Rs 347.294 million (2011: Rs 516.583 million).

14.

Freehold
land
Buildings
on
freehold
land
Plant
and
machinery
Gas
turbine
blading
Auxiliary
plant
Office
and
equipment
machinery
Fixtures
and
fittings
Vehicles
Total
Net carrying value basis
Year ended June 30, 2012
Opening net book value (NBV)
Additions (at cost)
Transfers
Disposals (at NBV)
Depreciation charge
Closing net book value (NBV)
46,285
46,285
299,866
4,678
(30,203)
274,341
14,489,540
270,124
(1,292,724)
13,466,940
2,009,529
2,850,928
(511,262)
4,349,195
81,332
31,382
(20,990)
91,724
20,818
9,880
(7,440)
23,258
564
66
(233)
397
10,243
98
4,517
(1,175)
(1,337)
12,346
16,958,177
3,167,156
4,517
(1,175)
(1,864,189)
18,264,486
46,285
46,285
709,304
(434,963)
274,341
34,524,463
(21,057,523)
13,466,940
7,526,509
(3,177,314)
4,349,195
292,791
(201,067)
91,724
104,890
(81,632)
23,258
17,646
(17,249)
397
49,529
(37,183)
12,346
43,271,417
(25,006,931)
18,264,486
4 - 11
4 - 10.71
10-11
20
20
20
25
46,285
46,285
317,665
11,749
(29,548)
299,866
15,767,198
(1,277,658)
14,489,540
1,575,828
719,937
(286,236)
2,009,529
64,025
35,165
(128)
(17,730)
81,332
15,881
11,117
(6,180)
20,818
1,163
219
(818)
564
12,090
285
(482)
(1,650)
10,243
17,800,135
778,187
285
(610)
(1,619,820)
16,958,177
46,285
46,285
704,626
(404,760)
299,866
34,254,339
(19,764,799)
14,489,540
4,675,581
(2,666,052)
2,009,529
261,409
(180,077)
81,332
95,010
(74,192)
20,818
17,580
(17,016)
564
46,089
(35,846)
10,243
40,100,919
(23,142,742)
16,958,177
4 - 9.92
4 - 8.22
10
20
20
20
25
Gross carrying value basis

As at June 30, 2012
Cost
Accumulated depreciation
Net book value (NBV)
Depreciation rate % per annum
Year ended June 30, 2011
Opening net book value (NBV)
Additions (at cost)
Transfers
Disposals (at NBV)
Depreciation charge
Closing net book value (NBV)
As at June 30, 2011
Cost
Net book value (NBV)
The cost of fully depreciated assets which are still in use as at June 30, 2012 is Rs 1,803 million (2011: Rs 1,729 million).
Annual Report 2012
51

2012
14.1 The depreciation charge for the year has been allocated as follows:
Cost of sales
Administration expenses
- note 25
- note 26
2011
1,832,417
31,772
1,864,189
1,587,804
32,016
1,619,820
14.2 Disposal of property, plant and equipment

2012
Particulars of assets
Sold to
Vehicles
Suzuki Liana
Employee
Mr. Imran Iqbal
Toyota Corolla - GLi

Ex-employees
Mr. Rizwan ul Haq
Mr. Sajjad Mehmood
Cost
Accumulated
depreciation
Book
value
Sale
proceeds
Mode of
disposal
827
(661)
166
166
Company Policy
1,384
1,007
3,218
(576)
(806)
(2,043)
808
201
1,175
808
210
1,184
Company Policy
Company Policy
Book
value
Sale
proceeds
Mode of
disposal
2011
Particulars of assets
Sold to
Cost
Accumulated
depreciation
Vehicles
Employee
Mr. Fazal-ur-Rehman
Toyota Corolla - XE
Honda Civic
Outsiders
Mr. Sajjad Hussain
Mr. Shahid Nazir
Auxillary Plant and

Machinery
BOD Apparatus
Video Image Camera
52
1,007
(722)
285
285
Company Policy
500
986
(500)
(789)
197
533
887
Negotiation
Negotiation
138
2,548
5,179
(138)
(2,420)
(4,569)
128
610
40
2,106
3,851
Negotiation
Negotiation
Third Party
M/s Business
Dynamic Enterprises
M/s Olympus

2012
15.
Intangible assets - Computer software
2011

Year ended June 30
Opening Net Book Value (NBV)
Additions (at cost)
Disposals (at NBV)
Amortisation charge
Closing NBV
5,791
3,488
(1,891)
7,388
2,415
4,912
(1,536)
5,791
35,062
(27,674)
7,388
31,574
(25,783)
5,791
20
20

Cost
Accumulated amortisation
NBV
Amortisation rate % per annum
15.1 Amortization charge for the year has been allocated to cost of sales.
2012
2011
16.
Assets Subject to Finance Lease

Year ended June 30
Opening NBV
Additions (at cost)
Disposals (at NBV)
Depreciation charge
Closing NBV
52,908
6,537
(4,517)
(14,014)
40,914
50,476
20,821
(285)
(18,104)
52,908
87,562
(46,648)
40,914
100,914
(48,006)
52,908
25
25

Cost
NBV
16.1 Depreciation charge for the period has been allocated in administrative expenses.
Annual Report 2012
53

2012
17.
Advance to contractor for office premises
Civil works
Plant and machinery including in transit Rs Nil
(2011: 286.574 million)
Others including amount for leased vehicles not yet
delivered Rs 34.186 million (2011: 1.529 million)
18.
2011
71,352
10,934
71,352
-
6,235
289,124
42,427
130,768
1,529
362,005
- note 18.1
53,407
11,805
65,212
12,014
53,198
41,453
9,831
51,284
8,788
42,496
- note 18.1.1
- note 18.1.2
32,507
20,900
53,407
41,453
41,453

Loans to employees - considered good
Security deposits
Less:
Receivable within one year
18.1 Loans to employees - considered good

Loans to employees - unsecured
Loans to employees - secured
18.1.1 These represent unsecured loans to non-executive employees for the purchase of plot, car, construction of
house etc. and are repayable in monthly installments over a maximum period of 120 months. These loans
carry interest of 9 percent per annum (2011: 9 percent per annum). Included in loans to employees are loans
amounting to Rs 1.180 million (2011: Rs 10.237 million) given to employees who were victims of flood.
These are interest free and repayable upto 10 years.
18.1.2 These represent secured loans to executive employees under officers' housing loan policy for the purchase
of residential plot, residential house, renovation of house etc. and are repayable in monthly installments over
a maximum period of 109 months. These loans carry interest of 8.53 percent to 9.63 percent (2011: Nil) per
annum. These loans are secured against the property purchased/renovated of the concerned employee.
2012
19.
Stores and spares

Stores and spares including in transit Rs 4.285 million
(2011 : Rs 114.276 million)
- note 19.1
Less:
2011
- note 19.2
3,868,762
3,514,907
142,358
3,726,404
114,336
3,400,571
Stores and spares include items which may result in fixed capital expenditure but are not distinguishable.
54

19.1 Included in stores are items valuing Rs 61.138 million (2011: Rs 96.407 million) which are being held by
the following suppliers:
2012
2011
Siemens AG Germany
Middle East Engineering Company (MEELSA)
Scherzinger Pump Technology, Germany
MJB International, UAE
Siemens Pakistan Engineering Company Limited
Allweiler AG
38,503
7,526
9,351
5,758
61,138
40,184
9,124
3,901
28,089
9,351
5,758
96,407
114,336
39,232
153,568
11,210
142,358
88,581
37,200
125,781
11,445
114,336
3,663,960
575,497
4,239,457
2,918,087
422,933
3,341,020
19.2 Provision for store obsolescence

Opening balance as on July 1
Add:
Provision for the year
Less:
20.
Stores written off against provision
Stock in trade
Furnace oil
Diesel
- note 20.1
20.1 Stock in trade of Rs 2.425 million (2011: Rs 2.425 million) is being carried out at Net Realisable Value.
2012
21.
Trade debts
Trade debts
Less:
2011
- note 21.1
- note 21.2
69,401,209
68,298
69,332,911
67,230,691
109,751
67,120,940
21.1 These are considered good and include an overdue amount of Rs 58,109 million (2011: Rs 54,362 million)
receivable from WAPDA. The trade debts are secured by a guarantee from the Government of Pakistan
under the Facilitation Agreement. These are in the normal course of business and are interest free, however,
a penal mark-up of SBP discount rate plus 4 percent per annum is charged in case the amounts are not
paid within due dates.
Annual Report 2012
55

2012
21.2 Provision for doubtful debts
Opening balance
Add:
Less:
22.
Trade debts written off against provision
2011
109,751
19,092
128,843
60,545
68,298
110,482
110,482
731
109,751
12,014
103,053
8,788
133,645
560,381
1,967,923
3,689
661,928
1,709,345
6,924
147,843
431,783
579,626
2,725
3,217
10,433
3,243,061
198,139
881,888
146,670
1,226,697
2,105
4,652
23,118
3,777,202
Loans, advances, deposits, prepayments and

other receivables
Loans to employees - considered good
Advances to suppliers - considered good
- note 22.1
Claims recoverable from Government:
- Sales tax
- note 22.2
- Income tax
Prepayments
Claims recoverable from WAPDA for pass through items:
- Workers' Welfare Fund
- Workers' Profit Participation Fund
- Flood Surcharge
- note 22.3
Security deposits
Refundable from Workers' Profit Participation Fund
- note 22.4
Other receivables
22.1 Advances to suppliers include amounts due from WAPDA Rs 48.334 million (2011: Rs 68.592 million).
These are in the normal course of business and are interest free.
22.2 Sales tax recoverable includes an amount of Rs 16.972 million (2011: Rs 16.972 million), which represents
refund for input tax on purchase of diesel for start-up. This refund was withheld by Deputy Collector
(Refunds) and has also been adjudicated against the Company by Collector of Customs, Federal Excise &
Sales Tax. Company has filed Miscellaneous Application before the Customs, Excise and Sales Tax
Appellate Tribunal.
Pending the outcome of the appeal the amount has been shown as recoverable in the financial statements
as according to the management of the Company, there are meritorious grounds that the ultimate decision
would be in its favour.
22.3 Under section 14.2(a) of Part III of Schedule 6 to the Power Purchase Agreement (PPA) with WAPDA,
payments to Workers' Welfare Fund and Workers' Profit Participation Fund are recoverable from WAPDA
as pass through items. Similarly under section 6.15(a) of Part I of Schedule 6 to the Power Purchase
Agreement (PPA) with WAPDA, any surcharge levied is recoverable from WAPDA as pass through item.
56

2012
2011
22.4 Workers' Profit Participation Fund

Opening refundable
(4,652)
431,783
427,131
430,348
(3,217)
Less: Payments made during the year

Closing refundable
(1,460)
495,348
493,888
498,540
(4,652)
Following the amendments made by the Finance Act 2006 to the Companies Profits (Workers' Participation)
Act, 1968, the Company has established the KAPCO Workers' Participation Fund in March, 2008 to allocate
the amount of annual profits stipulated by the Act for distribution amongst workers eligible to receive such
benefits under the Act.
As fully explained in note 13.1(ii), the Company has not made any provision for Workers' Profit Participation
Fund for the years upto June 30, 2006, based on a legal advice and in view of a constitutional petition
pending adjudication in Supreme Court.
2012
2011
23.

At banks on:
- Current accounts
- Savings accounts
- note 23.1
In hand
304,163
2,442
306,605
165
306,770
272,396
3,572
275,968
145
276,113
23.1 Included in these are total restricted funds of Rs Nil (2011: Rs 13.590 million) held by banks under lien as
margin against letters of credit. The balances in saving accounts bear mark up of 5 percent to 6 percent
per annum (2011: 5 percent to 7.5 percent per annum).
24.
Sales
Energy purchase price
Capacity purchase price
85,376,620
15,127,684
100,504,304
59,699,701
14,651,044
74,350,745
Energy purchase price is exclusive of sales tax of Rs 13,660.260 million (2011: Rs 10,146.074 million).
Annual Report 2012
57

2012
25.
Cost of sales
Fuel cost
Salaries, wages and benefits
Plant maintenance
Gas turbines overhauls
Repair and renewals
Depreciation on property, plant and equipment
Amortisation on intangible assets
Liquidated damages
2011
- note 25.1
- note 14.1
- note 15.1
- note 19.2
85,652,226
977,457
201,183
265,133
281,877
1,832,417
1,891
1,027
39,232
89,252,443
59,941,657
878,832
183,965
733,042
285,491
1,587,804
1,536
3,000
37,200
63,652,527
Cost of sales include Rs 592.798 million (2011: Rs 589.926 million) for stores and spares consumed.
25.1 Salaries, wages and benefits
Salaries, wages and benefits include following in
respect of retirement benefits
Pension
Expected return on plan assets
Amortisation of actuarial loss
Medical
Amortisation of actuarial gain
Free electricity
50,517
197,491
(150,733)
9,229
106,504
47,279
155,810
(116,036)
87,053
2,812
12,627
(6,264)
9,175
3,136
11,787
(4,639)
10,284
9,643
41,129
50,772
6,984
30,846
37,830
In addition to above, salaries, wages and benefits also include Rs 24.461 million (2011: Rs 22.268 million)
in respect of provident fund contribution by the Company.
58

2012
26.
Administrative expenses
Traveling
Motor vehicles running
Postage, telephone and telex
Legal and professional charges
Computer charges
Auditors' remuneration
Printing, stationery and periodicals
Repairs and maintenance infrastructure
Training expenses
Rent, rates and taxes
Depreciation on property, plant and equipment
Depreciation on assets subject to finance lease
Infrastructure cost
Differential payable to WAPDA
Education fee
Bad debts written off
Advances written off
Other expenses
2011
- note 26.1
- note 14.1
- note 16.1
- note 26.2
- note 21.2
19,866
42,306
10,701
31,970
5,879
2,881
14,381
33,292
10,568
15,143
31,772
14,014
26,717
113,828
29,562
45,861
15,598
19,092
12,626
496,057
19,953
36,093
10,863
20,159
5,681
2,488
8,499
33,780
9,192
14,894
32,016
18,104
37,322
148,978
28,448
12,820
13,059
452,349
26.1 Auditors' remuneration

The charges for auditors' remuneration include the following in respect of auditors' services for:
Statutory audit
Half yearly review
Workers' Profit Participation Fund audit, Employees Provident and
Pension Fund audit, special reports and certificates.
Out of pocket expenses
1,685
597
1,518
506
396
203
2,881
315
149
2,488
26.2 This represents income tax differential payable to WAPDA in accordance with clause 6.7 and 6.15(a) of Part
I of Schedule 6 of Power Purchase Agreement (PPA) on account of difference in income tax rate as provided
for in the PPA and the current tax rate as applicable to the Company.
27.
Other operating expenses

Donations
- note 27.1
600
600
16,150
16,150
27.1 None of the directors and their spouses had any interest in any of the donees during the year.
Annual Report 2012
59

2012
28.
Other operating income

Income from financial assets
Income on bank deposits
Interest on loans to employees
Interest on late payment - WAPDA
Income from non-financial assets
Profit on disposal of property, plant and equipment
Colony electricity
Provisions and unclaimed balances written back
Others
29.
2,529
2,831
7,511,566
7,516,926
1,834
2,997
8,030,496
8,035,327
9
3,442
103,996
38,083
145,530
7,662,456
3,241
4,136
317,327
21,389
346,093
8,381,420
564,066
325,091
3,033,285
5,763,242
7,705
85,082
3,743
9,782,214
687,776
23,061
2,767,208
5,148,050
7,673
66,606
3,804
8,704,178
2,205,102
424,215
2,629,317
3,299,708
81,049
3,380,757
(65,158)
(65,158)
2,564,159
(469)
(469)
3,380,288
Taxation
For the year:
- Current
- Deferred
Prior years:
- Current
- Deferred
30.1 Tax charge reconciliation

Numerical reconciliation between the average effective tax rate
and the applicable tax rate
Applicable tax rate
Effect of change in prior years' tax
Effect of tax credit
Others
Average effective tax rate
60
Finance cost
Interest and mark-up including commitment charges on:
- Long term loan from WAPDA - unsecured
- Long term finances - secured
- Finances under markup arrangements - secured
- Credit supplies of raw material
- Liabilities against assets subject to finance lease
Exchange loss
Bank and other charges
30.
2011
%age
35.00
(0.75)
(4.40)
(0.16)
29.69
%age
35.00
(0.86)
(0.02)
34.12

31.
Remuneration of Directors, Chief executive and Executives
31.1 The aggregate amount charged in the financial statements for the year for remuneration including certain
benefits to the chief executive, and executives of the Company is as follows:
Managerial remuneration including

bonus and other allowances
Contribution to provident & pension funds
and other retirement benefit plans
Leave passage
Chief Executive
Executives
2012
2011
2012
2011
32,667
25,169
235,543
195,359
2,242
1,900
36,809
1,766
26,935
44,696
10,017
290,256
32,101
8,761
236,221
71
68
Number of Persons
The Company also provides the Chief Executive and some of the Executives with Company transport,
telephones and medical facilities.
31.2 Remuneration to other directors
Aggregate amount charged in the financial statements for the year for fee to 6 directors (2011: 6 directors)
was Rs 0.670 million (2011: Rs 0.280 million).
32.
Transactions with related parties

The related parties comprise associated undertakings, key management personnel and post retirement
benefit plans. The Company in the normal course of business carries out transactions with various related
parties. Amounts due to/from related parties are shown under payables and receivables and remuneration
of the key management personnel is disclosed in note 31. Other significant transactions with related parties
are as follows:
2012
Relationship with the Company
Nature of transaction
i. Associated undertakings
Purchase of services
Sale of goods and electricity
Interest expense
Interest income on late payment
Bad debts written off
Advances written off
ii. Post retirement benefit plans
Expense charged
2011
810
100,504,304
564,066
7,511,566
45,861
5,856
1,449
74,350,745
687,776
8,030,496
12,820
-
190,912
157,435
Sale and purchase transactions with related parties are carried out on commercial terms and conditions.
Interest is charged between associated undertakings on the basis of mutually agreed terms.
33.
Proposed dividend
The Board of Directors of the Company have proposed a final dividend for the year ended June 30, 2012
of Rs 3.15 (2011: Rs 3.50) per share amounting to Rs 2,772.798 million (2011: Rs 3,080.886 million) at their
meeting held on August 28, 2012 for approval of members at the Annual General Meeting to be held on
October 22, 2012. These financial statements do not reflect this dividend payable.
Annual Report 2012
61

34.
2012
MWh
2011
MWh
11,788,128
11,755,920
6,065,461
5,687,720
Capacity and production

Annual dependable capacity (Based on 8,784 hours)
Actual energy delivered
Capacity for the power plant taking into account all the planned scheduled outages is 11,175,518 MWh
(2011: 10,824,333 MWh). Actual energy delivered by the plant is dependent on the load demanded by
WAPDA and the plant availability.
35.
Rates of exchange
Liabilities in foreign currencies have been translated into Rupees at USD 1.0616 (2011: USD 1.1621), EURO
0.8439 (2011: EURO 0.8007), GBP 0.6799 (2011: GBP 0.7214) and YEN 84.2531 (2011: YEN 93.4667)
equal to Rs 100.
2012
2011
36.
Cash generated from operations

Profit before tax
8,635,446
9,906,961
Adjustments for:
- Depreciation on property, plant and equipment
- Amortisation on intangible assets
- Depreciation on assets subject to finance lease
- Profit on disposal of property, plant and equipment
- Income on bank deposits
- Bad debts written off
- Advances written off
- Provision for store obsolescence
- Provision for doubtful debts
- Staff retirement benefits accrued
- Finance cost
1,864,189
1,891
14,014
(9)
(2,529)
45,861
15,598
39,232
19,092
166,451
9,782,214
1,619,820
1,536
18,104
(3,241)
(1,834)
12,820
37,200
135,167
8,704,178
20,581,450
20,430,711
(365,065)
(898,437)
(2,276,924)
(254,564)
(1,073,815)
(15,431,490)
772,284
1,175,557
(1,592,585)
18,988,865
(1,260,735)
6,020,334
(12,000,270)
8,430,441
Profit before working capital changes

Effect on cash flow due to working capital changes:
- Increase in stores and spares
- Increase in stock-in-trade
- Increase in trade debts
- Decrease/(Increase) in loans, advances, deposits,
prepayments and other receivables
- Increase in trade and other payables
62

2012
37.
Cash and cash equivalents

38.
2011
306,770
(20,049,549)
(19,742,779)
276,113
(23,512,168)
(23,236,055)
Rupees in thousand
6,071,287
6,526,673
Numbers
880,253,228
880,253,228
Rupees
6.90
7.41
Earnings per share
38.1 Basic earnings per share

Profit for the year
Weighted average number of ordinary shares
Earnings per share
38.2 Diluted earnings per share
A diluted earnings per share has not been presented as the Company does not have any convertible
instruments in issue as at June 30, 2012 and June 30, 2011 which would have any effect on the earnings
per share if the option to convert is exercised.
39.
Financial risk management
39.1 Financial risk factors

The Company's activities expose it to a variety of financial risks: market risk (including currency risk, other
price risk and interest rate risk), credit risk and liquidity risk. The Company's overall risk management
program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects
on the financial performance.
Risk management is carried out by the management in accordance with the Financial Risk Management
Policy approved by the Board of Directors (the Board). This policy covers specific areas such as foreign
exchange risk, interest rate risk, credit risk and investment of excess liquidity. All treasury related transactions
are carried out within the parameters of this policy.
(a)
Market risk
(i)
Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or
receivables and payables that exist due to transactions in foreign currencies.
The Company is exposed to currency risk arising from various currency exposures, primarily with respect
to the United States Dollar (USD), Great Britain Pound (GBP) and Euro. Currently, the Company's foreign
exchange risk exposure is restricted to the amounts receivable/payable from/to the foreign entities. The
Company's exposure to currency risk was as follows:
Annual Report 2012
63

2012
2011
Trade and other payables - USD

Advances to suppliers - USD
Net exposure - USD
(3,576)
(3,576)
(761,065)
(761,065)
Trade and other payables - GBP

Advances to suppliers - GBP
Net exposure - GBP
(1,471)
(1,471)
Trade and other payables - Euro

Advances to suppliers - Euro
Net exposure - Euro
(78,763)
(78,763)
(3,993,972)
(3,993,972)
Rupees per USD

Average rate
Reporting date rate
89.40
94.20
85.63
86.05
Rupees per GBP

Average rate
Reporting date rate
141.47
147.07
136.44
138.62
Rupees per Euro

Average rate
Reporting date rate
119.53
118.50
117.07
124.89
The following exchange rates were applied during the year:
If the functional currency, at reporting date, had fluctuated by 5% against the USD, GBP and Euro with all
other variables held constant, the impact on profit after taxation for the year would have been Rs 2.760
million (2011: Rs 18.587 million) respectively lower/higher, mainly as a result of exchange gains/losses on
translation of foreign exchange denominated financial instruments. Currency risk sensitivity to foreign
exchange movements has been calculated on a symmetric basis.
(ii)
Other price risk

Other price risk represents the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices (other than those arising from interest rate risk or
currency risk), whether those changes are caused by factors specific to the individual financial
instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The
Company is not exposed to equity price risk since there are no investments in equity securities.
(iii)
Interest rate risk

Interest rate risk represents the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market interest rates.
The Company has no significant long-term interest-bearing assets. The Company's interest rate risk
arises from short term financing. Borrowings obtained at variable rates expose the Company to cash
flow interest rate risk.
64

At the balance sheet date, the interest rate profile of the Company's interest bearing financial instruments
was:
2012
Financial assets
Fixed rate instruments
Staff Loans
Floating rate instruments
Bank balances - savings accounts
2011
53,407
41,453
2,442
3,572
3,409,627
4,247,760
2,516,305
83,569
20,049,549
30,775,515
53,424,938
800,000
65,018
23,512,168
29,550,609
53,927,795
Financial liabilities
Fixed rate instruments
Long term loan - WAPDA
Floating rate instruments
Other long term loans - secured
Trade payables
Fair value sensitivity analysis for fixed rate instruments
The Company does not account for any fixed rate financial assets and liabilities at fair value through profit
or loss. Therefore, a change in interest rate at the balance sheet date would not affect profit or loss of the
Company.
Cash flow sensitivity analysis for variable rate instruments
If interest rates on late payments, liabilities against assets subject to finance lease and finances under markup arrangement, at the year end date, fluctuate by 1% higher/lower with all other variables held constant,
profit after taxation for the year would have been Rs 60.020 million (2011: Rs 4.014 million) higher/lower,
mainly as a result of higher/lower interest expense on floating rate borrowings.
(b)
Credit risk
Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the
other party by failing to discharge an obligation. Company's credit risk is primarily attributable to its
trade debts and its balances at banks. The carrying amount of financial assets represents the
maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows:
Annual Report 2012
65

2012
2011
Trade debts
Loans, advances, deposits, prepayments and other receivables:
- Workers' Welfare Fund receivable from WAPDA
- Workers' Profit Participation Fund receivable from WAPDA
- Flood surcharge receivable from WAPDA
- Security deposits
- Refundable from Workers' Profit Participation Fund
- Other receivables
65,212
69,332,911
51,284
67,120,940
147,843
431,783
2,725
3,217
3,340
306,605
70,293,636
198,139
881,888
146,670
2,105
4,652
13,055
275,968
68,694,701
The credit risk on liquid funds is limited because the counter parties are banks with reasonably high credit
ratings. The Company believes that it is not exposed to major concentration of credit risk and the risk
attributable to trade debts and Workers' Welfare Fund and Workers' Profit Participation Fund receivable
from WAPDA is mitigated by guarantee from the Government of Pakistan under the Facilitation Agreement.
Age analysis of trade receivable balances is as follows:
2012
2011
Not yet due
Due past 90 days
Due past 90 to 180 days
Due past 181 to 365 days
Due past 365 days
11,223,755
36,484,161
17,037,531
4,521,434
66,030
69,332,911
12,758,989
31,068,086
18,937,753
4,282,171
73,941
67,120,940
The credit quality of cash and bank balances that are neither past due nor impaired can be assessed by
reference to external credit ratings (if available) or to historical information about counterparty default rate:
Short
term
Long
term
Rating
Agency
Rating
National Bank of Pakistan
United Bank Limited
Faysal Bank Limited
Habib Bank Limited
Standard Chartered Bank
NIB Bank Limited
Deutsche Bank AG
Bank Alfalah Limited
Citibank N.A.
66
A-1+
A-1+
A1+
A-1+
A1+
A1+
A-1
A1+
A-1
AAA
AA+
AA
AA+
AAA
AAA+
AA
A+
JCR-VIS
JCR-VIS
PACRA
JCR-VIS
PACRA
PACRA
Standard & Poors
PACRA
Standard & Poors
2012
2011
849
1
303,436
1
7
15
2,296
306,605
1,385
98
12
262,416
41
6
2
8,500
3,508
275,968

Due to the Company's long standing business relationships with these counterparties and after giving due
consideration to their strong financial standing, management does not expect non-performance by these
counter parties on their obligations to the Company. Accordingly, the credit risk is minimal.
(c)
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with
financial liabilities.
The Company manages liquidity risk by maintaining sufficient cash and the availability of funding
through an adequate amount of committed credit facilities. At June 30, 2012, the Company had
borrowing limits available from financial institutions at Rs 28,100 million (2011: Rs 26,600 million) and
Rs 306.770 million (2011: Rs 276.113 million) in cash and bank balances. The Company follows an
effective cash management and planning policy to ensure availability of funds and to take appropriate
measures for new requirements.
The following are the contractual maturities of financial liabilities as at June 30, 2012:
Carrying
amount
Long term loan - unsecured

Long term loan - secured
Liabilities against assets subject
to finance lease
Finances under mark-up
arrangements - secured
Less than
One to five
one year
years
More than
five years
3,409,627
2,516,305
701,405
953,622
2,708,222
1,562,683
83,569
22,115
61,454
20,049,549
45,569,371
71,628,421
20,049,549
45,569,371
67,296,062
4,332,359
The following are the contractual maturities of financial liabilities as at June 30, 2011:
Carrying
amount

Liabilities against assets subject
to finance lease
Finances under mark-up
arrangements - secured
Less than
One to five
one year
years
4,247,760
800,000
838,132
-
2,483,225
800,000
65,018
19,370
45,648
23,512,168
39,190,323
67,815,269
23,512,168
39,190,323
63,559,993
3,328,873
More than
five years
926,403
926,403
Annual Report 2012
67

39.2 Fair values of financial assets and liabilities

The carrying values of all financial assets and liabilities reflected in the financial statements approximate their
fair values. Fair value is determined on the basis of objective evidence at each reporting date.
Loans and receivables
2012
2011
39.3 Financial instruments by categories
Financial assets as per balance sheet
Trade debts
Loans, advances, deposits, prepayments and
other receivables:
- Workers' Welfare Fund receivable from WAPDA
- Workers' Profit Participation Fund receivable from WAPDA
- Flood surcharge receivable from WAPDA
- Security deposits
- Refundable from Workers' Profit Participation Fund
- Other receivables
65,212
69,332,911
51,284
67,120,940
147,843
431,783
2,725
3,217
3,340
306,770
70,293,801
198,139
881,888
146,670
2,105
4,652
13,055
276,113
68,694,846
Financial liabilities at
amortised cost
2012
2011
Financial liabilities as per balance sheet
3,409,627
2,516,305
83,569
20,049,549
45,569,371
71,628,421
4,247,760
800,000
65,018
23,512,168
39,190,323
67,815,269
39.4 Capital risk management

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital
structure, the Company may adjust the amount of dividends paid to shareholders, return capital to
shareholders through repurchase of shares, issue new shares or sell assets to reduce debt. Consistent with
others in the industry and the requirements of the lenders, the Company monitors the capital structure on
the basis of gearing ratio.
68

This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings
including current and non-current borrowings, as disclosed in note 7, less cash and cash equivalents as
disclosed in note 23. Total capital is calculated as 'equity' as shown in the balance sheet plus net debt. The
Company's strategy, which was unchanged from last year, was to maintain a gearing ratio of 60% debt and
40% equity. The gearing ratio as at year ended June 30, 2012 and June 30, 2011 are as follows:
2012
2011
Borrowings
Less: Cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
40.
- note 7
- note 23
5,925,932
306,770
5,619,162
23,649,396
29,268,558
5,047,760
276,113
4,771,647
23,959,945
28,731,592
Percentage
19
17
Date of authorisation for issue

These financial statements were authorised for issue on August 28, 2012 by the Board of Directors of the
Company.
41.
Corresponding figures
Corresponding figures have been re-arranged, wherever necessary, for the purposes of comparison.
However, no significant re-arrangements have been made.
Aftab Mahmood Butt

(Chief Executive)
Malcolm P. Clampin
(Director)
Annual Report 2012
69

Balance Sheet: As at June 30, 2012

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Balance Sheet: As at June 30, 2012

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Balance Sheet

as at June 30, 2012

Current portion of long term liabilities

CONTINGENCIES AND COMMITMENTS

Issued, subscribed and paid up capital

The annexed notes 1 to 41 form an integral part of these financial statements.

Aftab Mahmood Butt

KOT ADDU POWER COMPANY LIMITED

Assets subject to finance lease

Long term loans and deposits

Stores and spares

Loans, advances, deposits, prepayments

Cash and bank balances

Annual Report 2012

Profit and Loss Account

Other operating expenses

Other operating income

Profit from operations

Profit before tax

Profit for the year

Appropriations have been reflected in the statement of changes in equity.

Aftab Mahmood Butt

KOT ADDU POWER COMPANY LIMITED

Statement of Comprehensive Income

Other comprehensive income

Total comprehensive income for the year

The annexed notes 1 to 41 form an integral part of these financial statements.

Aftab Mahmood Butt

Annual Report 2012

Cash Flow Statement

Fixed capital expenditure

Net cash used in investing activities

Repayment of liabilities against assets subject to finance lease

Net cash used in financing activities

Net increase/(decrease) in cash and cash equivalents

Net cash generated from/(used) in operating activities

Cash flows from financing activities

Cash and cash equivalents at beginning of the year

The annexed notes 1 to 41 form an integral part of these financial statements.

Aftab Mahmood Butt

KOT ADDU POWER COMPANY LIMITED

Statement of Changes in Equity

Final dividend for the year ended

Total comprehensive income for the year

Interim dividend - Rs 3.00 per share

Balance as on June 30, 2011

Final dividend for the year ended

Total comprehensive income for the year

Interim dividend - Rs 3.75 per share

Balance as on June 30, 2012

The annexed notes 1 to 41 form an integral part of these financial statements.

Aftab Mahmood Butt

Annual Report 2012

Notes to and Forming Part of the Financial Statements

Legal status and nature of business

Standards, amendments and interpretations to published approved accounting standards

International Accounting Standard (IAS) 1 (amendment), Presentation of financial statements, is

KOT ADDU POWER COMPANY LIMITED