Islamabad February 27 2024: Engro Corporation booked loss of PKR 30 billion after it carried out an assessment of the recoverable amount of the thermal energy assets, according to the information shared by the company.
On a consolidated basis, Engro Corporation’s revenue grew by 35% to PKR 482 billion in 2023 against PKR 356 billion in 2022. Consolidated PAT before accounting impact due to remeasurement of thermal energy assets stood at PKR 66 billion (PAT attributable to shareholders: PKR 34 billion) compared to PKR 46 billion (PAT attributable to shareholders: PKR 24 billion) in 2022 recording an EPS of PKR 63.01 compared to PKR 42.23 in 2022. Major variance is attributable to higher urea sales, efficient plant operations, higher earnings from dollar-denominated businesses, and efficiencies derived through cost optimization.
‘However, after incorporating the accounting impact due to remeasurement of thermal energy assets, the consolidated PAT stood at PKR 36 billion (PAT attributable to shareholders: PKR 21 billion) with an EPS of PKR 38.60 in 2023. Further details on accounting impact of thermal assets are covered in the next section” states the company.
Engro Corporation announced a final cash dividend of PKR 2/- per share for the year. This is in addition to the PKR 46/- per share dividend announced during the year, bringing the cumulative payout to PKR 48/- per share.
Referring to the various disclosures made at PSX by the Company regarding the ongoing discussions with Liberty Mills Limited along with other parties acting in concert, the Company is now evaluating to execute the proposed divestment of the Company’s thermal energy assets comprising of shareholding in Engro Powergen Qadirpur Limited, Engro Powergen Thar (Pvt.) Limited and Sindh Engro Coal Mining Company Limited held via Engro Energy Limited through a sale of shares process.
SECP vide SRO 986 (I)/2019 dated September 2, 2019, has granted specific exemptions to Independent Power Producers (IPPs) from applicability of IFRS 9, IFRS 16 and IAS 21. As a result of this, debt component recovered from CPPA-G as part of tariff approved by NEPRA is recorded as revenue in the Profit or Loss Statement over the life of the loan. However, the corresponding depreciation expense related to the IPP is recorded over the term of the Power Purchase Agreement (PPA). The term of the loan being shorter than the term of the PPA results in higher Net Assets in the Consolidated Financial Statements of the Group.
In accordance with the requirements of IAS 36, the Company has carried out an assessment of the recoverable amount of the thermal energy assets for the purpose of Standalone and Consolidated Financial Statements.
Due to the specific accounting treatment for IPPs, as mentioned above, the Net Assets of thermal energy assets in the Consolidated Financial Statements of the Group are higher than their recoverable amounts. Accordingly, an accounting impact of PKR 30 billion (Owners’ Share: PKR 13 billion) has been recognized in the Consolidated Financial Statements for the year ended December 31, 2023.
In case of Standalone Financial Statements of the Company for the year ended December 31, 2023, no impact has been recognized as the recoverable amount of thermal energy assets is significantly higher than their carrying amount.
