Kapco Financials

INDEPENDENT AUDITOR’S
REPORT
To the members of Kot Addu Power Company Limited
Report on the Audit of the Financial Statements
Opinion
We have audited the annexed financial statements of Kot Addu the Company in accordance with the International Ethics
Power Company Limited (the Company), which comprise the Standards Board for Accountants’ Code of Ethics for
statement of financial position as at June 30, 2023, and the Professional Accountants as adopted by the Institute of
statement of profit or loss, the statement of comprehensive Chartered Accountants of Pakistan (the Code) and we have
income, the statement of changes in equity, the statement of fulfilled our other ethical responsibilities in accordance
cash flows for the year then ended, and notes to the financial with the Code. We believe that the audit evidence we have
statements, including a summary of significant accounting obtained is sufficient and appropriate to provide a basis for
policies and other explanatory information, and we state that our opinion.
we have obtained all the information and explanations which,
to the best of our knowledge and belief, were necessary for
the purposes of the audit. Material Uncertainty Related to
Going Concern
In our opinion and to the best of our information and
according to the explanations given to us, the statement of We draw attention to note 2.2 in the financial statements,
financial position, the statement of profit or loss, the statement which describes the pending renewal / extension of the Power
of comprehensive income, the statement of changes in Purchase Agreement with the Power Purchaser. As stated in
equity and the statement of cash flows together with the note 2.2, these events or conditions indicate the existence of
notes forming part thereof conform with the accounting and a material uncertainty that may cast significant doubt about
reporting standards as applicable in Pakistan and give the the Company’s ability to continue as a going concern. Our
information required by the Companies Act, 2017 (XIX of opinion is not modified in respect of this matter.
2017), in the manner so required and respectively give a true
and fair view of the state of the Company’s affairs as at June
30, 2023 and of the profit and other comprehensive income,
Key Audit Matters
the changes in equity and its cash flows for the year then Key audit matters are those matters that, in our professional
ended. judgment, were of most significance in our audit of the
financial statements of the current period. These matters
Basis for Opinion were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
We conducted our audit in accordance with International and we do not provide a separate opinion on these matters.
Standards on Auditing (ISAs) as applicable in Pakistan. Our In addition to the matter described in the Material Uncertainty
responsibilities under those standards are further described Related to Going Concern section, we have determined
in the Auditor’s Responsibilities for the Audit of the Financial the matter described below to be the key audit matter to be
Statements section of our report. We are independent of communicated in our report.
A.F. FERGUSON & CO., Chartered Accountants, a member firm of the PwC network
308-Upper Mall, Shahrah-e-Quaid-e-Azam, P.O. Box 39, Lahore-54000, Pakistan.
Tel: +92 (42) 3519 9343-50 / Fax: +92 (42) 3519 9351 www.pwc.com/pk
KARACHI LAHORE ISLAMABAD
KOT ADDU POWER COMPANY LIMITED 61

Following is the key audit matter:
Sr. No Key audit matter How the matter was addressed in our audit
(i) Contingent Taxation Liabilities Our audit procedures included the following:
• Obtained and examined details of the pending tax
(Refer notes 4.1, 12.1.1 and 12.1.2 to the financial statements)
matters and discussed the same with the Company’s
management;
The Company has contingent liabilities in respect of various
income and sales tax matters, which are pending adjudication • Circularized confirmations to the Company’s external tax
before the taxation authorities and the Courts of law. counsels for their views on open tax assessments and
matters. Furthermore, examined prior years’ precedents
Contingencies require management to make judgments and of outcomes in favor of the Company at various forums
estimates in relation to the interpretation of laws, statutory related to matters under consideration which support the
rules, regulations and the probability of outcome and financial Company’s stance;
impact, if any, on the Company for disclosure and recognition • Examined correspondence of the Company with the
and measurement of any provision that may be required relevant authorities including judgements or orders
against such contingencies. passed by the competent authorities in relation to the
issues involved or matters which have similarities with the
Due to significance of amounts involved, inherent uncertainties issues involved;
with respect to the outcome of matters and use of significant
management judgments and estimates to assess the same • Involved in-house tax specialists to assess management’s
including related financial impacts, we considered contingent conclusion on contingent tax matters and to evaluate the
liabilities relating to income and sales tax, a key audit matter. consistency of such conclusions with the views of the
management and external tax advisors engaged by the
Company; and
• Assessed the adequacy and appropriateness of the
related disclosures in the financial statements.
Information Other than the Responsibilities of

Financial Statements and Management and Board of
Auditor’s Report Thereon Directors for the Financial
Management is responsible for the other information. The Statements
other information comprises the information included in the
Management is responsible for the preparation and fair
annual report, but does not include the financial statements
presentation of the financial statements in accordance with
and our auditor’s report thereon.
the accounting and reporting standards as applicable in
Pakistan and the requirements of Companies Act, 2017
Our opinion on the financial statements does not cover
(XIX of 2017) and for such internal control as management
the other information and we do not express any form of
determines is necessary to enable the preparation of financial
assurance conclusion thereon.
statements that are free from material misstatement, whether
due to fraud or error.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
In preparing the financial statements, management is
so, consider whether the other information is materially
responsible for assessing the Company’s ability to continue
inconsistent with the financial statements or our knowledge
as a going concern, disclosing, as applicable, matters related
obtained in the audit or otherwise appears to be materially
to going concern and using the going concern basis of
misstated. If, based on the work we have performed, we
accounting unless management either intends to liquidate
conclude that there is a material misstatement of this other
the Company or to cease operations, or has no realistic
information, we are required to report that fact. We have
alternative but to do so.
nothing to report in this regard.
Board of directors are responsible for overseeing the

Company’s financial reporting process.
62 Annual Report 2023

Auditor’s Responsibilities
for the Audit of the Financial
Statements
Our objectives are to obtain reasonable assurance about • Conclude on the appropriateness of management’s use
whether the financial statements as a whole are free from of the going concern basis of accounting and, based
material misstatement, whether due to fraud or error, and on the audit evidence obtained, whether a material
to issue an auditor’s report that includes our opinion. uncertainty exists related to events or conditions that
Reasonable assurance is a high level of assurance, but is may cast significant doubt on the Company’s ability
not a guarantee that an audit conducted in accordance with to continue as a going concern. If we conclude that
ISAs as applicable in Pakistan will always detect a material a material uncertainty exists, we are required to draw
misstatement when it exists. Misstatements can arise from attention in our auditor’s report to the related disclosures
fraud or error and are considered material if, individually in the financial statements or, if such disclosures are
or in the aggregate, they could reasonably be expected to inadequate, to modify our opinion. Our conclusions are
influence the economic decisions of users taken on the basis based on the audit evidence obtained up to the date of
of these financial statements. our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going
As part of an audit in accordance with ISAs as applicable in concern.
Pakistan, we exercise professional judgement and maintain
professional skepticism throughout the audit. We also: • Evaluate the overall presentation, structure and content
of the financial statements, including the disclosures,
• Identify and assess the risks of material misstatement of and whether the financial statements represent the
the financial statements, whether due to fraud or error, underlying transactions and events in a manner that
design and perform audit procedures responsive to achieves fair presentation.
those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The We communicate with the board of directors regarding,
risk of not detecting a material misstatement resulting among other matters, the planned scope and timing of the
from fraud is higher than for one resulting from error, audit and significant audit findings, including any significant
as fraud may involve collusion, forgery, intentional deficiencies in internal control that we identify during our
omissions, misrepresentations, or the override of internal audit.
control.
We also provide the board of directors with a statement
• Obtain an understanding of internal control relevant to that we have complied with relevant ethical requirements
the audit in order to design audit procedures that are regarding independence, and to communicate with them
appropriate in the circumstances, but not for the purpose all relationships and other matters that may reasonably be
of expressing an opinion on the effectiveness of the thought to bear on our independence, and where applicable,
Company’s internal control. related safeguards.
• Evaluate the appropriateness of accounting policies From the matters communicated with the board of directors,
used and the reasonableness of accounting estimates we determine those matters that were of most significance in
and related disclosures made by management.
KOT ADDU POWER COMPANY LIMITED 63

the audit of the financial statements of the current period and c) investments made, expenditure incurred and guarantees
are therefore the key audit matters. We describe these matters extended during the year were for the purpose of the
in our auditor’s report unless law or regulation precludes Company’s business; and
public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should d) zakat deductible at source under the Zakat and Ushr
not be communicated in our report because the adverse Ordinance, 1980 (XVIII of 1980), was deducted by the
consequences of doing so would reasonably be expected to Company and deposited in the Central Zakat Fund
outweigh the public interest benefits of such communication. established under section 7 of that Ordinance.
The engagement partner on the audit resulting in this

Report on Other Legal and independent auditor’s report is Amer Raza Mir.
Regulatory Requirements
Based on our audit, we further report that in our opinion:
a) proper books of account have been kept by the

Company as required by the Companies Act, 2017 (XIX
of 2017);
A. F. Ferguson & Co.
b) the statement of financial position, the statement of Chartered Accountants
profit or loss, the statement of comprehensive income, Lahore
the statement of changes in equity and the statement of Date: September 25, 2023
cash flows together with the notes thereon have been UDIN: AR202310118KSVHhlQql
drawn up in conformity with the Companies Act, 2017
(XIX of 2017) and are in agreement with the books of
account and returns;
64 Annual Report 2023

FINANCIAL
STATEMENTS
For the year ended June 30, 2023
STATEMENT OF
FINANCIAL POSITION
As at June 30, 2023
2023 2022
Note (Rupees in thousand)
EQUITY AND LIABILITIES

CAPITAL AND RESERVES
Authorised capital
3,600,000,000 (2022: 3,600,000,000) ordinary
shares of Rs 10 each 36,000,000 36,000,000
Issued, subscribed and paid up capital
880,253,228 (2022: 880,253,228) ordinary
shares of Rs 10 each 5 8,802,532 8,802,532
Capital reserve 6 444,451 444,451
Revenue reserve: un-appropriated profits 56,836,744 59,348,925
66,083,727 68,595,908
NON-CURRENT LIABILITIES
Deferred liabilities
- Deferred taxation 2,100,017 677,510
- Staff retirement benefits 839,622 1,204,680
7 2,939,639 1,882,190
CURRENT LIABILITIES
Lease liabilities 8 – 3,434
Contract liability 9 – 4,613,061
Finances under mark-up arrangements - secured 10 22,153,719 37,370,346
Trade and other payables 11 9,614,950 21,470,058
Provision for taxation - net – 1,855,133
Unclaimed dividend 1,056,126 971,233
32,824,795 66,283,265
CONTINGENCIES AND COMMITMENTS 12
101,848,161 136,761,363
The annexed notes from 1 to 43 form an integral part of these financial statements.
Aftab Mahmood Butt M. Rabnawaz Anjum Hafiz Muhammad Yousaf

Chief Executive Officer Chief Financial Officer Director
66
2023 2022
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 13 1,931,244 2,237,359
Intangible assets 14 – 1,720
Right of use assets 15 – 2,220
Long term deposits 16 9,351 21,128
Staff retirement benefits - Pension 17 1,011,912 721,960
2,952,507 2,984,387
CURRENT ASSETS
Stores and spares 18 3,927,475 3,698,057
Stock-in-trade 19 11,565,471 6,235,956
Trade debts 20 26,611,385 62,154,482
Investments at fair value 21 50,101,538 54,067,311
Income tax due from Government 18,021 –
Loans, advances, deposits, prepayments
and other receivables 22 4,751,983 6,602,988
Cash and bank balances 23 1,919,781 1,018,182
98,895,654 133,776,976
101,848,161 136,761,363

67
STATEMENT OF
PROFIT OR LOSS
2023 2022
Sales 24 25,435,312 136,599,624

Cost of sales 25 (26,004,159) (128,067,519)
Gross (Loss) / Profit (568,847) 8,532,105
Administrative expenses 26 (842,579) (976,701)

Other operating expenses 27 (1,360,293) (277,451)
Other income 28 15,843,925 12,618,768
Operating Profit 13,072,206 19,896,721
Finance cost 29 (6,252,898) (4,373,107)

Profit before tax 6,819,308 15,523,614
Taxation 30 (2,860,551) (5,629,994)

Profit for the year 3,958,757 9,893,620
Earnings per share - basic and diluted Rupees 39 4.50 11.24

68
STATEMENT OF
COMPREHENSIVE INCOME
2023 2022
(Rupees in thousand)
Profit for the year 3,958,757 9,893,620
Items that will not be reclassified subsequently to profit or loss:

- Re-measurement of net defined benefit obligation - net of tax 130,961 80,576
Items that may be reclassified subsequently to profit or loss – –
Other comprehensive income for the year - net of tax 130,961 80,576
Total comprehensive income for the year

4,089,718 9,974,196

69
STATEMENT OF
CHANGES IN EQUITY
Share Capital Revenue Reserve: Total

capital reserve Un-appropriated
profits
Balance as at June 30, 2021 8,802,532 444,451 55,976,628 65,223,611

Profit for the year – – 9,893,620 9,893,620
Other comprehensive income:
- Re-measurement of net defined benefit
obligation - net of tax – – 80,576 80,576
Total comprehensive income for the year – – 9,974,196 9,974,196
Transactions with owners

Final dividend for the year ended
June 30, 2021 - Rs 3.50 per share – – (3,080,886) (3,080,886)
Interim dividend for the year ended

June 30, 2022 - Rs 4.00 per share – – (3,521,013) (3,521,013)
Profit for the year – – 3,958,757 3,958,757

Other comprehensive income:
- Re-measurement of net defined benefit
obligation - net of tax – – 130,961 130,961
Total comprehensive income for the year – – 4,089,718 4,089,718
Transactions with owners

Final dividend for the year ended
June 30, 2022 - Rs 4.00 per share – – (3,521,013) (3,521,013)
Interim dividend for the year ended

June 30, 2023 - Rs 3.50 per share – – (3,080,886) (3,080,886)


70
STATEMENT OF
CASH FLOWS
2023 2022
Cash flows from operating activities

Cash generated from operations 36 21,652,497 51,316,629
Finance cost paid (6,324,433) (6,664,924)
Taxes paid (3,394,927) (9,920,668)
Staff retirement benefits paid (504,954) (44,308)
Net cash generated from operating activities 11,428,183 34,686,729
Cash flows from investing activities

Fixed capital expenditure including acquisition of intangible assets (12,876) (93,834)
Income on bank deposits received 117,181 40,128
Income on investments 8,158,206 3,508,208
Net decrease / (increase) in long term deposits 11,777 (14,709)
Investments acquired during the year - (38,747,700)
Investments disposed off during the year 2,933,721 10,090,779
Proceeds from sale of property, plant and equipment 2,474 1,925
Net cash generated from / (used in) investing activities 11,210,483 (25,215,203)
Cash flows from financing activities

Repayment of lease liabilities 38 (3,434) (7,114)
Dividend paid 38 (6,517,006) (10,842,765)
Net cash used in financing activities (6,520,440) (10,849,879)
Net increase / (decrease) in cash and cash equivalents 16,118,226 (1,378,353)
Cash and cash equivalents at beginning of the year (36,352,164) (34,973,811)
Cash and cash equivalents at the end of the year 37 (20,233,938) (36,352,164)

71
NOTES TO THE
FINANCIAL STATEMENTS
1 Legal status and nature of business

Kot Addu Power Company Limited (the Company or KAPCO), was incorporated in Pakistan on April 25, 1996 as a
public limited company under the Companies Ordinance, 1984 (now Companies Act, 2017). The Company was listed
on April 18, 2005 on Pakistan Stock Exchange Limited. The principal activities of the Company are to own, operate and
maintain a multi-fuel fired power station with fifteen generating units and aggregate nameplate capacity of 1,600 MW
in Kot Addu, District Muzaffargarh, Punjab, Pakistan and to sell the electricity produced there from to a single customer,
Pakistan Water and Power Development Authority (WAPDA) under a Power Purchase Agreement (PPA), which was
initially for a period of 25 years. WAPDA irrevocably transferred all of its rights, obligations and liabilities under the PPA to
Central Power Purchasing Agency Guarantee Limited (CPPA-G) (Power Purchaser) thereunder via Novation Agreement
which became effective on May 21, 2021 after approval from the relevant authorities. The PPA was extended by 16
months from June 26, 2021, pursuant to the terms of Master Agreement and the Third Amendment to the PPA, which
expired on October 24, 2022.
The Company has a plant site at Kot Addu (Muzaffargarh), a corporate office located in Lahore and registered office
located in Islamabad.
A Special Purpose Vehicle was incorporated in 2014 under the name of KAPCO Energy (Private) Limited (KEPL) for
establishment of a coal power project. However, the project was called off and KEPL was put into liquidation under the
Easy Exit Scheme of SECP. Subsequently, the liquidation application of KEPL was withdrawn for exploring investments
opportunities. However, the share capital of KEPL has not yet been subscribed by the Company, therefore, the
Company has not prepared consolidated financial statements.
2 Basis of preparation
2.1 These financial statements have been prepared in accordance with the accounting and reporting standards as
applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise of:
– International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB)
as are notified under the Companies Act, 2017;
– Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan (ICAP)
as notified under the Companies Act, 2017; and
– Provisions of and directives issued under the Companies Act, 2017.
Where provisions of and directives issued under the Companies Act, 2017 differ from the IFRS or IFAS, the provisions
of and directives issued under the Companies Act, 2017 have been followed.
2.2 Impact on Going Concern Assumption due to expiry of PPA

The PPA of the Company was initially for a term of 25 years and was due to expire on June 26, 2021. Pursuant to the
terms of the Third Amendment to the PPA and Master Agreement (together, the ‘Agreements’), the term of the PPA
was extended till October 24, 2022, which expired during the current financial year due to which the Plant was not
operational for the remaining period of the year.
The generation license of the Company expired on September 21, 2021, which has been extended by National Electric
Power Regulatory Authority (NEPRA) for a period of three years from the date of its expiry.
The Company also took up the matter of renewal / extension of PPA beyond its expiry with the relevant Authorities and
submitted application for Reference Tariff as well as Provisional Tariff before NEPRA.
Based on the critical strengths of the Power Plant and System requirements of National Transmission and Dispatch
Company (NTDC), the Power Plant was included in the approved Indicative Generation Capacity Expansion Plan
(IGCEP) (2022-2031) till 2026. In line with the approved IGCEP (2022-2031), NEPRA approved the Provisional Tariff of
the Company on August 4, 2023 for 500 MW capacity on Take-and-Pay basis. The Company is in process of finalizing
the Interim PPA with the Power Purchaser subject to legal formalities. The Final Tariff Determination by NEPRA is also
in process and it is expected to be issued in due course after public hearing. Thereafter, the Final PPA will be executed
with the Power Purchaser.
72
The pending renewal / extension of the PPA indicates the existence of material uncertainty that may cast significant
doubt on the Company’s ability to continue as a going concern and, therefore, it may be unable to realize its assets and
discharge its liabilities in the normal course of business.
Notwithstanding that the Company has accepted the Provisional Tariff, in the best interest and whereas the Company
has also filed review petition before NEPRA recording its reservations on the Provisional Tariff, which include certain
items allowed to other IPPs in their respective Tariffs and the Switchyard Facility of the Company, which may result in
certain positive adjustments in the Final Tariff.
In addition, the management of the Company has also decided to take the following steps:
• Cost optimization / rationalization for managing the total cost of the Plant;
• Investment of surplus funds for generating sufficient income;
• Participation in the Competitive Trading Bilateral Contracts Market (CTBCM) once it is implemented by the
Government of Pakistan (GoP), which will allow the Company to sell electricity as Merchant Plant and to Bulk
Consumers / Distribution Companies (DISCOs) through wheeling arrangements; and
• exploring opportunities for diversification of its operations.
Notwithstanding, as elaborated above, the Company has sound financial position and as per the Management’s
forecasts, the Company has sufficient liquidity and reserves to meet the operational expenditures and discharge
its liabilities for the foreseeable future even at zero load factor. Further, the Company draws strength from the
following:
• receivables from the Power Purchaser of Rs 26,611 million as at June 30, 2023 backed by GoP Guarantee which
will be realised in normal course of business; and
• investments of PIBs and Sukuks of Rs 50,102 million as at June 30, 2023.
Based on foregoing, Management is confident that the Company will continue as a going concern in the foreseeable
future. Thus, these financial statements have been prepared on a going concern basis and consequently, do not
require adjustment relating to the realisation of its assets and liquidation of liabilities.
2.3 New accounting standards / amendments and IFRS interpretations that are effective for the year ended June 30, 2023
Certain standard amendments and interpretations to approved accounting standards are effective for the accounting
periods beginning on or after July 01, 2022 but are considered not to be relevant or to have any significant effect on
the Company operations and are, therefore, not detailed in these financial statements.
2.4 New accounting standards / amendments and IFRS interpretations that are not yet effective
There are certain standards, amendments and interpretations to the accounting standards and interpretations that
are mandatory for the Company’s accounting periods beginning on or after July 01, 2023 but are considered not to
be relevant to the Company’s operations and are, therefore, not detailed in these financial statements, except for the
following:
2.4.1 Amendments to IAS 1, ‘Classification of liabilities as current or non-current’

The narrow-scope amendments to IAS 1 Presentation of Financial Statements, effective for accounting periods
beginning on or after January 01, 2023, clarify that liabilities are classified as either current or non-current, depending
on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or
events after the reporting date (e.g. the receipt of a waiver or a breach of covenant). The amendments also clarify what
IAS 1 means when it refers to the settlement of a liability.
The amendments could affect the classification of liabilities, particularly for entities that previously considered
Management’s intentions to determine classification and for some liabilities that can be converted into equity.
73
NOTES TO THE
These amendments are not expected to have a material impact on the Company’s financial statements when they
become effective.
2.4.2 Amendments to IAS 1 and IFRS Practice Statement 2, ‘Disclosure of Accounting Policies’
The IASB amended IAS 1 to require entities to disclose their material rather than their significant accounting policies.
The amendments define what is ‘material accounting policy information’ and explain how to identify when accounting
policy information is material. They further clarify that immaterial accounting policy information does not need to be
disclosed. If it is disclosed, it should not obscure material accounting information.
To support this amendment, the IASB also amended IFRS Practice Statement 2 Making Materiality Judgements to
provide guidance on how to apply the concept of materiality to accounting policy disclosures.
The above mentioned amendments are effective for accounting periods beginning on or after January 01, 2023.
The Company is in the process of assessing the impact of this amendment on the Company’s financial statements.
2.4.3 Amendments to IAS 12, ‘Deferred Tax related to Assets and Liabilities arising from a Single Transaction’
The amendments to IAS 12 Income Taxes, effective for accounting periods beginning on or after January 01, 2023,
require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of
taxable and deductible temporary differences. They will typically apply to transactions such as leases of lessees and
decommissioning obligations and will require the recognition of additional deferred tax assets and liabilities.
become effective.
2.4.4 Amendments to IAS 8, ‘Definition of Accounting Estimates’

The amendment to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, effective for accounting
periods beginning on or after January 01, 2023, clarifies how companies should distinguish changes in accounting
policies from changes in accounting estimates. The distinction is important, because changes in accounting estimates
are applied prospectively to future transactions and other future events, whereas changes in accounting policies are
generally applied retrospectively to past transactions and other past events as well as the current period.
become effective.
2.5 Standards, amendments and interpretations to existing standards that are not yet effective but applicable / relevant to
the Company’s operations
2.5.1 The Securities and Exchange Commission of Pakistan (SECP) through S.R.O. 229 (I) / 2019 dated February 14, 2019
notified that the standard IFRS 9, ‘Financial Instruments’ would be effective for reporting period / year ending on or
after June 30, 2019. However, SECP through S.R.O. 985 (I) / 2019 dated September 30, 2019 granted exemption from
applying expected credit loss based impairment model to financial assets due from the Government till June 30, 2021
which was further extended till June 30, 2022 vide S.R.O. 1177 (I) / 2021 dated September 13, 2021. The extension is
further extended till December 31, 2024 vide S.R.O. 67(I) / 2023. The Management of the Company believes that the
application of this standard subsequent to December 31, 2024 will not have any material impact on the Company.
2.5.2 The Securities and Exchange Commission of Pakistan (SECP) through S.R.O. 24 (I) / 2012 dated January 16, 2012, as
modified by S.R.O. 986 (I) / 2019 dated September 2, 2019, granted exemption from the application of IFRS 16 ‘Leases’
to all companies, which have entered into power purchase agreements before January 1, 2019. However, SECP made
it mandatory to disclose the impact of the application of IFRS 16 on the Company’s financial statements.
74
Under IFRS - 16, the consideration required to be made by lessee CPPA(G) for the right to use the asset is to be
accounted for as lease under IFRS - 16 “Leases”. If the Company were to follow IFRS - 16, the effect on the financial
statements would be as follows:
2023 2022
De-recognition of property, plant and equipment (1,841,706) (2,109,956)

Decrease in deferred tax liability 939,657 696,450
Decrease in un-appropriated profits at the beginning of the year (1,413,506) (2,118,845)

Increase in profit for the year 511,457 705,339
Decrease in un-appropriated profits at the end of the year (902,049) (1,413,506)
2.5.3 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 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 GoP launched Benazir Employees’ Stock Option Scheme (“the Scheme”) for employees of
certain State Owned Enterprises (SOEs) and non-State Owned Enterprises (non-SOEs) where GoP holds significant
investment. The Scheme was 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 provided for a cash payment to employees on retirement or termination based on the price of shares
of respective entities. To administer this Scheme, GoP transferred 12% of its investment in such SOEs and non-SOEs
to a Trust Fund created for the purpose by each of such entities. The eligible employees were 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 provided that 50% of dividend related to shares transferred to the respective Trust Fund would be
distributed amongst the unit-holder employees. 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 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 the Institute of Chartered
Accountants of Pakistan (ICAP), has granted exemption to such entities from the application of IFRS 2 to the Scheme
as per S.R.O. 587 (I) / 2011 dated June 7, 2011.
Had the exemption not been granted, the staff costs of the Company for the year would have been higher by Rs 411
million (2022: Rs 539 million), profit after taxation would have been lower by Rs 251 million (2022: Rs 345 million),
retained earnings would have been lower by Rs 251 million (2022: Rs 345 million) and earning per share would have
been lower by Rs 0.29 per share (2022: Rs 0.39 per share)
75
NOTES TO THE
The Company received letter from GoP dated June 9, 2021, advising the Company to close-off the Scheme in light of
the order / judgment of Honorable Supreme Court of Pakistan. The detailed order / judgment of Honorable Supreme
Court of Pakistan are awaited to proceed for closure of the Scheme. As per the Management, there will be no material
impact of the order on the financial statements of the Company, however, depending upon the order of the Honorable
Supreme Court of Pakistan, the amount available in the fund will be transferred to GoP.
2.6 Basis of measurement

These financial statements have been prepared under the historical cost convention unless otherwise specifically
stated.
3 Significant accounting judgements, estimates and assumptions

The Company’s significant accounting policies are stated in note 4. Not all of these significant accounting policies
require Management to make difficult, subjective or complex judgments or estimates. The following is intended to
provide an understanding of the policies that Management considers critical because of the 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) Provision for taxation - Note 4.1

b) Staff retirement benefits - Note 4.2
c) Useful life and residual values of property, plant and equipment - Note 4.3
d) Provision for stores and spares - Note 4.9
e) Investments at fair value - Note 4.11
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
Income tax expense comprises current and deferred tax. Income tax is recognized in the statement of profit or loss
except to the extent that it relates to items recognized directly in equity or other comprehensive income, in which case
it is recognized in equity or other comprehensive income as the case may be.
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 profit for the year if enacted after taking into account tax credits, rebates and exemptions, if any. 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. Such judgments are reassessed whenever circumstances
change or there is new information that affects the judgments. Where, at the assessment stage, the taxation authorities
have adopted a different tax treatment and the Company considers that the most likely outcome will be in favour of the
Company, the amounts are shown as contingent liabilities.
Previously, income of the Company derived from the power station up to 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. up to June
27, 2006. Thereafter, the income of the Company is taxable under the provisions of the Income Tax Ordinance, 2001.
76
Deferred
Deferred tax is accounted for using the 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 future taxable profits will be available against which deductible
temporary differences, unused tax losses and tax credits can be utilised.
Deferred tax assets and liabilities are calculated at the rates that are expected to apply to the period when the asset is
realized or the liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted
by the reporting date. Deferred tax is charged or credited to the statement of profit or loss, except in the case of items
charged or credited to equity or other comprehensive income, in which case it is included in the statement of changes
in equity or statement of other comprehensive income as the case may be.
4.2 Staff retirement benefits

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, 2023. The actual return on plan
assets during the year is Rs 453 million (2022: Rs 124 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:
– Discount rate: 16.25 percent per annum (2022: 13.25 percent per annum).
– Expected rate of increase in salary level: 14.25 percent per annum (2022: 12.75 percent per annum).
– Expected rate of increase in pension: 6.00 percent per annum (2022: 5.00 percent per annum).
– Average duration of the plan: 6.19 years (2022: 6.85 years).
– Mortality rates: SLIC (2001-05)-1.
Plan assets include short-term and long-term Government instruments, term finance certificates of financial
institutions, investment in mutual funds and deposits with banks. Return on Government instruments and
debt is at fixed and floating rates.
The trustees are managing the pension fund as per applicable Trust Deed, Rules and Regulations applicable
to the fund.
(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. The trustees are
managing the provident funds as per applicable Trust Deeds, Rules and Regulations applicable to the fund.
(c) The Company provides medical facilities to its eligible retired employees and dependent family members
along with free electricity. Provisions are made annually to cover the obligation on the basis of actuarial
valuation and are charged to statement of profit or loss. The latest actuarial valuation was carried out as at
June 30, 2023.
77
NOTES TO THE
Projected unit credit method, using the following significant assumptions, is used for valuation of these
schemes:
– Discount rate: 16.25 percent per annum (2022: 13.25 percent per annum).
– Expected rate of increase in medical cost: 14.00 percent per annum (2022: 11.00 percent per annum).
– Expected rate of increase in electricity benefit:14.25 percent per annum (2022: 11.50 percent per
annum).
– Average duration of the medical plan: 15.22 years (2022: 14.09 years).
– Average duration of the electricity plan: 14.76 years (2022: 14.91 years).
– Mortality rates: SLIC (2001-05)-1.
(d) The Company has other long term employee benefits which include the encashment of frozen leaves for
eligible employees and a lumpsum amount payable to staff under Charter of Demand settlement. Frozen
leaves can be encashed upto 180 days at the time of retirement. Lumpsum amount is payable to staff members
at the rate of Rs 495,000 or Rs 561,000 per person according to the grade of respective staff member at the
time of retirement. The liability is calculated in present value terms by taking into account the expected date
of retirement of employees, the available balance of frozen leaves and / or the expected salary at the date of
retirement.
Retirement benefits are payable to all regular employees on completion of prescribed qualifying period of service
under these schemes.
The Company’s policy with regard to actuarial gains/losses is to immediately recognise all actuarial losses and gains in
other comprehensive income under IAS 19, ‘Employee benefits’.
4.3 Property, plant and equipment

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 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 statement of profit or loss on the straight line method so
as to write off the depreciable amount of an asset over the economic useful life or the remaining term of PPA, whichever
is lower, using the annual rates mentioned in note 13 after taking their residual values into account.
The assets’ residual values and estimated useful lives are reviewed at each financial year end and adjusted if impact
on depreciation is significant. The Company’s estimate of the residual value of its property, plant and equipment as at
June 30, 2023 has not required any significant adjustment.
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.
Major plant modifications and improvements are capitalised. Overhauls, maintenance and repairs are charged to
statement of profit or loss 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 13 regardless of whether they are in use or not. Refurbishment costs are accrued and charged to
statement of profit or loss.
78
4.4 Intangible assets
Expenditure incurred to acquire computer software are capitalised as intangible assets and stated at cost less
accumulated amortization and any identified impairment loss. Intangible assets are amortized 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 14.
Research and development expenditure that do not meet the criteria mentioned above are recognised as an expense
as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent
period. Such expenses are charged to ‘cost of sales’ and ‘administrative expenses’ in the statement of profit or loss, as
and when incurred.
Amortization on additions to intangible assets is charged from the month in which an asset is acquired or capitalised,
while no amortization is charged for the month in which the asset is disposed off.
4.5 Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non financial assets to determine whether
there is any indication of impairment. An impairment loss is recognized in statement of profit or loss for the amount by
which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s
fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows
from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
4.6 Capital work-in-progress

Capital work-in-progress is stated at cost less any identified impairment loss. All expenditure connected with specific
assets incurred during installation and construction period are carried under capital work-in-progress. These are
transferred to operating fixed assets as and when these are available for use.
4.7 Leases
The Company is a lessee for lease contracts related to motor vehicles.
4.7.1 Right of use assets

The Company recognises right of use assets at the commencement date of the lease (i.e., the date the underlying
asset is available for use). Right of use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities. The cost of right of use assets includes the amount of
lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date
less any lease incentives received. The right of use asset is depreciated on a straight line method over the lease term
as this method most closely reflects the expected pattern of consumption of future economic benefits. The right of use
asset is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
4.7.2 Lessee accounting

At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The lease liability is initially measured at the present value of the future lease payments at the commencement date.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases of the Company, the lessee’s incremental borrowing rate is used, being the rate
that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the
right of use asset in a similar economic environment with similar terms, security and conditions.
79
NOTES TO THE
To determine the incremental borrowing rate, the Company:
– where possible, uses the recent third party financing received by the Company as a starting point, adjusted to
reflect the changes in financing conditions since third party financing was received;
– uses expected terms of third party financing based on correspondence with the third party financial institutions,
where third party financing was not received recently; and
– makes adjustments specific to the lease e.g. terms and security.
Lease payments include fixed payments, variable lease payment that are based on an index or a rate, amounts
expected to be payable by the lessee under residual value guarantees, the exercise price of a purchase option if the
lessee is reasonably certain to exercise that option, payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option, less any lease incentives receivable.
In determining the lease term, Management considers all facts and circumstances that create an economic incentive
to exercise an extension option or not to exercise a termination option. Extension options (or periods covered
by termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not
terminated). While making this assessment, the Company considers significant penalties to terminate (or not extend)
as well as the significant cost of business disruption.
The lease liability is subsequently measured at amortised cost using the effective interest rate method. It is remeasured
when there is a change in future lease payments arising from a change in fixed lease payments or an index or rate,
change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if
the Company changes its assessment of whether it will exercise a purchase, extension or termination option. The
corresponding adjustment is made to the carrying amount of the right-to-use asset, or is recorded in profit or loss if the
carrying amount of right-to-use asset has been reduced to zero.
Payments associated with short-term and low value leases are recognised on a straight line basis as an expense in the
4.7.3 Lessor accounting

Lease income from operating leases where the Company is a lessor is recognized in income on a straight-line basis
over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the
underlying asset and recognized as expense over the lease term on the same basis as lease income. The respective
leased assets are included in the statement of financial position based on their nature.
4.8 Ijarah contracts

The Company has entered in to Ijarah contracts under which it obtains usufruct of an asset for an agreed period for an
agreed consideration. The Ijarah contracts are undertaken in compliance with the Shariah essentials for such contracts
prescribed by the State Bank of Pakistan.
Company accounts for its Ijarah contracts in accordance with the requirements of IFAS 2 ‘Ijarah’. Accordingly, Company
as a Mustaj’ir (lessee) in the Ijarah contract recognises the Ujrah (lease) payments as an expense in the statement of
profit or loss on straight line basis over the Ijarah term.
4.9 Stores and spares

Usable stores and spares are valued principally at weighted average cost. Impairment provision is recognised against
items determined to be obsolete and / or not expected to be used. Items in transit are valued at cost comprising invoice
value plus other charges paid thereon.
80
Refurbishable items are valued at the lower of cost and net realisable value. Cost of refurbishment is charged to the
statement of profit or loss as it is incurred. The item is charged to the statement of profit or loss when, upon inspection, it
cannot be refurbished. Provision for obsolescence of stores and spare parts wherever required, is made on the basis of
Management’s best estimate of usability of items as determined by the in-house technical team. Provision is recognized
against items determined to be obsolete.
4.10 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 realizable value is determined on the basis of estimated selling price in the ordinary course of business less
estimated costs of completion and the estimated costs necessary to make the sale. If the expected net realizable value
is lower than the carrying amount, a write-down is recognized for the amount by which the carrying amount exceeds
its net realizable value.
4.11 Financial instruments

4.11.1 Financial assets
a) Classification
The Company classifies its financial assets other than investments in equity instruments of subsidiary and associate in
the following measurement categories:
– those to be measured subsequently at fair value [either through other comprehensive income (‘OCI’) or through
profit or loss], and
– those to be measured at amortized cost.
The classification depends on the Company’s business model for managing the financial assets and the contractual
terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in
equity instruments that are not held for trading, this will depend on whether the Company has made an irrevocable
election at the time of initial recognition to account for the equity investment at fair value through other comprehensive
income (FVOCI).
The Company reclassifies debt investments when and only when its business model for managing those assets
changes.
b) Recognition and derecognition

Regular way purchases and sales of financial assets are recognized on trade date, being the date on which the
Company commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash
flows from the financial assets have expired or have been transferred and the Company has transferred substantially all
the risks and rewards of ownership.
c) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at
fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows
are solely payments of principal and interest.
81
NOTES TO THE
Debt Instruments
Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset
and the cash flow characteristics of the asset. There are three measurement categories into which the Company
classifies its debt instruments:
i) Amortised Cost
Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of
principal and interest, are measured at amortized cost. Interest income from these financial assets is included in other
income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit
or loss. Impairment losses are presented as separate line item in the statement of profit or loss.
ii) Fair Value through Other Comprehensive Income (FVOCI)

Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash
flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount
are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange
gains and losses, which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain
or loss previously recognized in OCI is reclassified from equity to profit or loss. Interest income from these financial
assets is included in other income using the effective interest rate method. Impairment expenses are presented as
separate line item in the statement of profit or loss.
iii) Fair Value through Profit or Loss (FVPL)

Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt
investment that is subsequently measured at FVPL is recognized in profit or loss in the period in which it arises.
As at the reporting date, the Company classifies the investments relating to Pakistan Investment Bond (PIB) and GoP
Ijarah Sukuk as fair value through profit or loss.
Equity instruments
The Company subsequently measures all equity investments except for investments in equity instruments of subsidiary
and associate at fair value. Where the Company’s Management has elected to present fair value gains and losses on
equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following
the derecognition of the investment. Dividends from such investments continue to be recognized in profit or loss as
other income when the Company’s right to receive payments is established.
Changes in the fair value of financial assets at FVPL are recognized in the statement of profit or loss. Impairment losses
(and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other
changes in fair value.
4.11.2 Impairment of Financial Assets due from Government

Financial assets due from the Government of Pakistan includes trade debts and other receivables due from CPPA-G
under the PPA that also includes accrued amounts. The Company follows relevant requirements of IAS 39 in respect
of impairment of these financial assets due to the exemption available in respect of IFRS 9 till December 31, 2024 as
stated in note 2.5.1.
A provision for impairment is established when there is objective evidence that the Company will not be able to collect
all the amount due according to the original terms of the receivable.
The Company assesses at the end of each reporting period whether there is objective evidence that the financial
asset is impaired. The financial asset is impaired and impairment losses are incurred only if there is objective evidence
of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’)
82
and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be
reliably estimated. Evidence of impairment may include indications that the debtor is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganization, and where observable data indicates that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or economic conditions that correlate with defaults. The amount of the
loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash
flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective
interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the statement of
profit or loss. When the financial asset is uncollectible, it is written off against the provision. Subsequent recoveries of
amounts previously written off are credited to the statement of profit or loss. If, in a subsequent period, the amount of the
impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was
recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized impairment
loss is recognized in the statement of profit or loss.
4.11.3 Impairment of financial assets other than those due from the Government of Pakistan and investment in equity
instruments
The Company assesses on a forward-looking basis, the expected credit losses (‘ECL’) associated with its financial
assets. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
The Company applies general 3-stage approach for loans, deposits and other receivables and bank balances i.e. to
measure ECL through loss allowance at an amount equal to 12-month ECL if credit risk on a financial instrument or a
group of financial instruments has not increased significantly since initial recognition.
Following are the financial assets that are subject to the ECL model:
– Long term deposits

– Loans, advances, deposits, prepayments and other receivables
– Investments at fair value
– Cash and bank balances
The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default
and loss given default is based on historical data adjusted by forward-looking information (adjusted for factors that
are specific to the counterparty, general economic conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including time value of money where appropriate). As for the
exposure at default for financial assets, this is represented by the assets’ gross carrying amount at the reporting date.
Loss allowances are forward looking, based on 12 month expected credit losses where there has not been a significant
increase in credit risk rating, otherwise allowances are based on lifetime expected losses.
Expected credit losses are a probability weighted estimate of credit losses. The probability is determined by the risk of
default which is applied to the cash flow estimates. The expected cash flows will include cash flows from the sale of
collateral held or other credit enhancements that are integral to the contractual terms. In the absence of a change in
credit rating, allowances are recognized when there is reduction in the net present value of expected cash flows. On
a significant increase in credit risk, allowances are recognized without a change in the expected cash flows, although
typically expected cash flows do also change; and expected credit losses are rebased from 12 month to lifetime
expectations.
The Company considers the probability of default upon initial recognition of asset and whether there has been a
significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there
is a significant increase in credit risk, the Company compares the risk of a default occurring on the instrument as at
the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and
supportable forward-looking information.
83
NOTES TO THE
The following indicators are considered while assessing credit risk:
– actual or expected significant adverse changes in business, financial or economic conditions that are expected to
cause a significant change to the counterparty’s ability to meet its obligations;
– actual or expected significant changes in the operating results of the counterparty;
– significant increase in credit risk on other financial instruments of the same counterparty; and
– significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees,
if applicable.
The Company considers the following as constituting an event of default for internal credit risk management
purposes as historical experience indicates that receivables that meet either of the following criteria are generally not
recoverable:
– when there is a breach of financial covenants by the counterparty; or

– information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its
creditors, including the Company, in full (without taking into account any collaterals held by the Company).
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future
cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable
data about the following events:
– significant financial difficulty of the issuer or the borrower;

– a breach of contract, such as a default or past due event;
– the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty,
having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;
– it is becoming probable that the borrower will enter bankruptcy or other financial reorganization; or
– the disappearance of an active market for that financial asset because of financial difficulties.
Where lifetime ECL is measured on a collective basis to cater for cases where evidence of significant increases in credit
risk at the individual instrument level may not yet be available, the financial instruments are grouped on the following
basis:
– Nature of financial instruments;

– Past-due status;
– Nature, size and industry of borrowers; and
– External credit ratings where available.
The grouping is regularly reviewed by Management to ensure the constituents of each group continue to share similar
credit risk characteristics.
The Company recognizes an impairment gain or loss in the statement of profit or loss for financial assets with a
corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt
instruments that are measured at FVOCI, for which the loss allowance is recognized in other comprehensive income
and accumulated in the investment revaluation reserve, and does not reduce the carrying amount of the financial asset
in the statement of financial position.
The Company writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and
has concluded that there is no reasonable expectation of recovery. The assessment of no reasonable expectation of
recovery is based on unavailability of counterparty’s sources of income or assets to generate sufficient future cash
flows to repay the amount. The Company may write-off financial assets that are still subject to enforcement activity.
Subsequent recoveries of amounts previously written off will result in impairment gains.
84
4.11.4 Financial liabilities
Financial liabilities are recognised at the time when the Company becomes a party to the contractual provisions of
the instrument. Financial liabilities at amortised cost are initially measured at fair value less transaction costs. Financial
liabilities at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed on
Financial liabilities, other than those at fair value through profit or loss, are subsequently measured at amortised cost
using the effective yield method.
4.12 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.
4.13 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 reporting
date. Initially they are recognised at fair value and subsequently stated at amortized cost.
4.14 Trade debts

Trade debts are amounts due from CPPA-G in the ordinary course of business. They are generally due for settlement as
referred to in note 4.23 and therefore are all classified as current. Trade debts are recognised initially at the amount of
consideration that is unconditional unless they contain significant financing components, when they are recognised
at fair value. Trade debts are carried at a value to be received less an estimate made for loss allowance based on a
review of all outstanding amounts at the year end. Bad debts are written off when identified. Furthermore, the Company
holds the trade debts with the objective of collecting the contractual cashflows and therefore measures the trade debts
subsequently at amortised cost using the effective interest rate method less provision for loss allowance.
4.15 Cash and cash equivalents

Cash and cash equivalents are carried in the statement of financial position 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 statement of financial position, finances under mark-
up arrangements are included in current liabilities.
4.16 Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently
stated at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is
recognized in the profit or 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.
Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it
is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down
occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is
capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.
Borrowings are removed from the statement of financial position when the obligation specified in the contract is
discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been
extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognized in profit or loss as other income or finance costs.
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 reporting date.
85
NOTES TO THE
4.17 Trade and other payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers. Trade and other payables are presented as current liabilities unless payment is not due within
12 months after the reporting period. Trade and other payables are recognized initially at fair value and subsequently
measured at amortized cost using the effective interest method. Exchange gains and losses arising on translation in
respect of liabilities in foreign currency are added to the carrying amount of the respective liabilities.
4.18 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 Company’s functional and presentation currency. Figures have been rounded off to nearest
thousand of Rupees, unless otherwise stated.
b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from
the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are
generally recognized in statement of profit or loss.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within
finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis
within other gains / (losses).
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities
such as equities held at fair value through profit or loss are recognized in statement of profit or loss as part of the
fair value gain or loss, and translation differences on non-monetary assets such as equities classified as at fair value
through other comprehensive income are recognized in other comprehensive income.
4.19 Borrowing costs

Mark-up, interest and other charges on borrowings are capitalised up to the date of commissioning of the related
property, plant and equipment, acquired out of the proceeds of such borrowings. All other mark-up, interest and other
charges are charged to statement of profit or loss.
4.20 Provisions
Provisions are recognized 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
a reliable estimate can be made of the amount of the obligation. Provisions are reviewed periodically and adjusted to
reflect the current best estimates.
4.21 Dividend
Dividend distribution to the Company’s shareholders is recognised as a liability in the period in which the dividends are
declared.
86
4.22 Segment reporting
Operating segments are reported in a manner consistent with the internal reports issued to the chief operating decision-
maker. The Chief Executive Officer has been identified as the ‘chief operating decision-maker’, who is responsible for
allocating resources and assessing performance of the operating segments. Currently the Company is functioning as
a single operating segment.
4.23 Revenue recognition

Revenue shall be recognized when (or as) the Company satisfies a performance obligation by transferring a promised
good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that
asset and thus has the ability to direct the use and obtain the benefits from the good or service.
Revenue from the sale of electricity to CPPA-G, the sole customer of the Company, is recorded on the following basis:
– Capacity Purchase Price revenue is recognized over time, based on the capacity made available to CPPA-G, at
rates as specified under the PPA with CPPA-G, as amended from time to time; and
– Energy Purchase Price revenue is recognized at a ‘point in time’, as and when the Net Electrical Output (NEO) is
delivered to CPPA-G.
Capacity and Energy revenue is recognized based on the rates determined under the mechanism laid down in the
PPA.
Late payment surcharge on amounts due under the PPA is accrued on a time proportion basis by reference to the
amount outstanding and the applicable rate of return under the PPA and the Tripartite agreement between SNGPL,
CPPA-G and the Company for RLNG supplies.
Further, the true-up income invoices on CPP is raised upon the receipt of the underlying CPP invoices, wholly or partially
in accordance with the clause 13.4(iv) of Part II of schedule 6 to the PPA. The accrual on true-up income is recorded on
time proportion basis in accordance with the terms of the PPA.
Invoices are generally raised on a monthly basis and are due after 25 to 30 days from acknowledgement by CPPA-G
except for weekly RLNG commodity invoices which are due in 3 days.
4.24 Contract assets / liabilities

A contract liability is the obligation to transfer goods or services to a customer for which the Company has received
consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the
Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or
the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs
under the contract.
A contract asset is recognized for the Company’s right to consideration in exchange for goods or services that it has
transferred to a customer. If the Company performs by transferring goods or services to a customer before the customer
pays consideration or before payment is due, the Company presents the amount as a contract asset, excluding any
amounts presented as a receivable.
4.25 Contingent liabilities

A contingent liability is disclosed when the Company has a possible obligation as a result of past events, whose
existence will be confirmed only by the occurrence or non-occurrence, of one or more uncertain future events not
wholly within the control of the Company; or the Company has a present legal or constructive obligation that arises
from past events, but it is not probable that an outflow of resources embodying economic benefits will be required to
settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability.
87
NOTES TO THE
4.26 Finance income

Finance income comprises interest income on funds invested (financial assets), dividend income, gain on disposal
of financial assets and changes in fair value of investments. Interest income is recognized as it accrues in statement
of profit or loss, using effective interest method. Dividend income is recognized in profit or loss on the date that the
Company’s right to receive payment is established.

4.27 Share capital
Ordinary shares are classified as equity and recognized at their face value. Incremental costs directly attributable to the
issue of new shares are shown in equity as a deduction, net of tax, if any.
5 Issued, subscribed and paid up capital

2023 2022 2023 2022
(Number of shares) (Rupees in thousand)
253,000 253,000 Ordinary shares of Rs 10 each

fully paid in cash 2,530 2,530
Ordinary shares of Rs 10 each
issued as fully
paid for consideration other

880,000,228 880,000,228 than cash 8,800,002 8,800,002
880,253,228 880,253,228 8,802,532 8,802,532
5.1 There has been no movement in the ordinary share capital of the Company during the year.
Ordinary shares of the Company held by associated undertakings are as follows:
2023 2022
(Number of shares)
Pakistan Water and Power Development Authority (WAPDA) 354,311,133 354,311,133

KAPCO Employees Empowerment Trust
[Formed under Benazir Employees’ Stock Option Scheme (BESOS)] 48,252,429 48,252,429
402,563,562 402,563,562
5.2 All ordinary shares rank equally with regard to the Company’s residual assets. Holders of these shares are entitled to
dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company.
6 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.
88
2023 2022
7Deferred liabilities
Deferred taxation 7.1 2,100,017 677,510
Staff retirement benefits 7.2 839,622 1,204,680
2,939,639 1,882,190
7.1
Deferred taxation
The liability for deferred taxation comprises of
timing differences relating to:
Taxable temporary difference

Unrealized true-up income 84,239 56,273
Unrealized interest income on late payment to CPPA-G 3,466,257 1,361,652
Accrued interest on investments 391,549 231,692
Deductible temporary difference

Accelerated tax depreciation (110,712) (108,170)
Provision for store obsolescence (683,366) (605,249)
Provision for doubtful debts (179,299) (115,420)
Write back of unpaid liabilities – (18,337)
Provision for other staff benefits (62,988) (64,038)
Unrealized exchange loss on trade payables (20,880) –
Unrealized loss on investments (447,276) (59,759)
Alternate corporate tax (337,507) –
Lease liabilities – (1,134)
2,100,017 677,510
7.1.1 Movement in deferred taxation

Opening balance 677,510 8,285,535
Charged / (credited) to statement of profit or loss 1,360,247 (7,608,025)
Charged to other comprehensive income 62,260 –
Closing balance 2,100,017 677,510
7.2
Staff retirement benefits
These are composed of:
Medical 7.2.1 196,075 290,936
Free electricity 7.2.1 482,040 719,691
Other long term employee benefits 7.2.5 161,507 194,053
839,622 1,204,680
89
NOTES TO THE
7.2.1 Post retirement Post retirement

medical free electricity
Note 2023 2022 2023 2022
The amounts recognised in

the balance sheet are as follows:
Present value of defined benefit

obligation as at June 30 196,075 290,936 482,040 719,691
Liability as at July 1 290,936 212,490 719,691 544,762

Charged to statement of profit or
loss account 31,564 25,454 76,531 65,257
Benefits paid during the year (2,898) (13,378) (1,591) (11,435)
Lump sum payment to optees 7.2.4 (131,527) – (336,139) –
Gain due to change in
financial assumptions (13,797) (1,953) (146,915) (19,194)
Loss due to change in
experience adjustments 21,797 68,323 170,463 140,301
Liability as at June 30 196,075 290,936 482,040 719,691
The movement in the present

value of defined benefit
obligation is as follows:
obligation as at July 1 290,936 212,490 719,691 544,762
Current service (income) / cost (7,070) 4,113 (19,058) 10,537
Interest cost for the year 38,634 21,341 95,589 54,720
Benefits paid during the year (2,898) (13,378) (1,591) (11,435)
Lump sum payment to optees 7.2.4 (131,527) – (336,139) –
Remeasurement loss recognised
in other comprehensive income 8,000 66,370 23,548 121,107
obligation as at June 30 196,075 290,936 482,040 719,691
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:
Post Retirement Medical

2023 2022 2021 2020 2019
As at June 30
obligations 196,075 290,936 212,490 192,764 175,061
Fair value of plan assets – – – – –
Deficit 196,075 290,936 212,490 192,764 175,061
Experience adjustment
on obligation - loss / (gain) 21,797 68,323 4,400 (7,373) 1,537
90
The present value of defined benefit obligation, the fair value of plan assets and the surplus or deficit of post retirement
free electricity is as follows:
Post retirement free electricity

2023 2022 2021 2020 2019
As at June 30
obligations 482,040 719,691 544,762 567,338 563,106
Fair value of plan assets – – – – –
Deficit 482,040 719,691 544,762 567,338 563,106
on obligation - loss / (gain) 170,463 140,301 (78,560) (82,564) (4,355)
Year end sensitivity analysis on present value of defined benefit obligation:
Post retirement Post retirement

medical free electricity
2023 2022 2023 2022
Discount rate+0.50% 181,159 270,446 446,458 666,038

Discount rate-0.50% 212,752 313,784 521,745 779,801
Increase in medical cost /
electricity benefit+0.50% 198,813 293,814 490,385 729,854
Increase in medical cost /
electricity benefit-0.50% 193,403 288,133 473,910 709,835
Maturity profile of the defined

benefit obligation
1. Weighted average duration

of the benefit (Years) 15.22 14.09 14.76 14.91
2. Distribution of timing of benefit

payments (time in years)
1 1,185 3,567 3,285 7,972

2 3,365 8,533 9,328 19,044
3 5,258 10,736 14,409 23,888
4 7,487 13,264 20,294 29,458
5 9,930 16,077 26,794 35,685
6 to 10 106,702 135,052 277,894 303,510
91
NOTES TO THE
7.2.2 Risk exposure

Through its defined benefit scheme, the Company is exposed to a number of risks, the most significant of which are
detailed below:

Interest rate risk - The present value of the defined benefit liability is calculated using a discount rate determined by
reference to the market yields at the end of the reporting period on high quality corporate bonds, or where there is no
deep market in such bonds, by reference to market yields on government bonds. Currencies and terms of bond yields
used must be consistent with the currency and estimated term of the post-employment benefit obligations being
discounted. A decrease in bond interest rates will increase the liability, and vice versa.
Medical and electricity cost inflation risk - The present value of the defined benefit liability is calculated after taking
into account the future growth in medical and electricity cost. As such, an increase in the medical and electricity cost
growth rate of the plan participants will increase the liability and vice versa.
Withdrawal rate risk - The present value of the defined benefit liability is calculated by reference to the best estimate
of the withdrawal rate / attrition rate of plan participants. As such, an increase in the withdrawal rate may increase /
decrease the liability and vice versa depending on the age-service distribution of the exiting employees.
Mortality rate risk - The present value of the defined benefit liability is calculated by reference to the best estimate of the
mortality of plan participants (actives and pensioners). An improvement in the mortality rates of the participants may
increase the liability.
2023 2022
7.2.3 Medical and electricity benefits recognised during the year

Amount recognised in statement of profit or loss:
- Loss on medical recognised 31,564 25,454
- Loss on electricity recognised 76,531 65,257
Amount recognised in other comprehensive income:
- Loss on medical recognised 8,000 66,370
- Loss on electricity recognised 23,548 121,107
7.2.4 During the year ended June 30, 2023, the Company offered an option to eligible members for lumpsum payment in
lieu of their monthly entitlement of electricity and medical benefits based on actuarial valuation, which was availed by
most of the eligible members of the scheme.
7.2.5 Movement of other long term benefits

July 1, (Reversal) / Payments June 30,
2022 Charge for during 2023
the year the year
Other long term benefits:

Provision for leave encashment 98,519 (2,914) (17,717) 77,888
Provision for lumpsum payment
to employees 95,534 3,167 (15,082) 83,619
194,053 253 (32,799) 161,507
92
July 1, Charge for Payments June 30,
2021 the year during 2022
the year

Provision for leave encashment 88,726 18,093 (8,300) 98,519
Provision for lumpsum payment
to employees 92,277 14,452 (11,195) 95,534
181,003 32,545 (19,495) 194,053
2023 2022
8 Lease liabilities
Present value of minimum lease payments 8.2 – 3,434
Less: Current portion shown under current liabilities – (3,434)
8.1 – –
8.1 The Company obtained motor vehicles on lease. Reconciliation of the carrying amount is as follows:
2023 2022
Opening balance 3,434 10,548

Additions during the year – –
Interests on lease liability 223 538
Payments made during the year (3,657) (7,652)
Lease liability as at June 30 – 3,434
Current portion shown under current liabilities – (3,434)

Long term lease liability as at June 30 – –
8.2 Minimum lease payments have been discounted at an implicit interest rate ranging from 13.9 percent to 17.6 percent
(2022: 8.6 percent to 13.9 percent) per annum to arrive at their present values. 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.
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
2023
Not later than one year – – –
Later than one year and not later
than five years – – –
– – –
93
NOTES TO THE
Minimum Future Present value

lease finance of lease
payment charge liability
2022
Not later than one year 3,670 236 3,434
Later than one year and not later
than five years – – –
3,670 236 3,434
2023 2022
9Contract liability
Opening Balance 4,613,061 19,128,298
Less: Amount recognised as revenue during the year 9.1 (4,613,061) (14,515,237)
– 4,613,061
9.1 The Company signed a Master Agreement and the Third Amendment to the Power Purchase Agreement on February
11, 2021 with Power Purchaser which later became binding on May 21, 2021. Pursuant to the terms and approval
of these Agreements, the outages due to fuel shortage during the period 2008 to 2016 had been treated as Other
Force Majeure Event (OFME) under the PPA and consequently, the Term of PPA had been extended by 485 days
(approximately 16 months). Pursuant to a letter of understanding signed by both parties on March 30, 2021, it was
agreed to treat the already received amount of Rs 19,287 million representing Capacity Purchase Price (CPP) of the
OFME period (485 days) as advance against future CPP. During the OFME extension period, no CPP invoice was raised.
Accordingly, this advance is adjusted, and the related revenue is recorded over the period from June 27, 2021 to
October 24, 2022 upon satisfaction of the underlying performance obligation i.e. ensuring the availability of the Plant.
2023 2022
10 Finances under mark-up arrangements - secured

- Under Conventional finances 8,586,689 16,507,171
- Under Islamic finances 13,567,030 20,863,175
10.1 22,153,719 37,370,346
10.1 Finances under mark-up arrangements available from various commercial banks amount to Rs 19,995 million (2022:
Rs 20,440 million) and finances available under musharika and murabaha arrangements amount to Rs 18,675 million
(2022: Rs 24,575 million). The rate of mark-up ranges from 14.26 percent to 25.08 percent (2022: 7.7 percent to 14.9
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 30 percent (2022: 20 percent
to 24 percent) per annum on the balances unpaid.
10.2 Letters of credit and bank guarantees

Of the aggregate facility of Rs 405 million (2022: Rs 392 million) for opening letters of credit and Rs 2,504 million (2022:
Rs 2,504 million) for guarantees, the amounts utilised as at June 30, 2023 were Rs 29 million (2022: Rs 233 million) and
Rs 2,504 million (2022: Rs 2,504 million) respectively.
94
10.3 The aggregate running finances, short term finances and letters of credit and guarantees are secured by joint pari
passu charge over current assets up to a limit of Rs 67,200 million (2022: Rs 90,792 million) and ranking charge over
current assets up to a limit of Nil (2022: Rs 4,001 million).
2023 2022
11Trade and other payables

Trade creditors 11.1 419,370 9,765,336
Accrued liabilities 11.2 636,764 779,426
Liquidated damages – 55,025
Markup accrued on:
- Finances under markup arrangements - secured 1,635,505 959,813
- Lease liabilities – 50
- Credit supplies of raw material 6,453,749 7,200,927
8,089,254 8,160,790
Deposits - interest free repayable on demand 11.3 694 453
Workers’ Welfare Fund 11.4 136,386 772,950
Workers’ Profit Participation Fund 965 –
Differential payable to CPPA-G 11.5 – 1,730,484
Provident fund payable 11.6 – 12,425
Others 331,517 193,169
9,614,950 21,470,058
11.1 Trade creditors include payable to Sui Northern Gas Pipelines Limited (SNGPL) amounting to Nil (2022: Rs 9,711
million).
11.2 Accrued liabilities includes Rs 35 million (2022: Rs 7 million) payable to CPPA-G against purchase of electricity.
11.3 These represent security deposits received against rent and utility charges of shops rented out in colony. None of these
deposits is utilizable for other purposes. These have been kept in a separate bank account in accordance with the
requirements of section 217 of the Act.
2023 2022
11.4
Movement in Workers’ Welfare Fund is as follows:
Opening balance 772,950 378,099
Provision made during the year 136,386 772,950
909,336 1,151,049
Payment made during the year (772,950) (378,099)
Closing balance 136,386 772,950
11.5 This represents income tax differential payable to / receivable from the Power Purchaser in accordance with clause 6.7
and 6.15(a) of Part I of Schedule 6 of 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.
11.6 The investments by the provident fund in collective investment schemes, listed equity and debts securities have been
made in accordance with the conditions specified in section 218 of the Companies Act, 2017 and rules specified
thereunder.
95
NOTES TO THE
12 Contingencies and commitments

12.1 Contingencies
12.1.1 Income tax
(i) Income tax returns of the Company for tax years 2003 to 2007 were filed, wherein, only normal tax depreciation was
claimed. Subsequently, the aforesaid returns were revised thereby 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 the Company was exempt from levy of income tax.
Tax depreciation in income tax return for tax year 2008 was also claimed with resultant written down value carried
forward from tax year 2007, as computed in the revised return of income in accordance with position explained above.
Such return and revised returns for tax year 2003 to 2007 were amended by Tax Authorities restoring the earlier
position and were also endorsed by Commissioner Inland Revenue (Appeals) [CIR(A)]. The Company preferred appeal
before Income Tax Appellate Tribunal (ITAT) [now Appellate Tribunal Inland Revenue (ATIR)] against the decision of
CIR(A) which was decided in the Company’s favour vide order dated April 14, 2012. No appeal was filed by the Tax
Department (the Department) before High Court within the time stipulated under law.
Subsequently, the Department filed miscellaneous application for rectification before ATIR which was decided against
the Company. Being aggrieved, the Company filed reference with the Honorable Lahore High Court (LHC) against
this order. The LHC proceeded to set aside the miscellaneous applications and declared the same to be pending
before ATIR vide order dated November 12, 2018. Being aggrieved, the Company applied for leave of appeal from
the Honorable Supreme Court of Pakistan, which was remanded back to LHC vide order dated August 9, 2019 for
deciding the matter afresh after addressing the question of law involved therein. The LHC decided the case against
the Company on May 25, 2022, by setting aside all the precedents of High Courts on this matter. Being aggrieved, the
Company again filed an appeal with the Honorable Supreme Court of Pakistan, which was verbally decided in favor of
the Company on April 20, 2023. However, detailed order was not issued within a period of 3 months from the date of
hearing, resulting in commencement of rehearing proceedings due to which the case is still pending adjudication. The
cumulative tax impact of this issue is approximately Rs 2,263 million.
(ii) The Deputy Commission Inland Revenue (DCIR) initiated proceedings under sections 147/205 alleging that the
Company had not paid advance tax liability to the tune of 90% of the tax liability for tax year 2015 and raised a tax
demand amounting to Rs. 69 million. Being aggrieved, the Company filed an appeal before Commission Inland
Revenue (Appeals) [CIR(A)], who vide order dated May 26, 2023, remanded back the issue to the DCIR on the grounds
that there are computational errors in the above order that need to be corrected. Being further aggrieved, the Company
filed an appeal before the Appellate Tribunal Inland Revenue which is pending adjudication.
(iii) The Additional Commissioner Inland Revenue amended the assessment for the tax year 2016 vide order dated October
13, 2017 and created a demand of Rs 1,162 million by disallowing certain expenses, which was later reduced to Rs
1,077 million through rectification order. The Company filed an appeal before Commission Inland Revenue (Appeals)
[CIR(A)], who vide order dated January 04, 2018 reduced the demand to Rs 779 million.
Being aggrieved, both the Department and the Company filed appeals before the Appellate Tribunal Inland Revenue
(ATIR). The ATIR proceeded to uphold the order passed by the learned CIR(A). Being aggrieved both the Department
and the Company filed appeals before the Honorable Lahore High Court (LHC). The LHC remanded the case back
to ATIR for fresh proceedings vide order dated February 13, 2019. The ATIR partially decided the case in favour of
the Company vide order dated December 16, 2020 and remanded back the remaining matters amounting to Rs. 277
million for fresh adjudication. Being aggrieved, the Company filed appeal in LHC against the said order of ATIR which
is pending adjudication.
(iv) The Deputy Commissioner Inland Revenue (DCIR) amended the assessment for the tax year 2017 vide order dated
June 23, 2023 and created a demand of Rs 322 million by disallowing certain expenses. Being aggrieved, the Company
filed an appeal before Commissioner Inland Revenue (Appeals) [CIR(A)], which is pending adjudication.
96
(v) The Additional Commissioner Inland Revenue amended the assessment for the tax year 2018 vide order dated May
28, 2019 and created a demand of Rs. 277 million by disallowing certain expenses. The Company filed an appeal
before Commissioner Inland Revenue (Appeals) [CIR(A)] against the said order, which was partially decided in favour
of the Company vide order dated July 23, 2019 and matter having a tax impact of Rs. 95 million was decided against
the Company. The Company filed an appeal before Appellate Tribunal Inland Revenue (ATIR) against the said order,
which was decided against the Company vide order dated September 24, 2021. Being aggrieved, the Company has
filed reference before the Honorable Lahore High Court, which is pending adjudication.
(vi) The Additional Commissioner Inland Revenue re-initiated proceedings for the tax year 2018 and created a demand
of Rs 1,121 million by charging tax on true up income on accrual basis instead of receipt basis. The Company filed
an appeal before CIR(A), which was decided against the Company vide order dated May 28, 2020. Consequently,
the Deputy Commissioner Inland Revenue issued recovery notice. Being aggrieved, the Company filed appeal before
ATIR, which was decided in favour of the Company vide order dated April 28, 2022. Being aggrieved, the Department
has filed an appeal before the LHC.
(vii) The Additional Commissioner Inland Revenue amended the assessment of tax year 2019 vide order dated March 05,
2020 and created a demand of Rs 2,203 million on account of chargeability of tax on true-up income, LP income from
CPPA-G and inadmissibility of few deductions and tax credit under section 65B. The Company filed an appeal before
CIR(A),which was partially decided in favour of the Company vide order dated May 28, 2020 and the demand was
reduced to Rs 1,604 million. Being aggrieved, the Company filed an appeal before ATIR which was decided in favour
of the Company vide order dated April 28, 2022 except for an issue amounting to Rs 3 million. Being aggrieved, the
Department has filed a reference against the Company before LHC, which is pending adjudication.
(viii) The Additional Commissioner Inland Revenue amended the assessment of tax year 2020 vide order dated February
01, 2021 creating a demand of Rs 6,121 million on account of chargeability of tax on true-up income, late payment
(LP) income from CPPA-G and inadmissibility of few deductions by disallowing certain expenses. The Company filed
an appeal before CIR(A) which was partly decided in its favour vide order dated September 01, 2021. Being aggrieved,
the Company filed appeal before ATIR that was decided entirely in its favour vide order dated April 28, 2022. Being
aggrieved, the Department has filed an appeal before LHC, which is pending adjudication.
(ix) The Additional Commissioner Inland Revenue (ACIR) amended the assessment of tax year 2021 vide order dated
February 26, 2022 and created a demand of Rs 6,788 million on account of chargeability of tax on True up income
and late payment income from CPPA-G and inadmissibility of few deductions. Being aggrieved, the Company has
filed appeal before CIR(A). The CIR(A) decided certain matters in favour of the Company except for remaining matters,
which were remanded back to ACIR for fresh consideration, vide order dated December 29, 2022.
The Management and the taxation expert of the Company believe that there are meritorious grounds available to
defend the foregoing demand. Consequently, no provision has been recorded in these financial statements.
12.1.2 Sales tax

(i) The Department issued a sales tax order dated April 30, 2014 against the Company for the financial period from June
2008 to June 2013 and created a demand of Rs 10,102 million by apportioning input sales tax between Capacity
Purchase Price (CPP) invoices and Energy Purchase Price (EPP) invoices and allowed input sales tax allocated to EPP
invoices only. The refund claims of the Company during the period falling between the aforementioned period were
also rejected by the Tax Authorities amounting to Rs 415 million. Against the foregoing order, the Company filed an
appeal before CIR(A) which was partially decided against the Company. However, CIR(A) instructed the Department to
rectify the demand by deleting the sales tax liability in respect of tax periods beyond five years, resulting in reduction of
demand to the tune of Rs 1,481 million. Being aggrieved, the Company filed an appeal before ATIR against the CIR(A)
order which was also decided against the Company. The Company filed an appeal before LHC against ATIR decision.
97
NOTES TO THE
The Department also created a demand of Rs 2,933 million for the financial period July 2013 to June 2014 pertaining to
aforementioned issue of apportionment of input tax. The Company filed an appeal before CIR(A) who remanded back
the demand of Rs 2,933 million till adjudication of petition from LHC on inadmissibility of input tax on Capacity invoices.
Being aggrieved, the Department has filed an appeal before ATIR against the order of CIR(A).
The LHC vide its judgment dated October 31, 2016 decided the case in favor of the Company and Company has
received the refund from Federal Board of Revenue (FBR) out of the refunds which were withheld by the Department
due to above mentioned apportionment issue. The Department has filed Civil Petition for Leave to Appeal (CPLA)
in Supreme Court of Pakistan against the decision of LHC, which was accepted, however appeal is pending
adjudication.
(ii) The Deputy Commissioner Inland Revenue (DCIR) issued an assessment order dated August 05, 2020 by rejecting the
credit notes and created a demand of Rs. 1,100 million. The Company filed appeal before CIR(A), which was remanded
back to DCIR vide order dated June 24, 2022 for verification from CPPA-G. The DCIR reinitiated the remand back
proceedings and created a demand of Rs. 30 million vide order dated September 26, 2022. The Company filed an
appeal with the CIR(A) which was decided against the Company. Being aggrieved, the Company filed an appeal with
Appellate Tribunal Inland Revenue (ATIR) and the same was decided in the favor of the Company vide order dated
June 06, 2023.
(iii) For tax year 2004-2009 a show cause notice was issued by the Commissioner in 2015 rejecting KAPCO’s deferred
refund amounting to Rs.61 million. The Company filed an appeal before CIR(A) who vide its order dated January
30, 2020 remanded the case back to Commissioner for fresh verification of all the documents pertaining to refund.
Subsequently, CIR issued an assessment order dated June 25, 2021 wherein all the deferred refund of the Company
was rejected along with imposition of penalty. Being aggrieved, the Company filed an appeal in CIR(A) against the
said order. The CIR(A) annulled the rejection of the sales tax refund and the case has been remanded back to the tax
department for processing of sales tax refund vide order dated June 13, 2022.
(iv) The Company was selected for sales tax audit for the tax year 2017 under section 72B of the Sales Tax Act, 1990.
The Department issued a sales tax order dated August 31, 2020 creating a demand amounting to Rs 2,689 million.
Being aggrieved, the Company filed an appeal before CIR(A), which was decided partially in favor of the Company.
However, the Department has filed an appeal before the Appellate Tribunal Inland Revenue (ATIR), which is pending
adjudication.
(v) The Deputy Commissioner Inland Revenue (DCIR) issued an assessment order dated September 30, 2021 and created
a demand of Rs 15,110 million for tax year 2019 mainly on account of alleged non compliance of section 73 of Sales
Tax Act, 1990. The Company filed appeal before CIR(A) who vide order dated January 28, 2022 annulled the demand
and remanded the case back to DCIR. The DCIR issued order dated March 29, 2022 in remand back proceedings and
created demand of Rs 155 million on inadmissibility of input tax on certain issues. The Company had filed an appeal
before CIR(A), who vide order dated September 29, 2022 reduced the demand to Rs. 1.2 million. Being aggrieved, the
Company and the Department filed an appeal with the ATIR against the said order, which is pending adjudication.
(vi) The Additional Commissioner Punjab Revenue Authority initiated a proceeding u/s 52 of Punjab Sales Tax on
Services Act, 2012 on the basis that Company has not complied with the provisions of Punjab Sales Tax on Services
(Withholding) Rules, 2015 and created a demand of Rs. 1,028 million. Being aggrieved, the Company filed an appeal
with the Commissioner Appeals, Punjab Revenue Authority, which is pending adjudication.
The Management and taxation experts of the Company believe that there are meritorious grounds to defend the
foregoing demands/cases. Consequently, no provision has been recorded in these financial statements.
12.1.3 Others
98
(i) Before introduction of amendments in Finance Act 2006, the Company had not established Workers’ Profit Participation
Fund under the Companies Profit (Workers’ Participation) Act, 1968 (the Act) based on the opinion of the legal advisor
that it did not employ any person who fell under the definition of Worker as defined in the Act.
Further, 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 subjudice 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.
Certain amendments were 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 yet to
be decided by the Federal Government, no such penalty may be imposed and the Company may not be liable to pay
interest.
In view of the foregoing, the Company did not make any provision for Workers’ Profit Participation Fund and interest
thereon in the financial statements up to June 30, 2006.
Subsequent to the amendments in Finance Act 2006, the Company had established the KAPCO Workers’ Profit
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. Accordingly contributions to WPPF were duly made up to the
year ended June 30, 2015.
In 2017, the Honorable Supreme Court of Pakistan decided that amendments in Workers’ Welfare Fund Ordinance,
1971 and Companies Profit (Workers Participation) Act, 1968 cannot be introduced through Finance Act, thereby,
the said amendments made through the Finance Act 2006 are void ab initio. Subsequently, the Commissioner Inland
Revenue (Peshawar) filed review petition in the Honorable Supreme Court of Pakistan against the said decision in case
of another company, which is pending adjudication.
In June 30, 2018, the Government of Punjab issued Companies Profits (Workers’ Participation) (Amendment) Ordinance
2018 and accordingly the Company made contribution to WPPF for the year ended June 30, 2018. During year ended
June 30, 2019, this Ordinance expired and no further enactment was made by the Government of Punjab till October
01, 2021. After enactment of Companies Profits (Workers’ Participation) Amendment Act, 2021 on October 1, 2021
Company has created provision of WPPF for the year ended June 30, 2022 and paid the same to the Fund as well.
During the year ended June 30, 2022, the Company received a notice from the Ministry of Overseas Pakistanis and
Human Resource Development, Workers Welfare Fund (the Ministry) to deposit the left-over amount of WPPF from
2016 onward to WWF. The Company rejected the stance of Ministry through its response and the issue remains
undecided. In case the liability materializes, the cumulative principal amount of WPPF for the year ended June 30,
2016 upto the year ended June 30, 2021 would amount to Rs 5,362 million (2022: Rs 5,362 million). 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 CPPA-G as a pass-through item under the provisions of PPA.
(ii) During the year ended June 30, 2022, NEPRA issued a letter to the Company seeking explanation in respect of the
extension of its PPA for a period of 485 days in lieu of settlement of the liquidated damages dispute between the
Company and the Power Purchaser by invoking the terms of the PPA under Other Force Majeure Events (OFME). The
Company submitted the explanation to NEPRA that extension of the PPA was within the terms of the PPA and there was
no violation of NEPRA regulations.
99
NOTES TO THE
During the year ended June 30, 2023, NEPRA issued a show cause notice dated July 21, 2022, to the Company
alleging prima facie violation of Regulation 6(2) of NEPRA Interim Power Procurement (Procedures and Standards)
Regulations, 2005 in respect of the extension of the Company’s PPA for 485 days. Being aggrieved, the Company
has filed an appeal, against the show cause notice before the NEPRA Appellate Tribunal in accordance with NEPRA
Regulations. The Company also simultaneously filed stay with the Honorable Lahore High Court against the said
notice, which was granted. The NEPRA Appellate tribunal remanded the case back to NEPRA vide order dated April 13,
2023, which is pending hearing.
The Management and the legal advisor of the Company believe that there are meritorious grounds available to defend
the notice issued by NEPRA.
(iii) Sui Northern Gas Pipelines Limited (SNGPL) has raised claims of late payment surcharge amounting to Rs 823 million
(2022: Rs 768 million). The legal advisor is of the view that these claims are not as per the underlying agreements,
therefore such claims have been disputed.
the foregoing claims. Consequently, no provision has been recorded in these financial statements.
(iv) The Company had provided bank guarantees in favour of Sui Northern Gas Pipelines Limited (SNGPL) on account of
payment of dues against gas sales etc., amounting to Rs 2,500 million in prior years, which was due to expire on June
09, 2023. During the year ended June 30, 2023, SNGPL issued encashment notice for the bank guarantee on June 07,
2023 for recovery of outstanding late payment surcharge balances. Subsequently, the Company obtained stay order
from the Honorable Civil Court against the said encashment notice based on the premise that late payment surcharge
is disputed and is not covered in the said bank guarantee.
the foregoing case. Consequently, no provision has been recorded in these financial statements.
12.2 Commitments
(i) Contracts for capital expenditure are Rs 4 million (2022: Rs 11 million).
(ii) Letters of credit other than for capital expenditure Rs 29 million (2022: Rs 233 million).
(iii) Contracts for car ijara are Rs 69 million (2022: Rs 133 million).
2023 2022

Not later than one year 17,997 28,702
Later than one year and not later than five years 50,954 104,603
Later than five years – –
68,951 133,305
100
13 Property, plant and equipment
Freehold Buildings on Plant and Gas Auxiliary Office Fixtures Vehicles Total
land freehold machinery turbine plant and equipment and
land blading machinery fittings
Net carrying value basis

Year ended June 30, 2023
Opening net book value (NBV) 100,773 12,402 1,984,542 44,140 22,587 23,725 21 49,169 2,237,359
Additions (at cost) – – – 9,548 3,046 282 – 12,876
Transfers from leased assets at NBV – – – – – – – 2,198 2,198
Disposals / adjustments (at NBV) – – – – – – – (1,956) (1,956)
Depreciation charge – (12,402) (208,863) (53,688) (5,975) (24,007) (21) (14,277) (319,233)
Closing net book value (NBV) 100,773 – 1,775,679 – 19,658 – – 35,134 1,931,244
Gross carrying value basis
As at June 30, 2023
Cost 100,773 894,051 35,513,576 9,095,423 427,321 171,345 17,830 181,911 46,402,230
Accumulated depreciation – (894,051) (33,737,897) (9,095,423) (407,663) (171,345) (17,830) (146,777) (44,470,986)
Net book value (NBV) 100,773 – 1,775,679 – 19,658 – – 35,134 1,931,244
Depreciation rate % per annum – 4 - 85.71 4 - 26.33 10-100 20-100 20-100 20-42.86 25-92.31
Year ended June 30, 2022
Opening net book value (NBV) 100,773 48,854 2,611,320 248,366 31,857 5,754 78 21,223 3,068,225
Additions (at cost) – 665 – – 1,699 31,345 – 57,999 91,708
Transfers from leased assets at NBV – – – – – – – 3,761 3,761
Disposals / adjustments (at NBV) – – – – (253) (164) – (1,692) (2,109)
Depreciation charge – (37,117) (626,778) (204,226) (10,716) (13,210) (57) (32,122) (924,226)
Closing net book value (NBV) 100,773 12,402 1,984,542 44,140 22,587 23,725 21 49,169 2,237,359
As at June 30, 2022
Cost 100,773 894,051 35,513,576 9,085,875 424,274 173,413 17,830 180,696 46,390,488
Accumulated depreciation – (881,649) (33,529,034) (9,041,735) (401,687) (149,688) (17,809) (131,527) (44,153,129)
Net book value (NBV) 100,773 12,402 1,984,542 44,140 22,587 23,725 21 49,169 2,237,359
Depreciation rate % per annum – 4 - 85.71 4 - 26.33 10-46.15 20-100 20-100 20-42.86 25-92.31
The cost of fully depreciated assets which are still in use as at June 30, 2023 is Rs 46,301 million (2022: Rs 7,702
million).
2023 2022
13.1 The depreciation charge for the year has been

allocated as follows:
Cost of sales 25 292,534 854,929
Administration expenses 26 26,699 69,297
319,233 924,226
101
NOTES TO THE
13.2 Disposal of property, plant and equipment of book value exceeding Rs 500,000
2023
Accumulated Sale Gain /

Particulars of assets Sold to Cost depreciation Book value proceeds (Loss) Mode of disposal

Nil
2022
Accumulated Sale Gain /

Particulars of assets Sold to Cost depreciation Book value proceeds (Loss) Mode of disposal
Employee
Honda Civic Prosmatec Mr. Ahmad Javed 2,679 (2,143) 536 536 – Company Policy
2023 2022
(Area in kanals)
13.3 Description Location

Plant site Kot Addu, District Muzaffargarh, Pakistan 3,081 3,081
Corporate office Lahore, Pakistan 2 2
Land (Plot) Islamabad, Pakistan 1 1
2023 2022
13.4 Assets not in possession

of the Company
Description Party
Blades & vanes Siemens AG, Germany – 324,704

Buckets, Nozzles &
Shrouds GE Middle East FZE, Dubai, UAE – 282,719
Transition Pieces &
Combustion Liners Japanese Integrated Turbine Services, UAE – 81,040
– 688,463
13.4.1 These assets were in possession of the third parties for refurbishment purposes.
102
2023 2022
14 Intangible assets - computer software

Year ended June 30
Opening net book value (NBV) 1,720 3,529
Additions (at cost) – 2,126
Amortization charge (1,720) (3,935)
Closing net book value – 1,720

Cost 67,968 67,968
Accumulated amortization (67,968) (66,248)
Net book value – 1,720
Amortization rate % per annum 20 - 100 20 - 100
14.1 Amortization charge for the year has been allocated to cost of sales.
14.2 The cost of intangible assets as on June 30, 2023 include fully amortized assets amounting to Rs 68 million (2022: Rs
59 million).
2023 2022
15 Right of use assets

Year ended June 30
Opening net book value (NBV) 2,220 7,455
Additions (at cost) – –
Transfers / disposals (at NBV) (2,198) (3,761)
Depreciation charge (22) (1,474)
Closing net book value – 2,220

Cost – 10,992
Accumulated depreciation – (8,772)
Net book value – 2,220
Depreciation rate % per annum 25 25
15.1 Depreciation charge for the year has been allocated to administrative expenses.

15.2 The lease contracts of the Company are related to motor vehicles which have been fulfilled during the year.

15.3 The cost of fully depreciated assets which are still in use as at June 30, 2023 is Nil (2022: Rs 9 million).
103
NOTES TO THE
2023 2022
16
Long term loans and deposits
Loans to employees - considered good 16.1 – 759
Security deposits 9,818 26,894
9,818 27,653
Less: Receivable within one year (467) (6,525)
9,351 21,128
16.1 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. The Company has recovered all the
loans given to employees and has not given any loans after the date of expiry of PPA i.e. October 24, 2022. These loans
carried an interest of 9 percent per annum (2022: 9 percent per annum).
2023 2022
17 Staff retirement benefits - Pension

Pension asset 17.1 1,011,912 721,960
17.1
Pension
The amounts recognised in the balance
sheet are as follows:
Fair value of plan assets 3,708,537 3,767,734
Present value of defined benefit obligation (2,696,625) (3,045,774)
Net Assets at June 30 1,011,912 721,960

The movement in the net assets is as follows:
Asset as at July 1 721,960 435,286
Income / (charge) to statement of profit or loss 43,714 (23,548)
Contribution paid by the Company – –
Remeasurement gain recognised in other comprehensive income 246,238 310,222
Assets at June 30 1,011,912 721,960
The movement in the present value of defined benefit

obligation is as follows:
Present value of defined benefit obligation as at July 1 3,045,774 3,411,589
Current service cost 46,176 65,051
Interest cost for the year 381,481 336,281
Benefits paid during the year (500,265) (186,323)
Gain due to change in financial assumptions (321,449) (785,043)
Loss / (gain) due to change in experience adjustments 44,908 204,219
Present value of defined benefit obligation as at June 30 2,696,625 3,045,774
The movement in fair value of plan assets is as follows:

Fair value as at July 1 3,767,734 3,846,875
Expected return on plan assets 471,371 377,784
Contribution paid by the Company – –
Benefits paid during the year (500,265) (186,323)
Remeasurement losses on plan assets (30,303) (270,602)
Fair value as at June 30 3,708,537 3,767,734
104
2023 2022
Plan assets are comprised of following:

Mutual funds 40% 40%
Interest bearing instruments 59% 58%
Other 1% 2%
100% 100%
The present value of defined benefit obligation, the fair value of plan assets and the surplus or deficit of pension fund is
as follows:
2023 2022 2021 2020 2019

As at June 30
Fair value of plan assets 3,708,537 3,767,734 3,846,875 2,974,569 2,823,878
Present value of defined
benefit obligations (2,696,625) (3,045,774) (3,411,589) (3,376,888) (2,475,094)
Surplus / (Deficit) 1,011,912 721,960 435,286 (402,319) 348,784
on obligation - loss / (gain) 44,908 204,219 (130,178) 13,332 20,798
on plan assets - (loss) / gain (30,303) (270,602) 293,633 (46,788) (173,364)
2023 2022
Year end sensitivity analysis on present value of

defined benefit obligation:
Discount rate + 0.50% 2,613,102 2,941,503
Discount rate - 0.50% 2,785,572 3,157,657
Increase in salary level + 0.50% 2,705,575 3,058,653
Increase in salary level - 0.50% 2,687,863 3,033,180
Increase in pension + 0.50% 2,760,334 3,120,952
Increase in pension - 0.50% 2,636,650 2,975,439
Maturity profile of the defined benefit obligation
1. Weighted average duration of the benefit (Years) 6.19 6.85
2. Distribution of timing of benefit payments (time in years)
1 246,995 390,213
2 369,519 301,502
3 357,167 354,613
4 401,919 338,062
5 369,742 369,700
6 to 10 2,311,624 2,193,759
17.2 Funding
The pension plan is fully funded by the Company. The funding requirements are based on the pension fund’s actuarial
measurement framework set out in the funding policies of the plan. The funding is based on a separate actuarial
valuation for funding purposes for which the assumptions may differ from the assumptions used in determining defined
benefit liability. Employees are not required to contribute to the plan.
105
NOTES TO THE
17.3 Expected future Contributions

Expected future contributions for the year ending June 30, 2023 is Nil since the Company has already contributed
more than required funds.
17.4 The sensitivity analysis is prepared using same computation model and assumptions as used to determine defined
benefit obligation based on Projected Credit Unit Method.
17.5 Risk Exposure

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are
detailed below:
Interest rate risk - The present value of the defined benefit plan is calculated using a discount rate determined by
reference to the market yields at the end of the reporting period on high quality corporate bonds, or where there is no
deep market in such bonds, by reference to market yields on government bonds. Currencies and terms of bond yields
used must be consistent with the currency and estimated term of the post-employment benefit obligations being
discounted. A decrease in bond interest rates will increase the liability, and vice versa.
Salary rate risk - The present value of the defined benefit plan is calculated by reference to the future salaries of plan
participants. As such, an increase in the salary of the plan participants will increase the liability and vice versa.
Pension rate risk - The present value of the defined benefit plan is calculated after taking into account the future pension
growth of plan participants. As such, an increase in the pension growth rate of the plan participants will increase the
liability and vice versa.
Withdrawal rate risk - The present value of the defined benefit plan is calculated by reference to the best estimate of the
withdrawal rate / attrition rate of plan participants. As such, an increase in the withdrawal rate may increase/decrease
the liability and vice versa depending on the age-service distribution of the exiting employees.
Mortality rate risk - The present value of the defined benefit plan is calculated by reference to the best estimate of
the mortality of plan participants during employment. An improvement in the mortality rates of the participants may
increase the liability.
2023 2022
17.6 Defined benefit obligation recognised during the year

Income / (expense) recognised in statement of profit or loss 43,714 (23,548)
Gain recognised in other comprehensive income 246,238 310,222
18
Stores and spares
Stores and spares 18.2 5,679,695 5,532,144
Provision for store obsolescence 18.3 (1,752,220) (1,834,087)
3,927,475 3,698,057
18.1 Stores and spares include items which may result in fixed capital expenditure but are not distinguishable.
18.2 Stores and spares include items in transit amounting to Rs 5.6 million (2022: Rs 212 million) and items valuing Nil (2022:
Rs 82 million) which are being held by the following suppliers for inspection / refurbishment purposes.
106
2023 2022
Osborne Engineering LLC – 1,613

MJB International – 57,290
GE Middle East FZE – 22,970
– 81,873
18.3 Provision for store obsolescence

Opening balance as at July 1 1,834,087 1,838,044
Add: Provision for the year – –
Less: Stores written off against provision (81,867) (3,957)
Closing balance as at June 30 1,752,220 1,834,087
19
Stock-in-trade
Furnace oil 10,865,909 5,518,434
Diesel 647,364 672,174
Coal 52,198 45,348
11,565,471 6,235,956
20
Trade debts
Trade debts 20.1 27,071,127 62,504,238
Provision for doubtful debts 20.2 (459,742) (349,756)
26,611,385 62,154,482
20.1 These are considered good except Rs 460 million (2022: Rs 350 million) which are considered doubtful. Trade debts
include an overdue amount of Rs 22,418 million (2022: Rs 47,465 million) receivable from CPPA-G, which is a related
party of the Company. The maximum aggregate amount outstanding during the period was Rs 62,504 million (2022: Rs
116,885 million). The trade debts are Pakistani rupee denominated and 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 late payment surcharge of SBP discount rate plus 4 percent per annum is charged in case the amounts are not paid
within due dates (25~30 days from invoice date) as prescribed in the PPA i.e. default by CPPA-G in timely payment,
except for weekly RLNG fuel invoices, due in 03 days, which are subject to markup of 1 month Kibor plus 2 percent per
annum for first 30 days, after which markup will be SBP discount rate plus 4 percent per annum.
Aging analysis of trade debts is given in note 40.1(b). Due to delays in settlement by the Power Purchaser, the Company
has financed the trade debts via short term financing arrangements (Note 10), trade creditors (Note 11) and from own
sources.
2023 2022
20.2 Provision for doubtful debts

Opening balance as at July 1 349,756 298,462
Provision for the year 117,263 386,414
Trade debts written off (7,277) (335,120)
Closing balance as at June 30 459,742 349,756
107
NOTES TO THE
21 Investments at fair value

2023 2022
Cost Carrying Value Cost Carrying Value
Fair value through profit or loss -

Government Securities
Pakistan Investment Bond 23,831,000 22,837,248 26,831,000 26,680,747
GoP Ijarah Sukuk 27,417,400 27,264,290 27,417,400 27,386,564
21.1 51,248,400 50,101,538 54,248,400 54,067,311
Particulars of debt securities are as follows:
Maturity Effective Yield 2023 2022

Pakistan Investment Bond 18-Jun-30 22.667% 22,837,248 26,680,747

GoP Ijarah Sukuk 9-Dec-25 21.843% 7,746,875 7,745,323
GoP Ijarah Sukuk 29-Oct-26 21.845% 19,517,415 19,641,241
50,101,538 54,067,311
21.1 These instruments pertain to the amounts received against settlement in lieu of the Third Amendment to the PPA.
2023 2022
21.2 Movement in investments

Opening fair value as at 1 July 54,067,311 25,670,360
Purchases during the year – 38,747,700
Disposal of investments (2,933,721) (10,090,779)
Fair value loss during the year (1,032,052) (259,970)
Closing fair value as at June 30 50,101,538 54,067,311
22 Loans, advances, deposits, prepayments and

other receivables
Advances to suppliers - considered good 22.1 27,272 2,410,330
Sales tax claims recoverable from Government 3,311,508 1,915,372
Prepayments 46,237 8,613
Profit from investments 1,003,971 702,097
Claims recoverable from CPPA-G as pass through items:
Workers’ Welfare Fund 22.2 79,942 772,949
Workers’ Profit Participation Fund 22.2 199,854 776,181
Receivable from Workers’ Profit Participation Fund Trust – 3,819
Security deposits 22.3 1,890 7,212
Differential receivable from CPPA-G 11.5 72,232 –
Loans to employees - considered good – 759
Other receivables 9,077 5,656
4,751,983 6,602,988
22.1 Advances to suppliers include amounts due for more than a year from WAPDA, an associated undertaking, amounting
to Rs 1 million (2022: Rs 1 million). These are in the normal course of business and are interest free.
108
22.2 Under section 14.2(a) of Part III of Schedule 6 to Power Purchase Agreement (PPA) with the Power Purchaser, payments
to Workers’ Welfare Fund and Workers’ Profit Participation Fund during PPA were recoverable from the Power Purchaser
as pass through items till the expiry of PPA.
22.3 All the security deposits are non-interest bearing.
2023 2022
23Cash and bank balances

At banks on:
- Current accounts 985,258 194,621
- Savings accounts
- Under interest / mark up arrangements 934,340 823,335
- Under arrangements permissible under Shariah – 56
23.1 934,340 823,391
1,919,598 1,018,012
In hand
- Cash 183 170
1,919,781 1,018,182
23.1 Included in these are total restricted funds of Rs. 5 million (2022: Rs 15 million) held by banks under lien as margin against
letters of credit. The balances in savings accounts are placed under markup arrangements and bear mark up ranging
from 12.25 percent to 19.50 percent (2022: 5.50 percent to 12.25 percent) per annum.
2023 2022
24Sales
Energy purchase price 24.1 24,236,353 143,586,615
Sales tax (3,485,712) (20,628,251)
Net energy purchase price 20,750,641 122,958,364
Capacity purchase price for the year under PPA - net 9.1 4,684,671 13,641,260
24.2 25,435,312 136,599,624
24.1 Included in revenue is an Energy Purchase Price invoice relating to generation during country-wide black out on
January 23, 2023 amounting to Rs. 128 million (2022: Nil) based on the terms of the expired PPA as agreed with the
Power Purchaser. The System Operator / Power Purchaser and GoP requested the Company to provide emergency
generation for the system restoration from blackout. The Board of Directors of the Company approved the support of
System Operator in the larger interest of the Country for the restoration of the national grid by necessary operations
through its black-start facility.
24.2 Sales recorded represent contracts with customers only. Furthermore, the Company’s net revenue disaggregated by
pattern of revenue recognition is as follows:
2023 2022
Revenue recognised at a point in time - Energy Purchase Price 20,750,641 122,958,364

Revenue recognised over time - Capacity Purchase Price 4,684,671 13,641,260
25,435,312 136,599,624
109
NOTES TO THE
2023 2022
25Cost of sales
Fuel cost 22,572,213 124,434,488
Salaries, wages and benefits 25.1 1,922,551 2,222,278
Depreciation on property, plant and equipment 13.1 292,534 854,929
Plant maintenance 211,482 284,313
Gas turbines overhauls 280,119 116,076
Repair and renewals 94,875 151,500
Plant insurance 25.2 628,665 –
Amortization on intangible assets 14.1 1,720 3,935
25.3 26,004,159 128,067,519
25.1 Salaries, wages and benefits

Salaries, wages and benefits include following in
respect of retirement benefits;
Pension
Current service cost 46,176 65,051
Net interest (income) / cost for the year (89,890) (41,503)
(43,714) 23,548
Medical
Current service cost (7,070) 4,113
Net interest cost for the year 38,634 21,341
31,564 25,454
Free electricity
Current service cost (19,058) 10,537
Net interest cost for the year 95,589 54,720
76,531 65,257

(Reversal) / provision for leave encashment (2,914) 18,093
Provision for lump sum payment 3,167 14,452
253 32,545
In addition to above, salaries, wages and benefits also include Rs. 52 million (2022: Rs. 50 million) in respect of provident
fund contribution by the Company.
25.2 The Plant insurance was a pass-through item till expiry of the PPA. Thereafter, the Company has recorded an expense
in respect of the same.
25.3 Cost of sales include Rs 146 million (2022: Rs 531 million) for stores and spares consumed.
110
2023 2022
26
Administrative expenses
Motor vehicles running 108,943 69,603
Legal and professional charges 111,802 71,560
Repairs and maintenance 73,438 80,535
Travelling 61,779 14,553
LDs arbitration cost – 32,387
Provision for doubtful debts 117,263 386,414
Bad debts written off 97,542 –
Colony running cost 53,782 45,600
Depreciation on property, plant and equipment 13.1 26,699 69,297
Depreciation on right of use assets 15.1 22 1,474
Computer charges 33,080 26,982
Printing, stationery and periodicals 13,159 11,400
Regulatory fee 36,404 17,734
Education fee for employees’ children 28,494 26,529
Training expenses 1,421 7,987
Postage, telephone and telex 9,065 10,098
Rent, rates and taxes 2,524 2,641
Auditors’ remuneration 26.1 12,165 7,677
Advance written off – 21,318
Donations 26.2 209 7,401
Other expenses 54,788 65,511
842,579 976,701
26.1
Auditors’ remuneration
The charges for auditors’ remuneration
include the following:
Statutory audit 5,402 4,481
Half yearly review 1,995 1,651
Workers’ Profit Participation Fund audit, Employees Provident
and Pension Fund audit, special reports and certificates 3,957 1,133
Out of pocket expenses 811 412
12,165 7,677
26.2 During the year ended June 30, 2022, an amount of Rs. 5 million was donated to Akhuwat Foundation, however, no
such amount was donated during the year. None of the directors and their spouses had any interest in any of the
donees during the year.
2023 2022
27
Other operating expenses
Fair value loss on investments at fair value 1,032,052 259,970
Loss on disposal of property, plant and equipment – 184
Workers’ Welfare Fund 27.1 56,444 –
Workers’ Profit Participation Fund 27.1 141,111 –
Project cost 17,845 –
Exchange loss 112,841 17,297
1,360,293 277,451
111
NOTES TO THE
27.1 The Workers’ Welfare Fund (WWF) and the Workers’ Profit Participation Fund (WPPF) were pass-through items till
expiry of the PPA. Thereafter, the Company has recorded an expense in respect of these items.
2023 2022
28
Other income
Income from financial assets
Income on bank deposits 117,181 40,128
Interest on loans to employees 14 116
Interest on PIBs and Sukuks 8,460,080 4,115,247
True-up income 28.1 45,476 747,369
Interest on late payment - CPPA-G 7,153,789 7,669,077
15,776,540 12,571,937
Income from non-financial assets
Colony electricity 14,287 10,854
Unclaimed balances written back 6,213 –
Profit on disposal of property, plant and equipment 518 –
Scrap sales 13,250 9,686
House rent recovery 11,781 12,285
Others 21,336 14,006
67,385 46,831
15,843,925 12,618,768
28.1 It represents True-up income resulting from change in US Dollar - Pak Rupee exchange rate exceeding the threshold
defined in PPA, compared to the rates used for indexation calculation of relevant CPP invoices, under section 13.4 (iv)
of Part II of Schedule 6 to PPA.
2023 2022
29
Finance cost
Interest and mark up including commitment charges on
- finances under markup arrangements - secured 5,621,177 3,601,471
- credit supplies of raw material 523,000 711,684
- car ijara 79,959 34,104
- lease liabilities 16,029 10,909
Bank and other charges 12,733 14,939
6,252,898 4,373,107
30
Taxation
Current tax
- Current year 1,421,184 13,237,723
- Prior year 79,120 296
1,500,304 13,238,019
Deferred tax 1,360,247 (7,608,025)
2,860,551 5,629,994
112
2023 2022
% age % age
30.1
Tax charge reconciliation
Numerical reconciliation between the applicable tax rate
and the average effective tax rate
Tax at applicable rate 29.00 29.00
Super tax 10.00 4.00
Impact of prior period tax adjustments 1.16 –
Tax rate change 1.81 7.36
Impact of Final Tax Regime – (4.07)
Others (0.02) (0.02)
Average effective tax rate 41.95 36.27
30.1.1 It represents tax expense pertaining to super tax, which has been levied at the rate of 10% (2022: 4%) on all companies
having taxable income of Rs 500 million (2022: Rs 300 million) or above through amendments introduced in the
Income Tax Ordinance, 2001 vide Finance Act 2023.
2023 2022
30.2
Tax recognised directly in other comprehensive income
Defined benefit obligation 83,729 42,182
83,729 42,182
31 Remuneration of Chief Executive, Directors and Executives

31.1 The aggregate amount charged in the financial statements for the year in respect of remuneration including certain
benefits to the chief executive and executives of the Company is as follows:
Chief Executive Executives

Note 2023 2022 2023 2022
Managerial remuneration 68,681 61,875 449,332 403,523

Bonus 34,341 30,938 114,834 101,397
Reimbursable expenses 4,718 3,840 61,063 37,007
Contribution to provident and
pension funds and other
retirement benefit plans 6,868 6,187 31,038 33,928
Leave passage 6,868 5,156 24,860 23,483
Other perquisites 31.1.1 5,639 4,208 25,152 30,477
127,115 112,204 706,279 629,815
Number of persons 1 1 69 64
113
NOTES TO THE
31.1.1 This includes Company transport, education of children, club charges, house loan subsidy, security and utilities
provided to the employees as per Company policy.
31.2 Remuneration to other directors

Aggregate amount charged in the financial statements for fee to 7 directors (2022: 7 directors) is Rs 45 million (2022: Rs
39 million) and Rs 3 million (2022: Rs 5 million) against club memberships.
A Company maintained vehicle is provided to the Chairman of the Board of Directors.
No other perquisite is provided to the directors.
32 Transactions with related parties

The related parties comprise associated undertakings, key management personnel, directors 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, including directors, is disclosed in note 31. Other significant transactions with related parties
are as follows:
Relationship with Percentage of Nature of 2023 2022

the Company shareholding transaction (Rupees in thousand)
i. Associated undertakings
CPPA-G 0% Sale of electricity 25,435,312 136,599,624

CPPA-G 0% Purchase of electricity 453,423 188,276
CPPA-G 0% Interest income on late payment 7,153,789 7,669,077
CPPA-G 0% True-up income 45,476 747,369
CPPA-G 0% Provision for doubtful debts 117,263 386,414
CPPA-G 0% Debts written off 104,819 335,120
WAPDA 40% Purchase of services 1,900 725
WAPDA 40% Dividend paid 2,657,333 4,428,889
KAPCO Employees
Empowerment Trust 5% Dividend paid 361,893 603,155
Central Depositary
Company* 0% Purchase of services – 3,245
ii. Post retirement benefit plans
KAPCO Employees
Provident Fund Trust 0% Contributions paid 55,631 50,611
Sale and purchase transactions with related parties are carried out on mutually agreed terms.
*Central Depositary Company is no longer a related party, hence the value of transaction during the year is not
disclosed.
114
32.1 Following are the associated undertakings / companies and post retirement benefits plans along with basis of their
relationship with the Company with whom the Company had entered into transactions during the current year;
Name of related parties Direct shareholding Relationship
WAPDA 40% Associated undertaking

KAPCO Employees Empowerment Trust 5% Common management
CPPA-G N/A Associated undertaking
Post retirement benefit plans:
- KAPCO Employees’ provident fund trust N/A Post employment benefits plan
33 Non-adjusting events after the reporting date

33.1 The Board of Directors of the Company have proposed a final dividend for the year ended June 30, 2023 of Rs 5.00
(2022: Rs 4.00) per share amounting to Rs 4,401 million (2022: Rs 3,521 million) at their meeting held on September
06, 2023 for approval of members at the Annual General Meeting to be held on October 24, 2023. These financial
statements do not reflect this dividend payable.
33.2 There are no other significant events that have occurred subsequent to the reporting date, other than those mentioned
elsewhere in these financial statements.
2023 2022
MWh MWh
34Capacity and production

Annual dependable capacity [based on 8,760 hours
(2022: 8,760 hours)] 11,756,064 11,756,064
Actual energy delivered 587,845 4,979,779
Capacity for the power plant taking into account all the planned scheduled outages is 11,736,511 MWh (2022:
10,954,161 MWh). Actual energy delivered by the plant is dependent on the load demanded by CPPA-G and the plant
availability. Furthermore, the PPA of the Company expired during the year due to which there is a significant shortfall in
generation.
35 Rates of exchange
Liabilities in foreign currencies as on June 30, 2023 have been translated into Rupees at USD 0.3483 (2022: USD
0.4854), EURO 0.3182 (2022: EURO 0.4635) and GBP 0.2737 (2022: GBP 0.4001) equal to Rs 100.
115
NOTES TO THE
2023 2022
36Cash generated from operations

Profit before tax 6,819,308 15,523,614
Adjustments for:
- Depreciation on property, plant and equipment 25 & 26 319,233 924,226
- Amortization on intangible assets 25 1,720 3,935
- Depreciation on right of use assets 26 22 1,474
- (Gain) / loss on disposal of property, plant
and equipment 27 & 28 (518) 184
- Interest income on investments at fair value 28 (8,460,080) (4,115,247)
- Income on bank deposits 28 (117,181) (40,128)
- Bad debts written off 26 97,542 –
- Exchange loss 27 112,841 17,297
- Advances written off 26 – 21,318
- Provision for doubtful debts 26 117,263 386,414
- Staff retirement benefits accrued 25 64,634 146,804
- Finance cost 29 6,252,898 4,373,107
- Fair value loss on investments at fair value 27 1,032,052 259,970
- Amortisation of contract liability 9 (4,613,061) (14,515,236)
Profit before working capital changes 1,626,673 2,987,732

Effect on cash flow due to working capital changes:
- Increase in stores and spares (229,418) (516,634)
- Increase in stock-in-trade (5,329,515) (314,069)
- Decrease in trade debts 33,597,186 42,081,535
- Decrease in loans, advances, deposits, prepayments
and other receivables 2,152,879 511,391
- (Decrease) / increase in trade and other payables (10,165,308) 6,566,674
20,025,824 48,328,897
21,652,497 51,316,629
37
Cash and cash equivalents
Cash and bank balances 23 1,919,781 1,018,182
Finances under mark up arrangements - secured 10 (22,153,719) (37,370,346)
(20,233,938) (36,352,164)
116
38 Reconciliation of liabilities arising from financing activities
July 1, Accruals / Payments June 30,
2022 Dividend declared 2023
Leases 3,434 – (3,434) –
Unclaimed dividend 971,233 6,601,899 (6,517,006) 1,056,126
July 1, Accruals / Payments June 30,

2021 Dividend declared 2022
Leases 10,548 – (7,114) 3,434
Unclaimed dividend 810,833 6,601,899 (6,441,499) 971,233
Unpaid dividend 4,401,266 – (4,401,266) –
39 Earnings per share

39.1 Basic earnings per share
Profit for the year Rupees in thousand 3,958,757 9,893,620
Weighted average number of ordinary shares Numbers 880,253,228 880,253,228
Earnings per share Rupees 4.50 11.24
39.2 Diluted earnings per share

Diluted earnings per share has not been presented as the Company does not have any convertible instruments in issue
as at June 30, 2023 and June 30, 2022 which would have any effect on the basic earnings per share.
40 Financial risk management

40.1 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 minimize 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. 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 is
as follows:
117
NOTES TO THE
2023 2022
Trade and other payables - USD 1,546,364 697,231

Trade and other payables - GBP 81,000 –
Trade and other payables - Euro 408,600 161,575
The following exchange rates were applied during the year:
Average rate Year-end spot rate

2023 2022 2023 2022
(Rupees)
USD 1 250.14 178.73 287.10 206.00

GBP 1 303.06 236.51 365.40 249.92
EUR 1 264.00 200.94 314.27 215.75
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 18 million (2022: Rs 6 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) 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.
At the reporting date, the interest rate profile of the Company’s interest bearing financial instruments is:
2023 2022
Financial assets
Fixed rate instruments
Staff loans – 759
Floating rate instruments

Bank balances - savings accounts 934,340 823,391
Investments at fair value 50,101,538 54,067,311
Trade debts - overdue other than late payment invoices 18,064,680 45,097,285
Financial liabilities
Floating rate instruments
Lease liabilities – 3,434
Finances under mark-up arrangements - secured 22,153,719 37,370,346
22,153,719 37,373,780
118
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 reporting date would not affect profit or loss of the Company.
Cash flow sensitivity analysis for variable rate instruments

If interest rates on late payments, lease liabilities and finances under mark-up 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 206 million (2022: Rs 258 million) higher/lower, mainly as a result of higher/lower interest expense on floating rate
borrowings.
If interest rates on investments and late payments on trade debts, at the year end date, fluctuate by 1% higher / lower
with all other variables held constant, profit after tax would have been Rs 502 million (2022: Rs 587 million) higher /
lower, mainly as a result of higher / lower interest rate expense on floating rate.
(iii) 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.
(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 is as follows:
2023 2022
Long term loans and deposits 9,351 21,128

Trade debts 26,611,385 62,154,482
Investments at fair value 50,101,538 54,067,311
Loans, advances, deposits, prepayments and other receivables
Loans to employees - considered good – 759
Profit from investments 1,003,971 702,097
Claims recoverable from CPPA-G as pass through items:
- Workers’ Welfare Fund 79,942 772,949
- Workers’ Profit Participation Fund 199,854 776,181
Security deposits 1,890 7,212
Other receivables 8,515 9,187
Balances with banks 1,919,598 1,018,012
79,936,044 119,529,318

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,
Workers’ Welfare Fund and Workers’ Profit Participation Fund receivable from CPPA-G is mitigated by guarantee from
the Government of Pakistan under the Facilitation Agreement. Age analysis of trade receivable balances is as follows:
119
NOTES TO THE
2023 2022
Not yet due 4,652,662 15,039,347

Due upto 90 days 1,237,298 45,780,217
Due past 90 to 180 days 541,968 4,415
Due past 181 to 365 days 18,923,414 317,950
Due past 365 days 1,715,785 1,362,309
27,071,127 62,504,238
Provision for doubtful debts (459,742) (349,756)
26,611,385 62,154,482
The credit quality of 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:
Rating Rating 2023 2022

Short term Long term Agency (Rupees in thousand)
Trade Debts
CPPA-G Not Available 26,611,385 62,154,482
Investments at fair value

National Bank of Pakistan A-1+ AAA VIS / PACRA 50,101,538 54,067,311
Cash and bank balances

-National Bank of Pakistan A-1+ AAA VIS / PACRA 26 88
-Habib Bank Limited A-1+ AAA VIS 1,162,918 1,000,106
-MCB Bank Limited A1+ AAA PACRA 17 75
-Habib Metropolitan Bank Limited A1+ AA+ PACRA 4,832 15,179
-Allied Bank Limited A1+ AAA PACRA – 11
-Samba Bank Limited A1 AA PACRA – 1
-Askari Bank Limited A1+ AA+ PACRA 750,038 –
-Meezan Bank Limited A-1+ AAA VIS 13 2,516
-Bank Al Habib A1+ AAA PACRA 7 –
-Standard Chartered Bank
(Pakistan) Limited A1+ AAA PACRA 1,484 –
-United Bank Limited A-1+ AAA VIS 230 3
-BankIslami Pakistan Limited A1 AA- PACRA 33 33
1,919,598 1,018,012
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, 2023, the Company had borrowing limits available from financial
institutions at Rs 38,670 million (2022: Rs 47,575 million) out of this the total unavailed amount is Rs 16,516 million
(2022: Rs 7,644 million) and Rs 1,920 million (2022: Rs 1,018 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.
120
The following are the contractual maturities of financial liabilities as at June 30, 2023:
Carrying Less than One to five More than

amount one year years five years
Finances under mark-up

arrangements - secured 22,153,719 22,153,719 – –
Trade and other payables 9,757,395 9,757,395 – –
Unclaimed dividend 1,056,126 1,056,126 – –
32,967,240 32,967,240 – –
The following are the contractual maturities of financial liabilities as at June 30, 2022:
Carrying Less than One to five More than

amount one year years five years
Lease liabilities 3,434 3,434 – –

Finances under mark-up
arrangements - secured 37,370,346 37,370,346 – –
Trade and other payables 20,697,108 20,697,108 – –
Unclaimed dividend 971,233 971,233 – –
59,042,121 59,042,121 – –
40.2 Fair values of financial assets and liabilities

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at measurement date. Underlying the definition of fair value is the presumption that the
Company is a going concern without any intention or requirement to curtail materially the scale of its operations or to
undertake a transaction on adverse terms. The carrying values of all financial assets and liabilities reflected in these
financial statements approximate their fair values. Fair value is determined on the basis of objective evidence at each
reporting date.
Specific valuation techniques used to value financial instruments include:
– Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
– Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices) (level 2).
– Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The following is categorization of assets which are disclosed at fair value as at June 30, 2023:
Level 1 Level 2 Level 3 Total

Assets:
Investments at fair value 50,101,538 – – 50,101,538
121
NOTES TO THE
The following is categorization of assets which are disclosed at fair value as at June 30, 2022:
Level 1 Level 2 Level 3 Total

Assets:
Investments at fair value 54,067,311 – – 54,067,311
2023 2022
40.3 Financial instruments by categories
40.3.1
Financial instruments at amortized cost include:
Financial assets as per statement of financial position
Long term loans and deposits 9,351 21,128
Trade debts 26,611,385 62,154,482
Loans, advances, deposits, prepayments and
other receivables
- Loans to employees - considered good – 759
- Workers’ Welfare Fund receivable from CPPA-G 79,942 772,949
- Workers’ Profit Participation Fund receivable from CPPA-G 199,854 776,181
- Security deposits 1,890 7,212
- Other receivables 8,515 9,187
Cash and bank balances 1,919,598 1,018,012
28,830,535 64,759,910
Financial liabilities as per statement of financial position

Lease liabilities – 3,434
Finances under mark-up arrangements - secured 22,153,719 37,370,346
Trade and other payables 9,757,395 20,697,108
Unclaimed dividend 1,056,126 971,233
32,967,240 59,042,121
40.3.2 Financial assets at fair value have been shown under note 40.2.
40.4 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.
This ratio is calculated as long term debt divided by total capital. Debt is calculated as total borrowings including
current and non-current portion of long term borrowings, if any. Total capital is calculated as ‘equity’ shown in the
balance sheet plus long term debt. The gearing ratios as at year ended June 30, 2023 and June 30, 2022 are as follows:
122
2023 2022
Total equity 66,083,727 68,595,908

Total debt – –
Total capital 66,083,727 68,595,908
Gearing ratio Percentage 0% 0%
41 Number of employees
Total number of employees at year end and average number of employees during the year are 449 (2022: 523) and
486 (2022: 520) respectively.
42 Corresponding figures
Corresponding figures have been re-arranged, wherever necessary, for the purposes of comparison. However, no
significant reclassifications have been made.
43 Date of authorisation for issue

These financial statements were authorised for issue on September 06, 2023 by the Board of Directors of the Company.

123

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INDEPENDENT AUDITOR’S

KARACHI LAHORE ISLAMABAD

KOT ADDU POWER COMPANY LIMITED 61

Information Other than the Responsibilities of

Board of directors are responsible for overseeing the

62 Annual Report 2023

KOT ADDU POWER COMPANY LIMITED 63

The engagement partner on the audit resulting in this

Based on our audit, we further report that in our opinion:

a) proper books of account have been kept by the

64 Annual Report 2023

EQUITY AND LIABILITIES

Aftab Mahmood Butt M. Rabnawaz Anjum Hafiz Muhammad Yousaf

Aftab Mahmood Butt M. Rabnawaz Anjum Hafiz Muhammad Yousaf

Sales 24 25,435,312 136,599,624

Administrative expenses 26 (842,579) (976,701)

Finance cost 29 (6,252,898) (4,373,107)

Taxation 30 (2,860,551) (5,629,994)

Earnings per share - basic and diluted Rupees 39 4.50 11.24

Aftab Mahmood Butt M. Rabnawaz Anjum Hafiz Muhammad Yousaf

Profit for the year 3,958,757 9,893,620

Items that will not be reclassified subsequently to profit or loss:

Items that may be reclassified subsequently to profit or loss – –

Total comprehensive income for the year

Aftab Mahmood Butt M. Rabnawaz Anjum Hafiz Muhammad Yousaf

Share Capital Revenue Reserve: Total

Balance as at June 30, 2021 8,802,532 444,451 55,976,628 65,223,611

Transactions with owners

Interim dividend for the year ended

Profit for the year – – 3,958,757 3,958,757

Transactions with owners

Interim dividend for the year ended

Aftab Mahmood Butt M. Rabnawaz Anjum Hafiz Muhammad Yousaf

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Aftab Mahmood Butt M. Rabnawaz Anjum Hafiz Muhammad Yousaf

1 Legal status and nature of business

2.2 Impact on Going Concern Assumption due to expiry of PPA

2.4.1 Amendments to IAS 1, ‘Classification of liabilities as current or non-current’

2.4.4 Amendments to IAS 8, ‘Definition of Accounting Estimates’

De-recognition of property, plant and equipment (1,841,706) (2,109,956)

Decrease in un-appropriated profits at the beginning of the year (1,413,506) (2,118,845)

2.6 Basis of measurement

3 Significant accounting judgements, estimates and assumptions

a) Provision for taxation - Note 4.1

4 Significant accounting policies

4.2 Staff retirement benefits

4.3 Property, plant and equipment

4.5 Impairment of non-financial assets

4.6 Capital work-in-progress

4.7.1 Right of use assets

4.7.2 Lessee accounting

To determine the incremental borrowing rate, the Company:

4.7.3 Lessor accounting

4.8 Ijarah contracts

4.9 Stores and spares

4.11 Financial instruments