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Finllncial statements for the year ended 30 June 2013

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GUJRANWALA ELECTRIC POWER COMPANY LIMITED (GEPCO)

Directors' Report to the members

The Directors of your Company take pleasure in presenting the 151h Annual Report along with

the audited financial statements of the company for the year ended June 30, 2013.

Economic Overview

Financial Performance

Abstract of Financial Statements

Abstract of financial results for the year ended June 30, 2013 compared with the previous year is appended below:

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Description FY 2012-13 FY2011-12 -------Profit before depreciation, financial charges and tax

7,847.502 (5,217.425) provision Depreciation (1,122.322) ( 1,000.108) Financial charqes (152.118) (196.900) Taxation {~.843) (24.719) · ProfitJ (Loss) for the year

·- ·-·---·-----G,5G3.21 !J (G,4~~-·_152)

Accumulated losses b/f -(13-.358-:-988) (6,919.836) Accumulated losses elf · ·--·- -· --· ......... . - - ·-·· -- ---··· - ___ (~, 795. 769)_~ __ U],358 . 98~)__

The Company has made a profit after tax of Rs. 6,563.219 million during the financial year ended June 30, 2013 as compared to loss after tax of Rs. (6,439.152) million in previous year.

During the year, the Company has received final invoice on account of cost of electricity delivered to GEPCO for the year 2011-2012. The differential cost of electricity has been treated as per IAS 8. Consequently, payable to Central Power Purchase Agency (CPPA) as at June 30, 2013 has been decreased by RS . 869.84 million with a corresponding decrease in cost of electricity and general sales tax receivable of Rs. 794.30 million and Rs, 75.53 million respectively.

The main reason of Profit for the FY 2012-13 is NEPRA determined notification of tariff w.e.f July 01,_ 2012.

Variance Analysis Determined vs. Actual Rs. in million

Description Actual NEPRA Var~anco .I 2012-13 2012-13 Sales 83,254 88 ,601..._ ___ B~_?-92. i Cost of Electricity (exclud ing adjustment of Rs. 794.3

70,517 75,244 4,727 million) Gross Profit 12,737 13,360 (623) Salaries & other Benefits 6,247 4,100 (2, 147) Repair & Maintenance 642 495 (147) Travelinq Exp 210 174 (36) Vehicle running expenses 222 200 (22) Depreciation 1, 122 1,098 (24) Others 349 486 137 Total 0 & M Exp. ___ · ___ 8,792 61553 (2 2391 Operating Income 3,945 6,807 (2,862) Other Income 1,987 1,960 27 Income before tax & F. char!les 5,932 8,767 (2 835)

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Description for Major Variances

1. Gross Profit Analysis

The decrease in sales and cost of electricity is due to receipt of fewer. units during the FY 2012-13 (6633 MKwh) as compared to NEPRA determination (7090 MKwh). The recovery of net decrease in gross profit will be allowed by NEPRA in the tariff determination FY 2013-14.

2. Salaries & Other Benefits

Provision amounting to Rs. 2, 186 million has been made in accordance with the latest actuarial valuation report as on June 30, 2013. Previously NEPRA did not add the provision in the tariff determination. The Company has submitted the details to NEPRA along with the latest actuarial report as part of the tariff petition FY 2013-14.

3. Repair & Maintenance, Travelling & Vehicle Running Expenses

The increase in Repair & Maintenance is due to the replacement of old transformers and energy meters.

The increase in travelling expenses is due to the iricrease in the rates of TA/DA by the Federal Government whereas the NERPA has allowed the expense in the tariff on year to year basis. Out of additional expense of Rs. 36 million, the amount paid relating to FY 2011-12 was Rs. 33 million.

The increase in the vehicle running expenses is due to the maintenance of old vehicles and the increase in the prices of petroleum products.

Filing of Tariff Petitions

The company has filed tariff petition FY 2013-14 on July 15, 2013 and NEPRA conducted public hearing on September 9, 2013 at Avari Hotel Lahore.

Other Financial Analysis

The position of various components of total revenue is mentioned below:

FY 2012-13 FY 2011-12 Revenue Components

Rs. in Min Ps./kwh Rs. in Min Ps./kwh Sale of power 51,806.636 875.16 53,378.657 864.06 Tariff differential subsidy 31,447.169 531 .23 15, 147.353 245.20 Tariff revenue 83,253.805 1,406.38 68,526.011 1109.26 Rental & service income 36.449 0.62 39.472 0.64 -----· - ------- ·- -- --- -- - -- - - - - ----- ---Amortized deferred credits 540.885 9.14 506.543 8.20 Other income 1,409.153 23.80 1,413.682 22.89 Non-Tariff revenue 1,986.487 33.56 1,959.697 31.73 Total Revenue 85,240.291 1,439.94 70,485.708 1140.99

The tariff differential subsidy worth Rs. 31,44 7.169 million (2012: Rs. 15, 14 7.353 million) mentioned above is the difference between the tariff determined by NEPRA and the tariff notified by GOP.

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: The account of revenues, the comparison of cost components is given as under:-

Cost Components FY 2012-13 FY 2011-12 Rs. in Min Ps./kwh Rs. in Min Ps./kwh

Purchase of power (including adjustment 69,722.923 1,177.81 69,526.788 1125.46 of Rs. 794.3 million) __ .

. ···- --- . - - --· -----· .. ---· ---- - - --- ----Salaries & wages 6,246.621 105.52 5,039.509 81.58 Repair & Maintenance 641.980 10.85 476.259 7.71 Vehicle running expense 221 .865 3.75 174.342 2.82 --·· ------ . ---·-· .. Travelling allowance 209.542 3.54 165.302 2.68 Electricity bill collection charges 204.806 3.46 171.507 2.78 Advertisement 4.116 0.07 10.772 0.17 Insurance grid station 11.451 0.19 11 .316 0.18 Other admin expenses 129.487 2.19 127.338 2.06 Depreciation 1,122.322 18.96 1,000.108 16.19 Financial charges 152.118 2.57 196.900 3. 19 Taxation 9.843 0.17 24.719 0.40 Total Cost 78,677.073 1,329.08 76924.860 1245.22

Thus the resultant profiU (loss) for respective year has emerged as under:

FY 2012-13 FY2011-12 Rs. in Min Ps./kwh Rs. in Min Ps./kwh

Total revenue 85,240.291 1,439.94 70,485.708 1140.99 Total cost 78,677.073 1,329.08 76,924.860 1245.22 Profit (Loss) 6,563.218 110.86 (6,439.152) (104.23)

Fixed Assets

The net fixed asset base of GEPCO has increased from Rs. 24,802.615 million as on June 30, 2012 to Rs. 31,414.722 million as on June 30, 2013, an increase of 26.66% during the year under review.

Operating Results

During the year ended June 30, 2013 your Company sold 5,919.704 Mkwh (2012: 6,177.624 Mkwh) having a decrease of 4.18 %. The comparison of category wise units sold during the year under review compared with that of last year has been appended below:

(In Mkwh)

Consumer Category FY 2012-13 FY 2011-12 Percentage

change

Domestic 3,280.70 3444.37 (4.75)% Commercial 360.77 395.54 (8.79)% Industrial 1,704.11 1741.27 ~2. 1 3~0/o Bulk 121.52 115.87 4.88% Agricultural tube wells 300.82 327.78 (8.23)% Public lighting 5.74 6.43 (10.75)% Residential colonies 0.95 1.08 (12.30)% AJK 145.10 145.28 (0.12)%

Total Consumption 5,919.70 6177.62 (4.18)%

:urchase of power during the year under review was 6632. 738 Mkwh (2012: 6958.264 Mkwh) 1.e. a decrease of 4.68 %. During the year under review, energy losses were 10.75°/., (2012: 11 .22%). i.e. percentage decrease by 0.4 7%

Consumption Behavior

It has been observed that, during the year under review, there has been no major shift in the share of consumption by each category of consumers in the overall sales as compared to the previous year. The table appended below shows the category wise pattern of consumption during the year ended June 30, 2013 as compared to the previous year.

Consumer Category FY 2012-13 FY 2011-12 Domestic 55.42 55.76 Commercial 6.09 6.40 Industrial 28.79 28.19 Bulk 2.05 1.88 ---- - . ---·- --Agricultural tube wells 5.08 5.31 Public lighting 0.10 0.10 -·--- - - - ------ ·----· .. .. . .. -- - ·-·· -· ·-- -----Residential colonies 0.02 0.02 AJK 2.45 2.35 Total ' 100% 100%

Comparison of category wise number of consumers and billing excluding subsidies during the year 2012-13 and 2011-12 is mentioned below:

FY 2012-13 FY 2011-12 Consumer Category Consumers Billing (Rs. Consumers Billing (Rs.

(In Thousand) Million) (In Thousand) Million) Domestic 2341 .69 21,986.35 2258.94 23,804.50 Commercial 294.73 5,278.15 287.25 5,588.87 Industrial 56.84 18,662.84 54.77 18,174.79

Bulk 0.13 2,406.87 0.13 2,478.94 ..

Agricultural tube wells 40.65 2,922.19 37.28 ·---~219.34_ --------Others 0.52 550.24 0.49 112.22

Total 2734.56 51,806.64 2638.86 53,378.66

New Grid Stations Under Loans

Seven (7) new grid stations under loan from Exim Bank of Korea and four (4) new grid stations and conversion of 2 grid stations from 66 KV to 132 KV under ADB loan trench II are under progress. The completion & commissioning of all these grid stations shall be within FY 2013-14. The total amount of loan from Exim Bank of Korea & ADS trench II is Rs. 3,558 million.

Earning Per Share

The earnings per share (EPS) of the company for the year ended June 30, 2013 has been Rs. 6,563,218.82 (2012: Rs. -6,439,152.74) .

Auditors

The existing auditors M/s KPMG Taseer Hadi & Co; Chartered Accountants shall retire on the conclusion of the Annual General Meeting. As suggested by the Finance & Audit Committee,

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The Directors of the Company have recommended their appointment as external auditor of the Company for the financial year ending June 30, 2014 at a fee as per ATR-14.

Future Outlook

The Federal Government has taken steps to enhance the electricity generation by settling the circular debt. The various steps are also under progress to eliminate the causes of circular debt. Also various cheap sources of electricity generation have planned in order to make the electricity tariff competitive. The various steps have been taken to improve the governance in the electricity distribution, as given below:- ·

1. Approval of energy policy by Council of Common Interest. 2. Reconstitution of independent BODs. 3. Campaign to reduce theft of electricity.

The construction of new Grids is expected to be completed by June-2014. With on track implementation of STG program, GEPCO will be able to remove local system bottlenecks. With this, GEPCO will be able to extend more connections to the consumers besides increasing sales which will help in economic uplift of the area under jurisdiction.

Acknowledgement

The Directors wish to praise all the employees of the company for the contribution and dedication for the smooth and successful running of the Company.

Compliance with Best Business Practices/Corporate Governance

The Federal Government has approved the Public Sectors Companies (Corporate Governance) Rules 2013 and the compliance report of these rules shall be submitted in the annual report FY 2013-14. The Company is already in compliance of the best business practices of the corporate governance and auditor report was submitted to the shareholders in the annual report FY 2011-12 on the basis of approval and adoption of the Code of Corporate Governance in the meeting held on June 13, 2011 .

Material Changes

There have been no material changes since June 30, 2012 and the Company has not entered into any commitment, which would affect its financial position at the date except for those mentioned in the audited financial statements of the Company for the year ended June 30, 2013.

Meetings of Board of Directors

The Directors held Nine (9) meeting for the period July 1, 2012 to June 30, 2013 and the attendance by each Director is given below:-

Sr. No. NAME MEETING ATTENDED 1. Mr. Hassan Javed Chairman 8 2. Mr. Mahboob Alam CEO 9 3. Mr. Muhammad Zargham Eshaq Khan Director 0 4. Prof: Dr. Muhammad Nizamuddin Director 2 5. Mirza Muhammad lmtiaz Ahmad 9 6. Mr. Maqsood Ahmed Butt Director 5 7. Mr. Mirza Arshad Mehmood Director 7 8. Mr. Ashfaq Ahmad Mughal Director 9 9. Mr. Muhammad Ashraf Khan Director 9 10. Khawaja Amer Hassan 4 11. Mr. Farid Malik Director 3

The Federal Government has reconstituted the Board of Directors and two (2) number of meetings of the new BOD were held till date.

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Corporate and Financial Reporting Framework

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The financial statements together with the notes thereon have been drawn up by the management in conformity with the Companies Ordinance, 1984. These financial statements present fairly the Company's state of affairs, the result of its operations, cash flow and changes in equity.

Proper books of account have been maintained·by the Company .

Appropriate accounting policies have been consistently applied in the preparation of financial statements and accounting estimates are based on reasonable and prudent judgment.

International Accounting Standards, as applicable in Pakistan. have been followed in the preparation of financial statements .

The system of internal control is sound in design and has been effectively implemented and monitored and is being continuously reviewed by the internal audit function .

There are no doubts upon the Company's abili ty to continue as a going concern .

There has been no material departure from the best practices of corporate governance as detailed in code of corporate governance. '

Pattern of Shareholding

Out of 1,000 ordinary shares of Rs. 10/- each, 993 shares are held in the name of President of Islamic Republic of Pakistan.

For and on behalf of The Board of Directors

~~M CHIEF EXECTUTIVE OFFICER

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KPMG T:isccr H:ic!i & Co. Chorlerel1 /\ccounta11ts 53 L Gulbern Ill I :11111111I 1.ilu -.1:11 ,

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Telephone + 92 (42) 3585 0471-76 Fnx + !J2 (42) 35135 0477 Internet www.kpmg.com.pk

Auditors' Rcpo1·t to the Members

We have audited the annexed balance sheet of Gujranwala E lectric Power Company Limited ("the Company") as at 30 June 2013 and the related profit and loss account, statement of comprehensive income, cash now statement and· statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

It is the responsibility of the Company's management to establish and 1irnintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.

We conductccl our audit in accordance with the audi ting standards as applicnblc in Pakistan. These standards require that wc plan and perli.inn tltc audit lo obtain n;asonablc assur:111ce about whether the above said st;itcmcnts arc free of any material misstatement. An audit includes examining, on a test b:isis, evidence supporting the amounts :md disclosures in the above said statements. An audit also includes assessing the accounting policies and signilicant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis fo r our opin ion and, after due verification, we report that:

a) As stated in note 20.2 of the accompanying financial statements, based on the stay order of the Honorable Lahore High Court, the Company has withheld the recovery of fue l price adj ustment amounting to Rs. ' l.'177.10 million rrom domestic consumers hnving electricity consumption up lo the extent or 350 units per month and the Court has asked the Company to rcrund consumers fuel adjustment charges already recovered. The Company has filed an appeal before the Honorable Lahore High Court and has obtained stay order on the said matter. The Company has not billed this amount to the consumers, however, has recogn ized the revenue and related receivable against these units of electricity. The recoverability or fuel price adjustment is contingent upon a favorable outcome of the case. International Accounting Standard on Provisions, Contingent Liabilities and Contingent Assets (IAS-37) requires that, contingent assets arc not recognized in linancial slal<.:rnents unless the realization or income is virtually certain. Had this receivable not been booked as required by IAS-37, the current assets of the Company wou ld have decreased by Rs. 4,477.10 million, opening accumulated loss would have decreased by Rs. 3,397.52 million and the profit for the yea r would have been decreased by Rs. 1,079.58 million; and

b) As stated in note 15 of the accompanying financial statements, trade debts include a balance of Rs. 2,546.20 million from the Government of Azad Jammu and Kashmir (J\JK). There :s a dispute between the Company and Government of AJK over tariff rates of electricity. The tariff dctcrm'incd by the sub-comm ittee on Raising of Mangla D.-1111 project was Rs. 2.32 per unit, which was increased to Rs. 2.59 per unit subsequently. Government of AJK claims, it does not fall under the purview of NEPRJ\, hence, it has been settling its dues at the tariff rates determined by sub-committee. Accordingly, the recoverability of the above amount is not certain. However, the management is of the

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view that this matter will be dealt afler resolution or t:ll'iff rates, in accordance with the tlirc<.:tions or Ministry or W:1tcr and Power, as l"ully e:-;pl:1i11cd in the above referred note. Had provision for doubtful debts been recogn ized in respect or this amount, the profit for the year would have decreased by Rs. 2,546.20 million with a corresponding decrease in current assets.

c) in our opinion, proper books .or account have been kepi by the Company as required by the Companies Ordinance, 1984;

d) in our opinion:

i) the balance sheet and profit and loss account together with .. the noies thereon have been drawn up in conformity with the Companies Ordinance, 1984, and arc in agreement with the books of account and arc further in accordance with accounting policies consistently applied;

ii) the expenditure incurred Lluring the year was for the purpose or the Company's business; and

iii) the business conducted, investments made and the expenditure incurred during the year were in :1ccord:1nci.: with the objects or the Company:

c) in our opinion and to the best or our information and according to the explanations given to LIS, CXCCpt ['or th<.: cfli.:cls on th<.: lin:111cial Slati.:mrnts or the mailer rcl\:rred in paragraph (a) and (b) above, the balance sheet, profit and loss account, statement or comprehensive income, cash now statement and statement of changes in equity together with the notes forming part thereor conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at 30 June 2013 and of the profit, its comprehensive income, its cash flows and changes in equity for the year then ended; and

f) in our opinion no Zakat was deductible at source under the Zakat and Ush r Ordinance, 1980 (XVIII of 1980).

We draw attention to note 10.3 of the accompanying financial statements, the Company has not accounted for provision against Workers' Profit Participation fund (WPPf) for the year ended 30 June 2013 amounting to Rs. 328.653 million as the decision regarding the applicability or WPPF Act on the Company is pending with Economic Coordination Committee, as fully explained in the above referred note .

Our opinion is not qualiiied in respect of above matter.

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Date: 7111 November, 2013

Kl'MG Tasccr ll:idi & Co. Cha rtered Accountants

(Bila l Ali)

- · _, - · -Gujranwala Electric Power Company Limited Balance Sheet As at 30 June 2013

Equi ty and liabilities

Share capital and reserves

Authorized share capital

5,000,000,000(2012: 5,000,000,000) ordinary

shares of Rs. 10 each

Note

Issued, subscribed and pa id up share capital ./

Accumulated loss Deposit fo r issuance of sh ares

Non-cu rren t liabi li ties

Deferred credit

Long term financin& - secured

Deferred liabil ities

Securi ty deposits

Curreot liabilities

Trade and other payables

Interest accrued on long tenn financing

Current portion of long tenn financing

Continge ncies and commitments

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- -2013 2012

Rupees Rupees

50,000,000,000 50,000.000,000

10,000 10,000

(6,795,769,178) ( 13,358,987,994)

3,018,636,801 3,018,636,801

(3,777,122,377) (I 0,340,34 1, 193)

12,252,729,891 10,840,73b,'739

4,509,215,632 1,737,391,247

8,205,407,320 6,609,376,955

2,749,039,352 2,4 18,022,838

27,716,392,195 21 ,605,527,779

37,848,372,177 33,735,795,987

572,438,959 242,011 ,873

323,392,802 189,289,825

38,744,203,938 34,2 17,097,685

62,683,473, 756 45!482,284,271

The annexed notes from I to 35 fonn an integral part of these financial statements.

Lahore C hief Executive

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Non-current assets

Property, plant and equipment 12 Long tenn loans - considered good 13

Curren t assets

Stores and spares I./ Trade debts 15 Short tenn loans and :?dvanccs 16 Interest receivable - accrued

Other receivables 17 Short term in,·estmcnts 18 Cash and bank balances 19

-: 2013

Rupees

31,414,722,379

179,171,705

31,593,894,084

724,678,196

14,967 ,095,085 49,935,762

90,364,944 12,222,328,213

2,200,000,000

835,177,472

31,089,579,672

62,683,473, 756

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2012

Rupees

24,802,615, 161

127,388,634

24,930,003, 795

833,197,765 13, 7 15,522,922

50,344,374 59,477,647

2,978, 167,974 I, 700,000,000

1,215,569,794

20,552,280,4 76

45,482,284,271

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Gujranwala Electric Power Company Limited Profit and Loss Account For the year ended 30 June 2013

Sale of electricity - net

Subsidy from Government

of Pakistan on sale of electricity

Cost of electricity

Gross profit I (loss)

Amortization of deferred credit

Operating expenses :

Distribution expenses

Administrative expenses

Operating profit I (loss)

Other income

Finance cost

Profit I (loss) before taxation

Taxation

Profit I (loss) after taxation

Note

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24

25

26

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2013 Rupees

51,806,636,291

31,447 ,168,647

83,253,804,938

(69,722,923,101)

13,530,881,83 7

540,884,764

14,071,766,601

(6,859,700,922)

(1,932,487,398)

(8,792, I 88,320)

5,279,578,281

1,445,601,786

6, 725,180,067

(152,118,134)

6,573,061,933

(9,843,117)

6,563,218,816

The annexed notes from 1 to 35 form an integral part of these financial statements . .

Lnhorc ~\~Q<._

Chief Executive

2012 Rupees

53,378,658,351

15,147,352,650

68,526,011,00 I

(69 ,526, 788,005)

(1 ,000,777,004)

506,542,589

(494,234,415)

(5,565,626,723)

( 1,610,826,653)

(7, 176,453,376)

(7,670,687,791)

1,453,154,519

(6,217,533 ,272)

( 196,900,294)

(6,414,433,566)

(24,719,174)

(6,439, 152,740)

Director

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Gujranwala Electric Power Company Limited Statement of Comprehensive Income For the year ended 30 June 2013

Proft I (loss) after tax for the year

Other comprehensive income for the year

Total comprehensive income I (loss) for the year

2013 Rupees

6,563,218,816

6,563,218,816

The annexed notes from I to 35 form an inte~ral part of these financial statements .

c )_p \, .. UL Lahore Chief Executive

2012 Rupees

(6,439, 152,740)

(6,439, 152,740)

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Gujranwala Electric Power Company Limited Cash Flow Statement For the year ended 30 June 2013

Cash flows from operating activities

Cash generated from operations

Increase in capital contribution

Increase in receipts against deposit works

Post employment benefits pa id

Finance cost paid

Taxes paid

Net cash generated from operating activities

Cash flows from investing act ivities

Fixed capital expenditure Proceeds from sale of property, plant and equipment Long term advances given to employees - net Short term investments

Interest income received

Net cash used in investing activities

Cash flows from financing activities

Proceeds from long term financing - net

Security deposits received - net

Net cash generated from financing activities

Net (decrease) I increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year

Note

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2013 Rupees

2,961 ,803,395

J ,457,480,003

668,605, 714

(728,030,479)

(65,225,825)

(213,518,674)

4,081,114,134

(7,351,469,101) 835,471

(60,377,702) (500,000,000)

212,561,000

(7 ,698,450,332)

2,905,92 7 ,362

331,016,514

3,236,943,876

(380,392,322)

1,215,569,794

835,177,472

The annexed notes from 1 to 35 form an integral part of these fi nancial statements.

Lahore ~~~ .___ Ch icf Exe cu tivc

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2012 Rupees

1,983,902,056

321,455,633

2, 170, 192,426

(524,080,447)

(90,284,164)

(38,140,760)

3,823,044,744

(4,061,680,728)

(50,838,045) (319,000,000)

155,663,448

(4,275,855,325)

573,855,058

330,869,829

904,724,887

451 ,914,306

763,655,488

1,215,569,794

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Gujranwala E lectric Power Company L imited Statement of Changes in Equity For the year ended JO June 201 J

Share capital

Accumulatetl · loss

Deposi t for issuance of

shares Total

---------------------------------------Ru pees---------------------------------------

Balance as at 30 June 2011 10,000 (6,919,835,254) 3,018,636,801 (3,901,188,453)

Total comprehens ive loss for the year (6,439, I 52,740) (6,439, 152,740)

Il:1lance as at 30 .June 2012 10,000 ( I 3,358,987,994) 3,018,636,801 (I 0,340,341, I 93)

Total comprehensive income for the year 6,563,2I8,816 6,563,218,816

Balance as at 30 June 2013 10 000 (6,79S,769, 178) 3,018,636,801 (3,777,122,377)

The annexed notes from I to 35 form an integral part of these.: financial statements.

L:ihorc Ch~~

Chief Executive

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Gujranwala Electric Power Company Limited Notes to the Financial Statements For the year ended 30 June 2013

1 The Company and its operations

2

1.1 Gujranwala Electric Power Company Limited (the Company) is a public limited company incorporated in Pakistan. The Company was established to take over all properties, rights, assets, obligations and liabilities of Gujranwala Arca Electricity Board owned by Pakistan Water and Power Development Authority (WAPDA) and such other assets and liabilities as agreed. The Company was incorporated on April 02, 1998 and commenced commercial operation on July 01, 1998. The principal activity of the Company is the distribution of electricity within defined geographical territory.

1.2 The Company took over certain properties, assets, rights, obligations and liabilities relating to distribution of electricity from Pakistan Water and Power Development Authority (WAPDA) under Business Transfer Agreement (BTA) dated 29 June 1998. The details of assets, liabilities and related matters as provided under clause 1.1 of the 13TA have been finalized with W APDA through a Supplementary Business Transfer Agreement (SBT A).

1.3 Council of Common Interest (CCI) in its meeting held on 12 September 1993 approved the privatization of thennal power generation units (GENCOs) and power distribution companies (DlSCOs) in a phased program. Cabinet Committee on Privatization (CCOP) in its meeting held on 17 February 2009 approved privatization of certain GENCOs and DISCOs, this decision was ratified by Federal Cabinet in its meeting, held on 06 January 20 I 0. President and Prih1c Minister of Pakistan also approved privatization of GENCOs and DISCOs including Company during a presentation given to them by Ministry of Privatization on 22 November 2010. Decision of President and Prime Minister has also been subsequently ratified by the Council of Common Interest (CCI) during its meeting held on 28 April 20 I I.

Basis ofnrcparntion

2.1 St:itcmcnt of comnli:rncc

These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards .Board as arc notified under the provisions of the Companies Ordinance, I 984 . Wherever, the requirements of the Companies Ordinance, 1984 or directives issued under the Companies ordinance, I n4 differ, the provision or directives of the Companies Ordinance, 1984 shall prevail.

2.2 Standards, interpretations and amendments to publishecl approved accounting standards that arc not yet effective

The following standards, amendments and interpretations of approved accounting standards will be effective for accounting periods beginning on or after 01 July 2013:

!AS 19 Employee Benefits (amended 20 l 1) - (effective for annual periods beginning on or after I January 2013) . The amended !AS l 9 includes the amendments that require actuarial gains and losses to be recognized immediately in other comprehensive income; this change will remove the corridor method and eliminate the ability for entities to recognize all changes in the defined benefit obligation and in plan assets in profit or loss, which currently is allowed under IAS 19; and that the expected return on plan assets recognized in profit or loss is calculated based on the rate used to discount the defined benefit obligation.

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I The Company lrns not planned to ndopt this amendment early, however, had this nmendment been adopted early, profit for the year would have been increased by Rs 569.40 million, comprehensive income would have been decreased by Rs 7,629.0 I million, accumulated loss would have been increased by Rs 7,629.01 million and deferred employee benefits would have been increased by 7 ,059 .6 l million .

IAS 27 Separate financiaf Statements (20 l J) - (effective for annual periods beginning on or after I January 2013). !AS 27 (201 1) supersedes !AS 27 (2008). Three new standards IFRS I 0 -Consolidated Financial Statements, JFRS 11- Joint Arrangements and IFRS 12- Disclosure of Interest in Other Entities dealing with !AS 27 would be applicable effective I January 2013. !AS 27 (201 I) carries forward the existing accountirg and disclosure requirements for separate financial statements, with some minor clarifications. The amendments have no impact on financial statements of the Company.

!AS 28 Investments in Associates and Joint Ventures (20 l I) - (effective for annual periods beginning on or after I Janunry 2013). !AS 28 (2011) supersedes !AS 28 (2008). !AS 28 (2011) makes the amendments to apply Ir-RS S to :in investment, or a portion of an investment, in an associate or a joint venture thnt meets the critcrin to be classi lied :is held for sale ; and on cessation of significant influence or joint control, even if an investment in an associate becomes an investment in a joint venture. The amendments have no impact on financial statements of the Company.

Offsetting financial Assets and financial Liabilit ies (Amendments to !AS 32) - (effective for annual periods beginning on or ::ifter I Janunry 2014). The amendments address inconsistencies in current practice when applying the offsetting criteria in !AS 32 Financial Instruments: Presentation. The amendments clarify the meaning of 'currently has a legally enforceable right of set-ofr; and that some gross settlement systems may be considered equivalent to net settlement. The amendment would not have significant impact on finnncial statement of the company.

Offsetting Financial Assets and financial Liabilities (Amendments to IFRS 7) - (effective for annual periods beginning on or after I Janunry 2013). The amendments to IFRS 7 contain new disclosure requirements for financial assets and liabilities that arc off:;et in the statement of finnncial position or subject to master netting agreement or similar arrangement. The amendment would not have significant impact on financial statement of the company.

Annual Improvements 2009-2011 (effective for arrn(ial periods beginning on or after I January 2013). The new cycle of improvements contains amendments to the fol lowing standards, with consequential amendments to other. standards and interpretations.

!AS 1· Presentation of Financial Statements is amended to clarify that only one comparative period -which is the preceding period - is required for a complete set of financial statements. If an entity · presents additional comparative information, then that additional information need not be in the form of a complete set of financial statements. However, such information should be accompanied by related notes and should be in accordance with IFRS. Furthennore, it clarifies that the 'third statement of financial position', when required, is only required if the effect of restatement is material to statement of financial position.

!AS 16 Property, Plant and Equipment is amended to clarify the accounting of spare parts, stand-by equipment and servicing equipment. The definition of 'property, plant and equipment' in !AS 16 is now considered in dctem1ining whether these items should be accounted for under that standnrd. If these items do not meet the definition, then they arc accounted for using !AS 2 Inventories.

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IAS 32 Financial Instruments: Presentation - is amended to clarify that IAS 12·Jncome Taxes applies to the accounting for income taxes relating to distributions to holders of an equity instrument and transaction costs of an equity transaction. The amendment removes a perceived inconsistency between !AS 32 and IAS 12.

IAS 34 Interim Financial Reporting is amended to align the disclosure requirements for segment assets and segment liabilities in interim financial reports with those in IFRS 8 Operating Segments. IAS 34 now requires the disclosure of a measure of total assets and liabilities for a particular reportable segment. In ad~ition, such disclosure is only required when the amount is regularly provided to the chief operating decision maker and there has been a material change from the amount disclosed in the last annual financial statements for that reportable segment.

IFRJC 20 - Stripping cost in the production phase of a surface mining (effective for annual periods beginning on or after I January 2013). The interpretation requires production stripping cost in a surface mine to be capitalized if certain criteria are met. The amendments have no impact on financial statements of the Company.

IFRIC 21- Levies 'nn Interpretation on the accounting for levies imposed by governments' (effective for annual periods bcginni1)g on or aflcr I January 2014). IFRIC 21 is an interpretation of !AS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The Interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.

IAS 39 Financial lnstrnments: Recognition and Measurement- Novation of Derivatives and Continuation of Hedge Accounting (Amendments to !AS 39) (effective for annual periods beginning on or after l January 2014). The narrow-scope amendments will allow hedge accounting to continue in a situation where a derivative, which has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a result of laws or regulation, if specific conditions are met (in this context, a novation indicates that part ies to a contract agree to replace their original counterparty with a new one).

Amendment to !AS JG "Impninnent of Assets" Recoverable Amount Disclosures for Non-Financial Assets (effective for annual periods beginning on or after 1 January 2014). These narrow-scope amendments to !AS 36 Impairment of Assets address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.

I Apart from above certain other standards, amendments to published standards and interpretations of accounting standards that became effective for accounting periods beginning on or after I January 2013, they have no significant impact on Company's financial statements.

3 Summary of sit?nificant accountint? policies

3.1

3.2

Ilasis of measurement

These financial statements have been prepared under the historical cost convention, except to the extent of recognition of certain employee benefits at present value and financial instruments carried at fair value.

Functional and presentation currency

The financial statements have been prepared using functional and presentation currency of Pakistan i.e. Pak Rupees. All financial information presentccl in Pakistan Rupees has been rounded to the nearest rupee unless otherwise stated.

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3.3

3.4

Use of judgments and estimates

The preparation of financial statements in confonnity with the approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Company's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience, including expectat ion of future events that are bel ieved to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Company's fin ancial statements or \.vhere judgments were exercised in application of accounting policies are as follows:

Employee retirement benefi ts Depreci ation method, residual values and useful

lives of depreciable assets Provisions and contingenc ies Taxation

Deferred credit

Note

3.5

3.6 3.10 3. 13

As the Company has applied JFRIC I 8, as a result of which amounts received from consumers and the Government as contributions towards the cost of extension of distribution network and of providing service connections ar'c deferred for amortization over the estimated useful lives of related assets except for separate ly identifiable serv ices in which case revenue is recognized upfront upon establishing a connection network.

3.5 Staff retirement benefits

The main features of the schemes operated by the Company for its employees are as follows:

Defined benc[it plans

The Company operates unfunded pension, post retirement free electricify and medical benefits schemes for all its permanent employees. Provisions arc made in accordance with the actuarial recommendations. The latest valuation was carried out as at 30 June 20 13. The future contribution rates of these plans include allowances for deficit and surplus. Projected Unit Credit Method with the following significant assumptions is used for valuation of these schemes:

Expected rate for discounting liabilities

Expected rnte for increase in electricity cost

Expected rate for increase in medical cost

Expected increase in pensionable pay

Pension index ra te

Exposure innation rate

Free electricity benefits

11.50%

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Expected rate for discounting liabilities Expected rate for increase in electricity cost Expected rate for increase in medical cost Expected increase in pensionable pay Pension index rate Exposure inflation rate

Free electricity benefits

12.50% 10.00%

2.00%

2012

Free medical benefits

12.50%

8.00%

2.00%

Pension and leave

cncashment benefits

12.50%

10.00% 4.00% 2.00%

Actuarial gains I losses in excess of corridor limit as of the balance sheet date arc recognized over the remaining service lives of employees.

Acc1111111/ati11r: compe11s11ted absences

The employees of the Company arc entitled to accumulating compensated absences, which are encashable at the time of retirement up to a maximum limit of 360 days. Provisions arc made in accordance with the actuarial recommendations. The latest valuation was carried out as at 30 June 2013.

Other benefits

For General Provident Fund and W J\PDA Welfare Fund, the Company makes deduction from salaries of the employees and remits these amounts to the funds established by WAPDA.

3.6 Property, plant and equipment

a) Cost

Operating fixed assets except freehold land arc stated at cost, excluding the costs of day to day servicing, less accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing the part of such assets when that cost is incurred if the recognition criteria arc met. Freehold land is stated at cost. Capital work-in-progress is stated at cost plus applicable overheads.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to profit and loss account during the year in which they are incurred.

b) Depreciation

Depreciat ion on property, plant and equipment is charged to profit and loss account on straight line method so as to write off the carrying amount of an asset over its estimated remaining useful life at the rates given in note 12.1 . Depreciation charge commences from the month in which asset is available for use and no depreciation in the month of disposal.

The assets' residual values, useful lives and methods arc reviewed, and adjusted if appropriate, at each financial year end .

c) Dcrecognition

An item .of property, plant and equipment is derccognized upon disposal or when no future economic benefits arc expected from its use or disposa l. J\ny gain or loss arising on dcrccognition of the asset (calculated as the difference between the net disposal proceeds and carrying amount of the asset) is ~1 included in the profit and loss account in the year the asset is derecognized. ·I

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d) Impairment of assets

The canying amounts of the Company's assets arc reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of such asset is estimated. An impairment loss is recognized wherever the canying amount of the asset exceeds its recoverable amount. Impairment losses arc recognized in profit and loss account. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of deprec iation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss account.

3.7 Stores and spares

These are valued at lower of fortnightly weighted average cost and net realizable value. Provision is made for obsolete items, except items in transit, which are stated at cost. Furthermore I 00% provision is created for the items of stores and spares which arc slow moving and older than 6 months.

3.8 T rade debts

Trade debts arc carried at original billed value less an estimate for provision for doubtful debts. 100% provision for doubtful debts, for private consumers, is made which are more than one year old, where as no provision is made for amount due from federal and provincial government consumers.

3.9 Trade and other na:vablcs

Liabiliti.cs for trade and other amounts paypble are initially recognized at fair value which is normally the transaction cost.

3.10 Provisions and con tin!!cncics

Provisions are recognized in the balance sheet when the Company has legal or constructive obligation as a result of past events, and it is probable that outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. However, provisions are reviewed at each balance sheet date and adjusted to reflect current best estimates.

3.11 Investments- Held to m:iturity

Investments with fixed maturity that the management has intent and abi lity to hold to maturity are classified as held to maturity and are initially measured at fair value and at subsequent reporting dates measured at amortized cost using the effective interest method.

3.12 Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, arc added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are charged to profit and loss account whenever incurred.

3.13 Taxation

Current

Provision for current tax is based on taxable income for the year determined in accordance with the prevailing law for taxation of income if any. The charge for current tax is calculated using prevailing current tax rates or tax rates after taking into account rebates and tax credits, if any, expected to apply to the profit for the year, if enacted or minimum tax at the rate of I percent of the turnover excluding the purchase price of electricity, whichever is higher. 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.

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Deferred

Deferred tax is accounted for by using the liabili ty method on all timing differences between carrying amounts of assets and liabili ties in the financial statements and their tax base. Deferred tax liabilities are recognized for all taxable temporary differences. The Company recognizes deferred tax assets on all deductible temporary di ffercnces to the extent it is probable that future taxable profits will be available against which these deductible temporary differences can be uti lized. Deferred tax asset is also recognized for the entry forward of unused ·tax losses and unused tax credits to the extent it is probable that future taxable profi ts will be available against which the unused tax losses and unused tax credits can be utilized.

· Deferred tax is charged to I credited in the profit and loss account except in case of items credited or charged to equity in which case it is included in equity.

The carrying amount of all deferred tax assets is reviewed at each balance sheet date and adjusted to the appropriate extent, if it is no longer probable that suffic ient taxable profits will be available to allow all or part of the deferred tax assets to be utilized.

3.14 Revenue recogn ition

Revenue is recognized to the extent it is probable that the economic benefits will flow to the Company and revenue can be measured reliably. The specific accounting policies arc:

a)

b)

c) d)

e) f)

g)

h) i) j) k)

Revenue from electricity sales is recognized on the basis of electricity supplied to consumers at rates determined by NEPRA and notified by GOP which may be less than as determined by NEPRA .

Tariff differential subsidy is recognized in the relevant period on the basis of rates determined by NEPRA and notified by Government of Pakistan, on accrual basis up to the date of approval of financial statements by the Board of Directors of the Company.

Meter and service rentals arc recognized on time proportionate basis. Surcharge on delayed payments is recognized on the basis of energy charges and Neelum Jhelum surcharge (NJS) due from consumers.

Fuel price adjustment is recognized on the basis of rates notified by NEPRA on accrual basis. Gain or loss on installation of new connection/ deposit works is recogn ized up to 10% variation between receipts against deposit works and actual expenditures incurred on the project. Commission on collection of PTV fee and electricity duty is recognized on the basis of actui1l billing collections from consumers. Interest on bank deposits is recognized on time proportionate basis. Profit on investments is recognized on the basis of effective yield. Revenue from sale of scrap is recognized on dispatch of goods. Deferred credit against consumers' contributions is released to profit and loss account over the expected useful life of the asset underlying the contribution except for separately indefinable services in which case revenue is r'ecognized upfront upon establishing a connection network. (See note 3.4 also).

1) All other miscellaneous incomes arc recognized on actual receipt basis.

3.15 Cash i1nd cas h equivalents

Cash and cash equivalents comprise cash in hand, cash at banks on current and deposit accounts and other short term highly liquid instruments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value .

3.16 Financial instruments

Financial instruments comprise long tenn advances, trade debts, loans and receivables, cash and bank balances, long term financings i1nd trade and other payables .

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Financial assets and liabilities arc recognized at fair value at the time the Company becomes a party to the contractual provisions of the instruments.

Financial assets are derecognizecl when the Company loses control of the contractual rights that comprise the financial asset. The Company loses such control if it realizes the rights to benefits specified in contract, the rights expire or the Company surrenders those rights. l?inancial liabilities are derccognizcd when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on subsequent measurement and derccognition is charged to the profit and loss account currently.

Financial assets and liabilities are offset when the Company has a legally enforceable right to offset and intends to settle either on a net basis or to realize the asset and settle the liability simultaneously.

3.1 7 Foreign currencies

The financial statements are presented in Pak Rupees, which is the Company's functional currency. Transactions in foreign currency during the year arc initially recorded in the functional currency at the rate prevailing at the date of transaction. Monetnry assets and liabilities denominated in foreign currencies arc retranslated at functional currency rate of exchange prevailing at the balance sheet date. All differences are taken to the profit and loss account.

3.1 8 Off-setting of fin ancia l assets and financial liabilities

Financial assets and liabilities are off set and the net amount is reported in the financial statements only when there is a legally enforceable right to set-off the recognized amount and the Company intends either to settle on a net basis, or to realize the assets and to settle the liabilities simultaneously.

2013 2012 Note Rupees Rupees

Issued, subscribed and paid up share capita l

1,000 (2012: 1,000) ordinary shares of Rs. I 0 each fully paid in cash 4.1 10 000 10.000

4.1 Shares are held by the President of Pakistan and his nominees. I

Deposit for issuance of shares

Incorporation expenses incurred by W APDA 5,042,775 5,042,775 Allocation of net worth 5. J 138,102,633 138,1 02,633 Allocation of debt services liability 5.2 1,541,250,11 1 1,541,250,111

Against transfer of assets 5.3 1,334,241,282 1,334,241,282

3,018l636l801 3,018,636.80 I .

5.1 This represents net worth of the Company against which the Company will issue shares to WAPDA pursuant to the Supplementary Business Transfer Agreement (SBT A).

5.2 This represents the debt services provided by WAPDA on foreign re-lent and cash development loans agai nst which the Company wil l issue shares to WAPDA.

5.3 This represents the reallocation of loans against assets constructed by National Transmission and Dispatch Company Limited and transferred to the Company during 0 I July 2002 to 30 June 2006 through WAPDA.

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2013 2012 Note Rupees Rupees

Deferred credit

Contrib11 tio11 Open ing balance 14,4 72,645,39.t 12, 111,698,034 Additions during the yc:ar 6.1 1,952,877 ,916 2,360,947,360

16,425,523,310 1'1,472,645,394 Less: A m ortization

Opening balance 3,631,908,655 3, 125,366,066 Amortized during' the year 540,884, 764 506.542.589

4.1 72,793z419 3,631,908,655 12,252, 729,89 1 10,840, 736, 739

6.1 This represents the capital contribution received from the consumers and Government against which assets arc to be constructed by the Company.

Long term financing - secured

From banking companies and other financial institutions

Bank of Punjab - Demand Finance Asian Development Bank - Re-lent by GOP Export Import Bank of Korea - Re-lc:nt by GOP

Less: Current maturity

Note

7.1 7.2 7.3

2013 Rupees

499,500,000 1,823,208,930 2,509 .899 ,504 4,832,608,434

323,392,802 4,509,215,632

2012 Rupees

599,400,000 947,129,562 380.151.510

1,926,681,072

189,289,325 1 737 391 247

7.1 This represents the demand finance facility sanctioned by The Bank of Punjab (BOP) for rehabi litation, upgradation and expansion of t:xisting network against a sanctioned limit of Rs. 999 million. The principal balance is repayable in ten half yearly installments ending on 21 May 20 18 and is secured by way of hypothecation of project assets up to Rs. 1,332 million, exclusive charge over book debts/receivables of the project. letter of right of set ofT ::ind demand promissory note of Rs. 2,315 million in favor of BOP. This carries interest on average 6 months KIBOR plus 145 BPS (20 12: 6 months KIBOR plus 145 BPS) to be paid on half yearly basis.

2013 2012 Note Rupees Rupees

7.2 Asian Development Bank - Re-lent by GOP

- Project - I 7.2.J 775,404,696 774,711,818 - Project - 2 7.2.2 1,04 7 ,804,234 172 41 7 744

1,823,208,930 947 129 562

7.2.1 This represents re-lent portion of term finance facility - Project I obtained by GOP from Asian Development Bank (ADI3) for power distribution and enhancement project which is secured against the guarantee by GOP .. Pursuant to the letter referenced 6(9)/\DB-408~ dated 30 March 2009 of.. Ministry of Economic Affairs and Statistics, out of the total facility obtained by the GOP, US$ 11.37 million were allocated to the Company. Company has drawn down USS 8.96 mi ll ion (PKR 775.40 million) [2012: (US$ 8.95 million) (PKR 774.7 1 million)). The facility carries interest rate of 17% per annum including interest rate of 11 % and exchange risk cover at the rate of 6% per annum payahle on half yearly basis. The principal amount is repayable in twenty-six half yearly installments ending on · 15 August 2023. Loan is repayable to GOP on the advice of Debt Management Wing of Economic Affairs Division of Pakistan. This project has been closed by ADB with e!Tect from 31 December 20 12 due to. un-ability of the Company to utilize full amount of loan within given time. As at 30 June 2013, overdue principal installments amounting to Rs. 131 .335 million were subsequently repaid on 29 July 2013.

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7.2.2 This represents re-lent portion of term finance facility - Project 2 obtained by the GOP from Asian Development Bank (ADB) for power distribution and enhancement project which is secured against the guarantee by GOP. Pursuant to the letter number 1 (3)ADB-ll/06-A dated 31 March 2011 of Ministry of Economic Affairs and Statistics, out of the total facili ty obtained by the GOP, US$ 48.55 million were allocated to the Company. The Company has drawn down USS I 0.83 million (PKR 1,047.80 million) (2012: (US$ 1.877 million) (PKR 172.'l I 8 million)). The facility carries interest rate of 15% per annum including interest rate of 8.2% and exchange risk cover at the rate of 6.8% per annum payable on half yearly basis. The loan is repayable to the GOP on the advice of Debt Management Wing of Economic Affairs Division of Pakistan, within a period of 17 years excluding the grace period of 3 ycars. Repayment schedule in this respect has not been finalized.

7.3

7.4

This represents a re-lent portion of term finance facility obtained by GOP from Export Import Bank of Korea for GEPCO substations for rural distribution construction which is secured against the guarantee by GOP. Pursuant to the re-lent agreement between GOP and the Comp:my, out of total facility of US$ 45 million. US$ 25.73 million (PKR 2,509.90 million) [2012: (US$ 4.03 million) (PKR 380. 15 mi llion)] has been drawn down by the Company. This facility carries interest rnte of 15% inclusive of relending interest of 8.2% plus exchange risk cover fee of 6.8% which shall be charged both on principal amount and interest amount separately. Repayments arc to be made within maximum period of 30 years including a grace period of I 0 years. Repayment schedule in this respect has not been finalized.

Government of Pakistan (GOP) through PHPL entered into a syndicated Term Finance Agreement on 22 February 20 12 with syndicate of banks led by Hnbib Bnnk Limited for financing of Rs. 136,450 million (Company's share amounts to Rs. 3,621 million). The lonn is for a period of five years with a grace period of two year and cnrri cd markup nt three months' KIBOR plus 2% per annum nnd secured by way of a guarantee by GOP, lien on collection nccount of electricity distribution companies (DISCOs) and nssignmcnt of receivables. Originally PHPL planned to re-lent the loan to DISCO's through multi partite agreement between Lenders, DISCOS and PHPL with each DISCO jointly and severely liable in-case of default by nny D!SCOs. Management of DISCOs objected to this arrangement and based on observations by DISCOs the proposed mechanism of loan wns revised in n joint meeting held nt Ministry of Water and Power on 14 May 2012 whereby a bi lateral agreement was proposed to be signed between each DISCO and Pl-IPL with DICSOs severally linblc. On 06 March 2012, Central Power Purchase Agency (CPPA) debited the Company's nccount with the nmot1nt of facility allocated to the Company. The re-lending agreement between the Company and Pl-IPL is not fina lized as of the reporting date and the management of the Company believes that the Company's obligation under the arrangement will nrisc once the rclending agreement between the Company and PHPL is finalized. Accordingly, the lonn related linbilities have not been recorded in these financial statements.

Furthermore, CPPA has debited Company's account by Rs. 34 7.152 million on account of mark-up accrued on this loan. However, the Company has not recorded this markup due to aforementioned reason.

7.5 During the year, CPPA has issued nn debit advice to the Company amounting to Rs. 908 million representing the faci lity allowed to the Company. The Company has not accounted for this loan liability due to non­availability ·of terms and conditions of the loan and linalizntion of re-lending agreement between the Company and PHPL.

Furthermore, CPPA hns debited Company's account by Rs. 15.182 million on nccount ofmnrk-up accrued on this lonn. However, the Company has not recorded this markt1p dt1e to aforementioned reason.

8 Deferred liabilities

Deferred tnxation Employment benefits

8.1 Deferred taxntion

Taxable tim ing differences Accelerated tax deprecintion.

Deductible timing differences Employee Benefits Unused tax losses

Note

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8.2

2013 Rupees

8,205,407,320 8,205,407 ,320

5,855,706,389

(2,871,892,562) (36,998,983,867)

2012 Rupees

6,609,376,955

6,609,376,955

5, 148,615,658

(2,313,281,934) (29,365,648,595)

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13ascd on prudence and considering the trend of Company's future taxable profits, deferred tnx asset has not been recognized in these financial statements. Tax losses available for carry forward and other deductible timing differences approximates to Rs. 113,916.79 million (2012: Rs. 90,511.23 million) including tax depreciation amounting lo Rs. 16,730.59 million (20 12: Rs. 10,230.50 million) .

8.2

8.2.1

Employment benefits

Post employment benefits Accumulatinl!. compensated absences

These arc composed of: Present value of defined benefit obligation Unreco1?.nized actuarial losses Liability recognized in the balance sheet

Movement in net liabilitv . Liability at the beginninl!. of the year

Charge for the year

Benefits paid durinl!. the year Liability at the end of the year

Chnri:c for the year Current service cost Interest cost Actuarial losses recognized

Less: Allocation to capital work­in-progress

These arc composed of: Present value of defined benefit obligation Unrecognized actuarial losses Liability recognized in the balance sheet

Movrment in net liability Liability at the beginning of the year Charge for lhe year

11enefits paid during the year Liability at the end of the: year

Ch:1rge fo r the year Current service cost Interest cost Actuarial losses recognized

Less: Allocation to caoital work-in-progress

201J 2012 Note Rune es Rupees

8.2./ 7.732.135.402 6.196, I 88,955 8.2. I 47J,27t,9Ul 413 188 000

X,10'>.407,;nO 6 609 376 955

2013

Post employment benefits Accumulating Pension Total compensated

l\lcdical free electricity forilit·v nbscnces

------------------------------------ Jlunces ---------------------------

1.085.875,415 1.898,19J.l 10 11,807 ,673,807 14,791.742,332 473.271.918 23-1,60-1,510 -103,090,091 6,421,912,329 7,059,606,930 ll51.270,905 1.495,103,01') 5.385,76 1,47!! 7.732. t:\5,402 473,271.91R

735.229.202 1.23-1.025,8-10 -l,226,933,913 G, 196.188.955 413.188.000 150,836,758 303,<148,475 1,774,887,861 2,229, 173,094 94 887 750 886,065.960 I.537.474.315 6,001,821.774 8.425.362.049 508.075.750 (3-1.795.055) (42,371.296) (616,060,296) (693,226,647) {34,803,832) 1151.270.905 1.495.103,019 5.385,76 1,478 7,732.135.402 473,271.918

11,62-l.1117 75.612.887 253.872.153 341. I 09,857 19.196,991 119.059.557 197 .873. 794 1.027,944.8-11 1.3-14,878,192 49,473,261

20.152,384 29,961,79-1 -193,070,867 543, 185.045 26,217,498 150.836,758 303,4-18,475 1.774,887.861 2.229.173.094 94.887.750

(8,959,077) (18,023,578) (I 05,420,963) (132,403,618) (S,635,938)

141,R77,61ll 21l5,424,897 1.669.466.891l 2,()96,769,476 ll9,251,812

2012

Post employment benefits Accumulating

Free electricity Pension Total compensated Medical

(a1;ililY absences

------------------------------------------------- Ru pees -------------------------------------------------

973.662.100 1.604 .176.000 8.531.588.873 11.109,426,973 413.188.000 238 432 898 370 150 160 4 304 654 960 4 913 238 018 735 229 202 I 234 025 840 4 226 933 913 6196188955 413 I RR 000

627.355.7 11 1.063.891.490 3. 730.215, I 28 5,421.462,329 244.799.832 I 46, 745,839 207,073,593 929,850,843 1,283 ,670,275 183,524,966 774.101.550 1.270.965,083 4.660.065,971 6. 705, 132.604 428.324.198 (Jll,872,348) (36,939,243) (433, 132,058) (508,943,649) (15, 136,79R) 735 229 202 I 234 025 840 4 226 933 913 6 196 188 955 413 lllll 000

J 7. 168.628 50.302,842 139.791,760 207.263.230 10.629.588 114.112.534 156.770.751 683.073.748 953.957.033 33.212.401

15 464 677 I 06 985 335 122450012 139 682 977 146.745.839 207.073.593 929.850,843 1,283,670.275 J 83.524.966

(9,065,796) (12,792,778) (57,445, I 60) (79,303,734) (11,337,970) J 37,680,043 194,280,815 872,405,683 1,204,366,541 172 186 996

2013 2012 8.2.2 The ch:1rge for the year lrns hcen allorntcd us follows: llnpecs Rupees

Distribution cost 1.743,317,030 I, I 0 l ,242,829 Administrative expenses -137,204,258 275,310,708 Allocntion to cnpital work-in-proerc~s 138:03? :556 90 64 1,701)

2,324,060,844 l,467, 195.241

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H.3 On i\ui;ust 14, 2009, the Government of rakis1an (GOr) launched Dcnazir Ernp~oyccs' Stock Oplion Scheme ("1hc Scheme") for employees of certain St:ite Owned Enterprises (SOEs) ond non·St:itc Owned Enterprises wh,·rc GOP holds sii;nifknnt investments (non-SOEs) The scheme is applicable to pcnnancnt and contractual employees who were in employment of these entities on the date of launch of the Scheme, subject to completion of live years vestini; period l>y all conlrnctual employees an<I hy pcrrnanelll employees in certain instances.

The Scheme provides for a cash payment to employees on retirement or tennination based on the price of shares of respective entities. To administer this scheme. GOI' shall Irnnsfcr 12% of its investment in s1;ch SOEs and non·SOEs to a Trust Fund to l>e created fo r the purpose by each of such entities. The eligible employees would be allotted units by c:1ch Trust Fund in proportion to the ir respective lcneth of service and on retirement or tcnnination such employees would be cnlilkd w receive such amounts from Trust Funds in exehanse for the surrendered units as would he determined based on market price for listed entities or breakup value for non-listed entities. The shares relating to the surrendered units would be trnnsfrrrcd back to GOI'.

The Scheme also provides that 50% of dividend related to shares transi'crrcd to the respective Trust Fund would distributed amoni::st the unit· holder employees. The balance 50% dividend would be transferred by the respective. Trust Fund to the Control Revolving Fund managed by the Privatiz.ition Commission of Pakistan for Payment to employees against surrendered units. The deficit, if any, in Trust Funds to meet the pre-purchase commitment would be met by GOP.

The IFRS 2 "Share Oascd l'nyments" will he implemented atler issuance of shares a1:ainst the "deposit for issuance of shares".

9 Securitv deposits

These represent security deposits aJ?ainst energy dchtors. These arc adiustablc on disconnection of electricity supply.

10 Trade 1111d other pnyoblcs

Creditors Due to associated undertakings • unsecured EQ surcharge payable Electricity duty payable PTV license fee payable Income tax payable collected on electricity bills Tariff differential subsidy payable to GOP Ncelam Jehlum surcharge payable Accrued liabilities Retention money • contractors General sales tax not yet realized Capital contribution awaiting connections Receipt against deposit works Workers' profit participation fund payable Others

Note

JO. I 10.l

17.1

10.3

2013 Rupees

32,339,SI l,4SS 703,131 ,li36

1,035,687,487 492,586, 706 53,265,518

131,664,934

45,762,362 109,867,233 20,991,844

172,919,S6S 783,742,992

1,652,490,905 270,351,281 36,398,259

37,848.372, 177

10.1 This includes amount of Rs. 31,991 .3 1 million (W 12: Rs. 27,414.57 million) payable to NTDC. an associated undertaking.

2013

Openins balance Cost of electricity

Less: Amount paid I adjusted Closing babncc

l 0.2 Due to nssoclntcd undcrtnkin::s ·unsecured

Lahore Electric Supply Company Limited ( LESCO) Water and Power Distribution Authority (W /\PD/\) Faisalabad Electric Supply Company Limited (FESCO) Pilkistan Electric Power Company Limited (PEPCO) Peshawar Electric Supply Company Limited (PESCO) Mult:ln Electric Power Company Limited ( MEPCO) Sukkher Electric Power Company Limited ( SEPCO)

27,414,SGS,793 77,578,477.S49

104,993,046,342

73,00 1,735,027 31,99 1,311 ,3 l 5

S46,920,33.t 135,678,833 13,108,085 S,340,S49

398,579 1,535,221

150,035 703, 131,636

20 12 Rupees

27,854,630,625 704,489,295

1,026,688,58 1 89,884,000 5l,124,684

146,613, 125 729,348,989

49,691 ,269 '285, 196,928

17,700,868 173,638,904 869,275,903

1,485,316,001 270,351,281 31,845,534

33,785,795,987

2012 Rupees

11,34 1,853,435 77,387,316,737 88,729,170,172

61,314,601,379 27.j 14 568 793

547,284,878 140,397,520

I I ,807,225 3,401,037

326,335 1,272,300

704 489 295

10.3 The Company has held payment of its contribution towards Workers' Profit Participation Fund (WPPF) relating to profit for the year ended 30 June 2005. The matter is pending for decision with the Economic Coordination Committee upon a recommendation submitted by WAPDA to exempt the corporatized entities under its umbrella from the r~quircmcnts of the Companies Profit (Workers' Participation) Act, 1968. However, during the previous years, the income tax authorities rniscd a demand of the said amount and accordingly, an amount of Rs. 23,440,000 was deposited in government treasury. i\s far ns remaining amount is concerned, it has been held by the Company till the matter is decided. ·

Furthennore, during the year. the Company has not made provision against WPl'I' amounting to Rs. 3'.!8,653,097 due to the aforementioned reason .

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11 Contingencies and commitments

Commitments

Commitments :igainst inland letters of credit and purchase orders for capit:il store items amount to Rs. 3,218.36 million (2012: Rs. 1, 192.86 million).

The Company has issued a bank guarantee in the favor of Pakistan Slate Oil Comp:iny Limited amounting to Rs. 21 million (20 12: Rs. 15 million) from National nank of Pakistan.

Claims against the Comp<U1Y not acknowledged as debt (unount lo Rs. 438.24 million (20 12: Rs. 375.48 million).

Debit advices amount ing to Rs. 4,891.4 1 million received from CPPA related to long term loans not accounted by the Company for reason fully cxplanicd in 110lcs 7.'I nnd 7.5 011 lhcs1: financial st:itcmcnts.

Supplementary charges amounting to Rs. 3,785.49 million being share of mark-up charged to the Company on del:iyed payments by CPPA to GENCOs but not accounted by the Company since the same is not allowable by NEPR.A in tarifT detcnnination.

The Company has received debit advices amounting to Rs. 1,368.74 million from CPPA being final adjustment of cost of electricity. The Company has not accounted for these advices as management is of the opinion that the cost of electricity charged by CPPA cannot exceed energy charges detennined by NEPRA in tarifT detem1in:ition.

In 1990, land measuring 74 Kanals anti 5 Martas acquired by \V APDA for construction of 132 KV grid stntion situntcd al Lahore Road (W APDA Town) Gujranwala for Rs. 8.19 million. Three out of ten land owners Ms. Ghazala Syed, Mr. lflikhar Ahmad and Mr. Faqcer Muhammad owners of 27 Kanai and 11 Marlas ehallengcd acquisition process beforc Senior Civi l Judge, Gujranwala. The Civil Judge declared the entire acquisition process null and void. The Company filed appeals before District & Session Judge, Gujranwala and Honorable Lahore High Court which were dismissed by all the courts. The Company filed an :ippcal befon: Supreme Court of Pakistan which w:is also dismissed. Thercafler, the Company filed Civil Review Petition before Supreme Court of Pakistan against Supreme Court's judgment dated 14 July 2009 which were converted into Civ il Appeals. These nppeals have been dismissed hy Supreme Court of Pakistan vidc judgment dated 24 January 2013. The Company hns fikd Civil Review Petitions before Supreme Court against said judgment. In view of Company's legal counsel, in a worst case scenario, the Company may be required to surrender the said !:ind which, in the opinion of the management, will not have any adverse cfTect on the operation of the grid station.

Jn 1973, a plot of land situated at 565 A Model Town, Gujranwala was transferred to WAPDA by GDA (formerly Gujranwala Improvement Trust). In 2004, while transferring the plot from \V APDA to GEPCO under the Supplementary Dusincss Transfer Agreement (SIJTA), transfer deed of the plot was missing in WAPDA record. \VAPDA requested GDA to provide the same. However, GDA found that 4 Kana ls and I mnrla of land was not allotted to W APDA nnd raised n demand of Rs 8 1.74 million for this disputed picct: of land. Jn 2009, the Company, in order to resolve the issue, agreed to put the matter before District Price Assessrm:nt Committee (DPAC). DPAC, having considered the mntter from both s ides

parties, decided to increase the demand to Rs 163.30 million on just and equitable basis. On J6 May 201 J, the Company received a notice from GDA for taking enforced possession of disputed land on account of failure to pay the demanded dues. The Company liled a declaratory suit against GDA before Civil Judge, Gujranwal:I along with st:iy application for status quo. The Court granted stanrs quo to the Company. GOA challenged the stay for status quo in Session Court, which was dismissed vidc judgment dated 27 November 2012 by the said court. The Company's legal counsel believes that the matter will be decided in the Company's favour, hence, no provision has been made in these financial statements.

The Company has not paid its contribution tow:irds WPPf. for the year ended 30 June 2005 amounting to Rs. 23.44 million upon directions from WAPDA. In connection therewith, no provision for interest on delayed payment has been made in these financial statements .

Furthermore, the Company has not booked provision for worker's profit participation fund amounting to Rs. 288,938 based upon the accounting profit of current year.

Snlt!s tnx

Inland Revenue Department raised :i dem:111d against the Company as a result of sales tax special audit for financial year 2008-09 on following issues:

(i) A demand has been raised nmounting to Rs. 2.385.50 mil lion in respect of general sales tax on subsidy income charged to Government of Pnkistan. The cnsc has been set aside hy the Commissioner Appcnls on the basis of rule 14 of Sales Tax Special Procedure Rules 2007 as follows: " foil ing of returns and deposit of sales tax ( l) in case of WAPDA and KESC, sales !:Ix levied and collected under rule 13 during the tax period shall be deposited on accrual basis (i.e.) the amount of tax actu:illy billed to the consumers or purchasers for the tax period". Tax department has filed appeal before Appellate Tribunal Inland Revenue :ig:iinst the order of Commissioner Appeals .

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(ii)

(iii)

(iv)

(v)

(vi)

(vii)

A demand has been raised from the Company in respect of general sales ta.x recoverable on supply of energy to steel melters amounting to Rs. 74 1 million. The case has been decided in favor of the Company by the Commissioner Appeals and directed the department to verify the amount recovered and in case of non-verification of any amount the same may be recovered from the respective registered persons along with default surcharge under section 34 of Sales Tax Act, 1990.

A demand has been raised amounting to R,s. 110.41\ million in respect of general sales tax recoverable on supply of energy to the Government of Azad J:tmmli & Kashmir (AJK). The Company is not charging general sales ta.x on sale of electricity to the Government of (AJK) as per the decision of the President of Pakistan dated 26 September 2002. However, department is of the view that no notification or amendment in law granting that specific exemption from charging general sales HI:< on sale of electricity to the Government (AJK) is available. The matter has been decided against the Company by the Commissioner Appeals. The Company has filed appeal, against the order of Commissioner Appeals, before Appellate Tribunal Inland Revenue (A l;IR).

A demand has been raised frbm the Company in respect of short payment of sales tax on an1ount received through demand notices amounting to Rs. 71 million. The matter has been decided against the Company by the Commissioner Appeals. The Company has tiled appeal, ngainst the order of Commissioner Appeals, before Appellate Tribunal Inland Revenue (A TIR).

A demand has been raised from the Company amounting to Rs. 39 million in respect of non payment of sales tax on "Operation offices gain on new connections" that is infect the differential of provisionnl demand notice and actunl equipment charges and income of non - utility opcr:uions. The matter has been decided against the Company by the Commissioner Appeals except for a relief of Rs 16.9 million.

Inland Revenue Department has raised a demand amounting to Rs. 1,235.8 million from the Company for the tax periods April 2011 to August 2011 and October 2011, on ground of alleged non-payment of sale tax collected from the steel mcltcrs and alleged illegal adjustment of such output tax against its input ta.x. The matter has been taken up by Company before the Commissioner Appeals. The matter has been set aside by Commissioner Appeals. However, the Company has prcft:m:d an appt:al before Appellate Tribunal Inland Revenue (ATIR). The Company's counsel is of the view that the matter will be decided in favor of the Company and accordingly, no provision has been made in these financial statements.

RTO Gujranwala has raised a demand of Rs 5.693 million along with default surcharge amounting to Rs 284.68 million for the periods from July 2009 to June 2011 in respect of general sales tax recoverable on tariff subsidy received from Government of Pakistan. The matter has been decided against the Company by Commissioner Inland Revenue (Appeals). However, the Company has preferred an appeal before Appellate Tribunal Inland Revenue (A TIR). The Company's counsel is of the view that the matter will be decided in favor of the Company :md accordingly, no provision has been made in these linancial stalcrnents.

During the year, FBR forcefully withdrt:w Rs. 43.52 million Company's bank accounts against default surcharge of Rs. 284.68 million as explained in preceeding paragragh.

/11cnmp Tnx

(vii i) Inland Revenue Department has raised a the demand from the Company amounting to Rs. I 02.5 million for tax year 2007, by disallowing brought forward losses up to February 24, 2007 (i.e. exempt period), provision for slow moving stores & spares and certain other expenses under section 2 l(c) of the Income Tax Ordinance, 200 I. The· matter has been decided in favour of the Company. However the department has filed an appreal in Appellate Tribunal Inland Revenue (ATIR). The Company's counsel is of the view that matter will be decided in favor of the Company, Accordingly no provision has been made in these financial statements.

(ix) Inland Revenue Department"hns raised a demand from the Company amounting to Rs. 27.9 million and Rs. 35.8 million for tax years 20 I 0 and 2011, respectively. The demand has been raised on the ground that tariff differential subsidy from GOP is part of gross revenue for calculation of minimum tax under section 113 of the Income T:>.x Ordinance, 200 I. The mat1er has been decided against the Company by the Commissioner Appeals for tax year 20 I 0 while pending for tax year 2011. However, the Company has taken up the matter to ATIR for :ax year 20 IO and Company's counsel is of tht: view that mattt:r will be decided in favor of the Company. Accordingly no provision has been made in these financial statements.

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l? Pr<iperty, pbnt and equipmtnt

();>crating fixed assets- ta'l£iblc Capiul \.\ Ork in progress

12.1 Operating fix ed 2.sseU- t3ngib le

Tra nsrerrcd

fr om WAPDA

Particulars Undtr

Agreement

as on

OJ J uly

1998

L3I1d - freehold 29,050,506

Bui ld ing on freehold land 225,461,02 5

Furniture and fL"\."'t\.J.res 2,73 0,458

Distribution eqLl !pmcnt 4,596,020,025

Mobile plant equipment 163 ,918

Tools, plant an j equipment 43,305,782

Vehicles 210,925,584

5,107,658 ,308

lCh-KSv.

-I - 1. -) -J -r

Co.st

Addi 1ion.1' (deletio ns) theru rl er

l 'p to last During \C3r the~

~OJ.J 72,693

920,468,798 80,507 ,368

13 ,853, I 82 2,668,773

2J,555,850,860 3,546,495,757

23,399,826

121,593,164 9,452,1 86

23J,6S8,892 5,184,615

(1,027,348)

26,271.227,415 3,643,2 81,351

As on

JO Jun e

2013

4 j0,423 , I 99

1,216,43 7,191

19,252,41 3

32,698,366,642

23,563,754

174,352,132

449,771 ,743

35,022,167,074

Note

I 1. 1

11.1

T ran.sf e rred

from WAPDA

Under A greeme nt

a.son

01 July

1998

6 1,758,809

748,098

1,258,93 6,440

44,9 14

11 ,865,3 12

57,787,152

1,391,1 40,715

-I 2013

Rupees

24,513,210,870 6,901,511,509

31,414,722,379

2013

-I 2012

Rupees

-)

21,992,059,209

2,810,555,952

24.802 615. 161

Depreci at ion

-I -·

Adjustment.J./

Depreci ation E1 pense (deleti ons) there.afte r

Lip to lut During Up to J.,t Durin g \ 'C.lr ~ear year the year

Rupees

170,279,421 22,969,004 53,463,570

9,863,491 1,204,480 (l ,020, IJ2)

6,S8 1 ,972,7~0 1,066,004,736 499,925,689

11,268,783 1,8 17,672 2,566.193

I 09, 153 ,456 8,953,957 (6,363, 198 )

299,6S3,3 J 5 21,371,718 (35,1 07,529)

(191 ,87;)

7,482,22 1,206 1,122,32 1,567 513,464,583 (191,877)

-I -) ... , ..

DOOK

VALUE .~on ASO:"I llltc

JO June 30 JU1'E % :?0 13 2013

430,423, J 99

.JCS,470,SC4 917,966,38 7

10,7S5,9:7 8,456,486 JO

9,7C-5 ,S39,605 22,991,527 ,037 3.5

I 5,697,552 7,866, 192 10

I ~ 3 . 609,5 27 50,742,605 JO

3.:3 ,S-U,779 I 06,228,964 10

10,5 08,956.104 :?4,513,210,870

Iii - •• ..

2012

Cort Depreciation

Trarufcrnd Transferred fromWAPDA from WAPDA

PanjcuJars Under Under BOOK

Agreement Additions/ Asrec:mcnt Adjwtmenu/ VALUE

as on (d<letions) thereafter As on as on Depreciation Expense (deletions) thereafter As on ASON Rate 01 July Up to last During 30 June 01 July Up to last During Up to last During JO June JO JUNE ~ ..

1998 year the year 2012 1998 year the year year the year 2012 2012 - Rupees

Land - freehold 29,050,506 394,6 J8,J08 6,754,585 430,423, 199 430,423, I 99 Building on rreehold land 225,4 6 J ,025 859,683,334 60,785,46-1 l, 145,929,823 6 J,7 58,809 148,650,277 2J,629,144 53 ,463,570 285,501,800 860,428,023 Furniture an..:! fixtures 2,730,458 12,443,977 1,409,205 16,583,640 74 8,098 8,723, I 53 1,140,338 (1,021,143) 1,001 9,591,447 6,992,1 93 10 Distribu1ion equipment 4,596,020,025 21,003,2 28,4 J 5 3,552,622,445 29,151,870,885 1,258,936,440 5,93 1,6-10,4 86 950,3 32,254 50 1,793,520 (1,867 ,83 1) 8,640,834,869 20,5 J I ,036,0 16 3.5 Mobile plant equipment J 63,928 23,3 95.226 3,60'.) 23,5 63,754 44,914 9,519,373 J,749,4JO (61,3 07) 2,627,500 13,879,890 9,683,864 JO Tools, plant and equipment 43,3 06,782 106,323, J46 15,270,0 18 164,899,946 11,865,J J 2 I 01,596,2 J 5 7,557,24 1 (7,507,527 ) J,J 44,329 J J4 ,655,570 50,244,376 JO Veh icles 2 J 0,925,584 173,268,909 6J,4J9,983 445,6J4,476 57,787,J 52 28 J ,983,73 I J 7.699,584 (38,J58,2 J7) 3,050,658 322,362,938 J 23,25 J ,538 JO

5.J07.658 .308 22.572 962 . J J 5 3.698.265.300 3 J .3 i8.885.723 J .391.140.72 5 6,482. J J 3.235 J.OOO. J07.97 J 508.508 896 4.955 .687 9.386.826.5 J4 2 J .992.0S9.209

12.J.1 As expla ined in note 1.2, the p:opcny and rights in the above 2s~ts were transferred to tJ-.c Compa1y on 0 1J uly 1998 by \VAPDA in accord.a.nee with the terms and conditions of the Business Transfer Agreement between WAPDA an.:! the Company. Hov.ever. the proc.ess oftraru!"er of titles of the freehold land a"'\d 'chicles in the name of Company in the land revenue records and v.:ith registr2tion au!.hority respectively is in progress.

12.1.2 The depreci.3.tion charse for~ year has been allocated a.s foll ov.s:

Distribution expenses Admini strative expenses

12 .2 Capital ~·ork in progress

Civil works Dis tribut ion equipment

Distribution equipment against deposit works Work.s under Asian. Development Bank a,d Expert L<nport Ba.'lk of Korea Joan

Stores held for capital expenditures

J2.2.I This includ.s material in traruit amount ing to Rs Nil million (20 J 2: 86.04).

Nott

]J 24

J].] .J

2013 20 J 2

Rupc-e:! Ru~cs

1,054,966,494 940, JOJ,492 67.355.073 60.006 479

1, 122.321,567 1.000 J07 97 J

37,846,037 44,047,426

l,J 75,950,465 l ,04 1,J 62,390

834,730,259 675,565,4 52

4:146,853,949 597,9J 8,968

706, I 30, 799 45 J,S6 1,7J6

6,901.5 11 ,509 2,8 J 0,555.952

12-3 The cost of the assets 3.S on 30 June 2012 include fully deprcc i.a:ed assets amounting to Rs . 391 .3::! million (20 12: Rs. 365 .07 million) but arc st ill in use of L1c Compa.'1y.

12.4 Owing the year, borrO\\·ing cost amounting to Rs. 245.76 mil lion (2012: Rs. 50.42 milli('fl) has been included in the cost of capital work in prosress.

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13

14

IS

2013 2012 Note Rupees Rupees

Long term loans - considered good

To employees House building I purchase or plots I R0,2114,745 130.315,770 Vehicles 21,144,293 10,735,566

13. I 201,429,038 141 ,05 1,336

Less: Current portion of long term loans 16 22,257,333 13,662,702

17911 7 11705 127 388.634

13. 1 Loans for house building and purchase of plots arc recoverable in 10 years, car and motor-cycle loans in 5 years and bicycle loans in 4 years. Interest is charged on these advances at the same rate as that payable on employees' balances in General Provident Fund maintained by W APDA. Loans are secured by mortgage of immoveable property and hypothecation of vehicles.

Stores nnd spares

Distribution equipments Grid station equipments Onice supplies

Less: Provision for slow moving stores and spares

14.1 Balance of provision as on 01 July Reversal for the year Balance of provision as on 30 June

Trnde debts

Considered good - Billed - Unbilled

Considered doubtful - billed

Less: Provision for doubtful debts

Note

/ ./.I

15.2

20.2

15.3

2013 Rupees

730,874,915

1,998, 136 722,489

733,595,540 8,917,344

7241678.196

9,947,896 (1,030,552) 8,91 7,344

7 ,25 1,386,586

7,715,708,499

14,967 ,095,085

209,326,219

15, 176,421,304

209,326,219 14,967 ,095,085

15.1 Trade debts arc secured lo the extent of corresponding consumers security deposits.

2012 Rupees

833,711,261 3,274,J 13 6, 160,087

843,145,661 9,9117,896

833, 197.765

23,541,874 { 1 3 ,593 .978~

9,947,896

6,086.729.976 7,628,792,946

13,7 15,522,922

184,072,236

13,899,595, 158 184,072,236

13.715.522,922

15.2 This includes Rs. 2,546.20 million (20 12: Rs. 1,711.19 million) receivable from the Government of Azad J:lmmu and Kashmir (AJK) on account or electricity sales. As per agreement executed between W APDA, GOP and Government of AJK, the tariff rate as fixed at Rs. 4.2 per unit with effect from September 2002. Out of this tariff rate Rs. 0.71, Rs. 2.44 and Rs. 1.05 per unit were to be borne by WAPDA, Government of AJK and GOP, respectively. Ti ll Mnrch 2007, the Company billed electricity to the Government of AJK at the tariff rate ns per the agreement and payments were cleared, accordingly. Subsequent to Mnrch 2007, the electricity is bi lled to Government of AJK at tariff rntes notified by GOP after determination by NEPRA. The accumulating balance receivable from Government of AJK represents the difference between rates applied on electricity bills to Government of AJK based on tariffs notified by GOP after dcterminntion by NEPRA and the tariff approved by the sub-committee on Raising of Mnngla Dam project. The tariff determined by the sub-committee was Rs. 2.32 per unit, which was increased to Rs. 2.59 per ~m it subsequent ly. Government of AJK claims, it docs not fall under the purview of NEPRA, hence, it hns been settl ing its dues at the tariff rates determined by sub-committee. Mnnagcmcnt has tnJ.:cn up the matter with Ministry of Water and Power, who is entering its resolution and accordingly, no provision has been created agninst the recoverability of this amount in these financial statements .

. i ') . i

Note 15.3 Provision for doubtfu l debts

Opening balance Oad debts written off

Provision for the year 2-1

16 Short term loans and advances

Advances to employees against salary

- Considered good

- Considered doubtful

against expenses - considered good

Less: Provision for doubtful advances to employees

Advances to suppliers/ con tractors - considered good Current portion of long term loans - considered good 13

17 Other receivables

Duties/charges and taxes receivables I 7. I Tarif subsidy reccivcable from GOP 17.2 General sales tax receivable from GOP General sales tax protected recei vable from GOI' Sales tax (paid under protest) I I {vii)

Agricultural subsidy receivable Pension receivable from associated undertakings Store shortages recoverable from employees 17.3 Due from WAPDI\ and other associated undertakings 17.4 Advance tax Capital contribution receivable against i~stallment connections Others

17.1 Duties/charges and taxes receivables

Receivables not yet rea lized General sales ta'\ - steel mcltcrs Neelam Jhelum surcharge Electricity duty Withholding income tax PTV license fee Equalization Surcharge

Payables not yet realized General sales tax - steel mclters Ncelam Jhelum surcharge Electricity duty Withholding income tax PTV license fee Equalization Surcharge

-----------

2013 Rupees

184,072,236 6 1,747

184,010,489 25,315,730

209,326,219

4,464,845

935,527 5,400,372 3,496,356 8,896,728

935,527

7,961,201

19,717,228 22,257,333

4919351762

7,697,276,255 1,938,890,335

566,711,967 43,520,428

514,437,370 847,985,076

22,579,310

163,068,905 291,930,341

93,776 135,8341450

12,222i328,213

573,240,807 113,146,620 48,293,351

171,688,341 39, 130,748 43,718,327

989,218,194

573,240,807 113,146,620

48,293,351 171,688,341 39,130,748 43,718,327

989,218,194

201 2 Rupees

154,548,310 576,332

153,971,978

30,100,258 184,072,236

2,548,561 . 935,527 3,484,088 4,272, 124 7,756,212

935,527

6,820,685 29,860,987 13,662,702 50.344.374

833,253,63 7 567,021,257

514,437,370 628,895,245

22,002,600 181,048,629 88,254,784

143,014 143, 111.438

2978167974

570,253,264 98,526,053 49,413,337

225,895,049 40,646,266 52,192,760

1,036,926, 729

570,253,264 98,526,053 49,413,3 37

225,895,049 40,646,266 52,192,760

1,036,926,729

': .. ·;

Ii

-•• • • I . .

II II 111-

11

• • Ii Ii

• • • • • II ••

17.2

17.3

17.4

Tarif subsidy receivcable from GOP

Opening balance

Subsidy receivable accrued during the year

Less: Amount received/adjusted

adjusted against Tf-C

Closing balance

Store shortages rccovcrahlc from employee~

Considered good

Considered doubtful

Less: Provision for doubtful recoverable

Due from \VAPDA and other associated untlertal<ings

WAPDA - Welfare Fund

Director (Hyde! Development)

Quctta Electric Supply Company Limited (QESCO)

Islamabad Electric Supply Company Limited ( !ESCO)

Hydcrabud Electric Supply Coillpany Limited (HESCO)

Jamshoro Power Generation Company Limited (GENCO- I)

Central Power Generation Company Limited (GENC0-2)

Northern Power Generation Company Limited (GENC0-3)

Lakhra Power Generation Company Limited (GENC0-4)

Tribal Electric Supply Comp:iny Limited (TESCO)

2013 Rupees

(729,348,989)

31,447,168,647

30,717,819,658

(23,020,543,403)

7,697,276,255

22,579,310

23,835,896

46,415,206

23,835,896

22,579,310

127,604,364

76,978

4,050,354

19,634,972

985,971

271 ,001

1,277,856

8,709,913

445,087

12,409

163,068,905

2012 Rupees

(3, 700,570,559)

15,147,352,650

11,446,782,091

(9,549,886,080)

(2,626,245,000)

(729,348,989)

22,002,600

23,835,896

45,838,496

23,835,896

22,002,600

151,483,556

76,978

3,193,707

l &,118,723

792,851

192,309

1,037,786

5,818,214

330,614

3,891

181,04 8,629

: '

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18

19

20

Short term investm ents - held to m:iturity

These represent term deposits with brinks carrying mark up at 9.35% to 12.71% (2012: 11.6% to 12.71%) per annum maturing during the next twelve months.

Note 2013

Rupees

2012 Rupees

Cash and brink balances

Cash in hand 691 875

Cash with banks on: Deposit accounts Current accounts

19. l 250,033,562

585,143,219

748,840,272

466,728,647

835,176,781 1,215,568,919

835, 177 ,4 72 1,215,569,794

19.1 Profit on balances in deposit accounts ranges from 6% to 10% (2012: 5% to 14%) per annum.

2013 2012

Note Rupees Rupees

Sa le of electricity

Sale of energy

Sale of electricity - Gross 20. J 61,279,370,049 63,342,625,495

Less: sales tax (9 ,472, 733, 758) (9,963,967, 144)

Sale of electricity · Net 51,806,636,291 53,378,658,3 51

20.1 Sale of energy

Sale of energy includes Rs 2,792.91 million (20 12: Rs 9,687.54 million) relating to fuel price adjustment out of which Rs. 2,229.90 million (2012: Rs. 5,668.37 million) has not been billed to the consumer.

20.2 The Honorable Lahore High Court in i1ts order datt:d 28 January 2013, in case of writ petition number

26524/20 11, has withheld the recovery of fuel price ndjustment (FPA) charged to domestic consumers having electricity consumption up to the extent of 350 units per month. The Honorable Court made the following judgement:

"The domestic consumers who rm.: consuming 350 Units or less per month arc not liable to priy the fuel adjustment price and the respondents are bound to refund the already recovered fuel adjustment charges to them or may adjust the refundable amount in future monthly bills."

The Company has filed an appeal before the Honorable Lahore High Court which has granted slay order agianst the said matter. The National Electric Power Regulatory Authority (NEPRA) has also asked the DISCOs lo comply with the order of Honorable Lahore High Court .

In light of the above, the Company is/ will not be able to bill the FPA amounting to Rs 4,477. I 0 million for the period from August 20 11 to March 2013 to the domestic consumers having electricity consumption up to 350 unit per month. Pending the final outcome, the Company has recognized the revenue amount to Rs. 1,079.58 million relating to current period and Rs. 3,397.52 million upto lo 30th June, 2012 and related receivable amounting to Rs 4,477. I 0 million on the basis that it will be able lo recover this amount by way of subsidy from the Government of Pakistan as directed by NEPRA in its determination for financial year 2012-13 .

_. ·~ .

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l. • •

r . ' .

111·"

ii .. Y:

21

22

23

24

This represents the Tariff Subsidy receivable from Government of Pakistan (GOP) in pursuance of the determination issued by National Electric Power Regulatory Authority (NEPRA) on 27th March 2013. This is the difference between rates notified by NEPRA and the rates charged to the consumers in accordance with the tariff notification issued by Government of Pakistan on 6th August 2013.

Co~t of electricity

22.1 Electricity purchases during the year have been incorporated according to invoices issued by NTDC/CPPA and adjusted in accordance w.ith monthly fuel jprice adjustment determined and notified by NEPRA. The average rate for the year was Rs. l 0.63 (2012: Rs. 9.99) per Kilo Watt Hour (KWH).

22.2 During the year, the Company has received final invoice on account of cost of electricity delivered to GEPCO for the year 2011-2012. The differential cost of electricity has been treated as change in accounting estimate and adjusted prospectively as per l.ntcrnational Accounting Standard 8 (!AS 8) "Accounting Policies, Changes in Accounting Estimates and Errors". Consequently, payable to Central Power Purchase Agency (CPPA) as at 30 June 2013 has been decreased by Rs. 869.84 million with a corresponding decrease in cost of electricity and general sales tax receivable of Rs. 794.30 million and Rs. 75.53 million respectively. The average rate of Rs l 0.63 for the year as mentioned in note 22. I docs not include the effect of this adjustment.

Distrilrntion expenses

Salaries, wages and other benefits Repair and maintenance Rent, rates and taxes Power, light and water Postage and telephone

Note

Reversal of provision for slow moving stores and spares J ./. J Office supplies and other cxpcm;cs Traveling and conveyance Vehicle running and maintenance Insurance - grid station Advances written off Depreciation Professional fees

Less: expenses capitalized

Administrative expenses

Salaries, wages and other bcneli ts .Power, light and water Postage and telephone Office supplies and other expenses Traveling and conveyance Vehicle running and maintenance Provision for doubtful debts - energy debtors Electricity bills collection charges Professional fees Auditors' remuneration Depreciation Advertisement and publicity Other charges

12.1.2

15.3

12./.2

2013 2012 Rupees Rupees

4,845,239,938 3,887,410,989 641,979 ,933 476,259,394

2,217,927 1,793,326 13,062,401 12,88 1,180 14,807,627 11,336,443 (1,030,552) ( 13,593,978) 14,371,839 13,692,091

159,101,865 125,208,747 151,369,498 122,139,688

11,450,966 11,316,215 655,223 463,107

1,054,966,494 940,101,492 IR 219 001 11.591.299

6,926,412,160 5,600,599,993

66.711.238 34.973.270 6,859,700,922 5,565,626, 723

1,401,380,722 1, 152,097,660 7,410,782 6,677,971 5,746,791 3,114,723 .

50,044,213 51,370,485 50,440,488 40,093,203 70,495,191 52,202,013 25,315,730 30,100,258

204,805,968 171,507,256 29,340,386 29,908,700

1,000,000 800,000 67,355,073 60,006,479 4,115,504 10,771,677

15,036,550 2,176,228 1,932,487,398 1.610.826.653

-

2013 2012 Note Rupees Rupees

25 Other income

Income from financial assets Income from non-financi:il assets

25.1 Income from fin:incia l :issets Return on bank deposits

25.2 Income from non-fin:inci:il :isscts

Meter I service rent Reconnection fees Surcharge on arrears of electricity sold Gain on installation of new connections/ deposit works Gain on sale of scrap Commission on electricity duty PTV commission Non-utility operations Insurance claims Miscellaneous

25. I 25.2

273,764,343

1,171 ,837,443 1,445,60 I , 786

273,764.343

36,448,942 4,471,421

724,741,719 86,524,982

50,097,903 17,618,166 99,189,995

137,364,831

2,363,063 13,016,421

1,171,837,443

213,295,964

1,239,858,555 1,453, 154,519

213,295,964

39,472,408 2,652,025

723,454,961 I 24,8 15,805 81,614,091 17,534,290 91,054,720

143,029,370

3,414,507

12,8 16,378

I .239.858.555

26 Finance cos t

Interest on long tem1 loans Dank and other charges Exchange gain

149,897,312

2,198,550 22,272

152,1 18,134

180,635,253

16,265,041

196,900.294

27 Rcmuncrntion of Chief Executive :ind Directors

28

The aggregate an1otmt charged in the lin:mcial statements for the year in respect of remuneration including certain benefits to the Chief Executive of the Company is as follows:

Managerial remuneration Other perquisites

2013 Rupees

3,110,868 216,845

3.327,713

In addition, Chief Executive is also provided with company maintained vehicle and free accommodation.

2012

Rupees

1,701,768 88,238

1.790.006

The aggregate amount charged in financial statements for the yenr ag:iinst meeting fees of !3oard meetings was Rs. 0.63

million (2012: Rs. 0.25 million).

2013 2012 Note Rupees Rupees

Taxation

Current For the year 28.I 9,843,117 9,066,023

Prior years 15,653,151

9,843, l l 7 24,7 19,1 74 Deferred

9 843 11 7 24.7 19. 174

29

30

28. I This represents final tax on commission income on collection of PTV fee.

28.2 In view of the available tax losst:s, no provision for taxation has been mnde during the current yenr (2012: Nil). Furthermore, for the purpose of calculating minimum tax under section I 13 of the Income Tax Ordinnncc, 2001, f-'edcral Board of Revt:nue through SRO 171 (I/2008) has directed that purchase price of electricity shnll be excluded from the turnover li ab le to minimum tnx up to the ycnr 2013.

Cash generated from operations

Profit I (loss) before taxation Adjustments for non-cash charges and other charges:

Depreciation Amortizntion of dckrrcd credit Return on tcnn deposits Provision for doubtful trade debts Gain on installation of new connections/ deposit works Reversal of provision for slow moving stores and spare parts Provision for employee benefits Finance cost Advances written off

Working capital changes

29.1 Worlcinc cnpitnl changes

Decrease I (Increase) in current assets: Stores and spare parts Trade debts Short term advances Other receivables

Increase in current liabi lities: Trade and other payables

Transactions with related parties

Nole

29.I

2013 Rupees

6,573,061,933

I, 122,321,567 (540,884,764) (243,448,297)

25,315,730 (91,565,808) (l ,030,552)

2,186,021,288 149,897,312

655,223

(6,218,540,237) 2,961,803,395

109,550,121 (I ,276,887,893)

8,348,020 (9,040,484,682)

3,980,934, 197 (11,218,540,237)

2012 Rupees

(6,414,433,566)

1,000, 107,971 (506,542,589) (160,113,391)

30,100,258

(13,593,978) 1,3 76,553,53 7

180,635,253 463,107

6,490,725,454 1.983.902.056

543,868,693 ( 4,873,530, 787)

97,981,175 ( 1,003,875,481)

11 , 726,281,854 6,490,725,454

Transactions with related parties arc priced at arm's length. Prices for transactions with related parties arc determined on the basis of comparable uncontrolled price method. The sale and purchase prices of electricity arc controlled by the National Electric Power Regulatory Authority (NEPRA).

The related parties comprise of W APDA, associated companies, directors of tht: Company, companies with common directorship and key management personnel. Detail of transactions with related parties, other than those which have been specifically disclosed elsewhere in these financial statements are as follows:

Nature of transnctions

As.rncinl erf 1111dertnki11gs

Electricity sales Electricity purchases Services Purchase of material Sale of material

Remuneration to key management personnel

2013 Rupees

28,106,650 77,578,477,549

52,325,427 35,794,705 45,022,995

50,852,312

The transactions with key manngement under the terms of employment arc excluded from such transactions.

2012 Rupees

23,738,758 77,387,316,737

44,459,121 29,031,850 7,737,001

42,734,325

31

". "

Financial Instruments

The Comoanv has exoosures to the following risks from its use of financial instruments:

Credit risk Liouiditv risk Market risk

The Board of Directors has overall responsibility for the establishment and oversight of Company's risk management framework. The Board is also responsible for developing and monitoring the Company's risk management policies.

31.1 Credit risk

Credit risk is the risk that one party to a financial instrument will fa il to discharge an obligation and cause the other party to incur a financial loss, without taking into account the fair value of any collateral. Concentration of credit risk arises when a number of counter parties arc eneaged in similar business activities or have similar economic features that would cause their ability to meet contractual obligations to be similarly afTectcd by changes in economics, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the Company's performance to developments afTecting a particular industry.

£~ansure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was domestic only nnd was as follows:

Loans and advances to employees Trade debts Advances to suppliers Profit accrued on bank deposits Other receivables Short term investments Cash at bank

2013 Rune cs

209.390.239 14,967,095.0RS

19.717.228 90,364.944

12.222.328.213 2.200.000.000

835, 176, 781 30,S44,072.4?0

2012 Rupees

147,872.021 13, 715.522.922

29.860.987 59.477.647

2.978.167.974 1.700.000.000 1,215.568,919

19 846 470 470

Gcoeraphically there is no concentration of credit risk ns the Company operates in the same gcographicnl area and the Company believes that it is not exposed to major conccntri1tion or cred it risk.

3 I. I. I The maximum exposure to credit risk for advances lo employees and tr;1dc receivables by type of product· al the rcpMing dntc wns:

Loans amt advances to employees Electricity consumers

20lJ

Rupees 2012

Rupees

20'>.~ 147 872 021 14,'167,09S,OllS 13,715522,922

Trndc debts arc secured to the extent of corresponding consumers' security deposits neainsl clcclricity connection. Advances lo employees arc secured against mortgage of house I plot and hypothccation on vehicles for which loans were sanctioned. The Company has arrangements with all the financial institutions for collection of bills from consumers_ The Company has issued standing instructions to oil these finnncinl institutions to transfer funds in the main account. At the end of the day the Company has funds lying in the bank accounts of financial institutions with high credit ratings. The Company nsscsscs the credit quality of the counter parties as satisfactory. The Com pony does not hold any colluteral as security against nny of its financinl ns.scls other thnn trade debts nnd advances to employees.

31.1.2 Short term investment comprise of term deposit receipts (TDRs) obtained from difTerenl financial institutions. These arc carried at face values. Long tcnn and short term credit ratings of these financial institutions arc as follows:

Long term Short term Rntini:: Agency

Habib llank Limited AAA Al+ JCR-VlS Allied Bank Limited AA+ Al+ PACllA Bank of Punjab AA· Al+ PACRA National Bank of Pakistan AAA Al+ JCR-VlS United Bank Limited AA+ Al+ JCR-VIS

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31.J.3

31.2

lmpMirmcnt losses

All trade debts as at the balance sheet date arc domestic consumers.

The aging of trade rece ivables at the reporting date is:

Not past due date

Past due 0 - 180 days Past due 180 - 365 days 1 • 3 years More thnn 3 yenrs

Less: Provision for doubtful debts

2013

Rupees

10,911,134,684 1, 772,899,617

52,418,486 605,083,564

1.1134.1184,953 I 5, 176,421,304

(209,326.219) 14,967,095,0115

2012

Rupees

11,021,964,849 1,1 43,474,730

116,878,172 585,927 ,848

1,031.349,559 13,899,595, I 58

( 184,072,236) 13 ,715.522,922

Oased on past experience the manai;ement believes that provision for doubtful debts is made in full against all permanently disconnected consumers, full provision is made ui;ninst the bulnnccs (other than i;ovcmmcnt debtors) outstanding for more than one year. Movement in the provis ion in respect of the trade receivables during the year is as disclosed in note 15.3.

The Company's exposure to credit risk is influenced mainly by the individual characteristics of eoch customer. As public interest company, it is liable to provide electricity connections to all of the customers falling within its distribution area. Credit risk is be inc managed by erfcetivc and cont inuous monitoring of its receivables and disconnection of electric ity.

Concentration of credit risk arises when a number of counter parties nre cni;ai;cd in similar business nctivities or have similar economic fea tures that would cause their abili ties to meet contractual obligation to be similarly erfected by the chnnges in economic, political or other conditions. The Company believes that it is not exposed to major concentration of credit risk as the consumers of the Company ore of diversified nature, which include domestic, commercial, agriculture, industrial and bulk rate consumers. The Company bel ieves that it is not

exposed to significant credit risk except to the extent of receivables from its rlefoulted consumers. The Company deals with regulnr and permanent consumers who normally make payments in time.

Llou ldl tv risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company's approach to managing liquidity is to ensure, as for as possible, that it will always have su ffic ient liquidity to meet its liabilities when due, under both

nonnal and stressed conditions. For this purpose financial support is available to the Company from Federal Government. Further liquidity position of the Company is closely monitored through budgets, cash flow projections and comparison with nctual results by the Board.

The followi ng arc the contractual maturities of the finanJial liabilities. including estimated interest payments:

Curryi ng nmouut Cont rHChrnl C"sh

nows Less than siA.

months

2013 Up to

one yenr Two to

live yen rs Over

live ycnr.1

------------------------------------------------··------n u P c cs------------------ ----

Flnnnclnl llnhl/ltlrs

Lone term financing 4,832,608,434 -( 4,832,608,434) (211,955,048) (1 11,437,754) (891,502,032) (3,61 7,7 1J,600)

Security deposits 2,749,039,352 (2,749,039,352) (2,749,039,352)

Trade and other payables 37,848,372,177 37,857,474 ,114 (37 ,848,372,177)

Interest accrued 572,438,959 (572,438,959) (404 ,117,540) (168,321,419)

46,002,458,922 29, 703,387,369 (38,464,444, 765) (111,437,754) (891,502.032) (6,535,074,371)

2012 Carrying Contractual Less than six Up to one Two to Over nmount cash nows months year five years five years

-------------- -------------··Ru pees-----·------------··--·----·------ ---·-

Financial liabi/irie.t

Long tcnn fi nancing 1,778,665,815 (3,823 ,820,332) (481 ,747,557) (208,878, I 78) (1,449,478,300) (1,683,716,297) Security deposits 2,418,022,838 (2,4 18,022,838) (2,41 8,022,838) Trade and other payables 33,785,795,987 (33,785,795,987)

Interest accrued 239 ,242,572 (239,242,572) (239,242,572)

38.221,727.2 12 (40,266,881, 729) (720.990, 129) (208,878, I 78~ ( 1,449,478.300~ (4.101 ,739,135)

The contractual cash nows rclatini; to the loon related linnncial liabilities have been determined on the basis of mark-up rates effective; as ut 30 June. The rntcs of mark-up have l>ccn disclosed in note 7 to these financial s tatements . .

..

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31.3

31.3.1

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Company believes that it is not exposed to any significant market risk.

Interest rate risk

At the reporting date the., interest rate profile of the Company's significant interest bearing financial

instruments was as follows:

Effective rnte Car!)'.ing amount 2013 2012 2013 2012

Fixed rate instruments % % Rupees Rupees

Financial assets Short term investment 9.35 - 12.7 11.6 - 12.71 2,200,000,000 1,700.000,000

Financial liabilities Long term financing IS - 17 15 - 17 (4,333, 108,434) (1, 179,265,815)

Variable rate ins truments

Financial assets Bank balances - deposit accounts 6 - 10 5 - 14 250,033,562 748,840,272 .

Financial liabilities Long tcrni financing 10.96 - 13.49 13.37 - 15.14 (499,500,000} (599,400,000)

Fair value sensitivity analysis (or fixed rate instruments

The Company does not account fo r any fixed rate financial assets and liabilities at fair value through profit and loss. Therefore a change in interest rates at the reporting date would not affect profit and loss account.

Cash aow sensitivity analysis (or variable rate iflstruments

A change of 100 basis points in interest rates at the reporting date would have increased/ (decreased) the

profit for the year by the amounts shown below. This analysis assumes that all other variab les, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2012.

As at 30 June 2013

Cash flow sensitivity-Variable rate financial ins trument

As at 30 June 2012

Cash flow sensitivity-Variable rate financial liabilities

Pro tit :ind loss t 00 bp Increase Rupees

2,494,664

I 494 403

Decrease Rupees

2,494,664

I 494.403

The sensitivity analysis prepared is not necessarily indicative of the effects on profit/ (loss) for the year and assets I liabilities of the Company.

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31.3.2 Other price risk

Other price risk is 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).

The Company is not exposed to any other price risk at the reporting date.

31.3.3 Fair value of financial instruments

The carrying values of other financial assets and financial liabilities reported in balance sheet approximate to their fair values .

31.3.4 Operntional risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Company's processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behavior. Operational risks arise from all of the Company's operations.

The Company's objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Company's reputation with overall cost effectiveness and to avoid control procedures

that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within the Company. This responsibility is supported by the development of overall Company standards for the management of operational risk in the following areas:

requirements for appropriate segregation of duties, including the independent authorization of transactions

requirements for the reconciliation and monitoring of transactions

compliance with regulatory and other legal requirements

documentation of controls and procedures

requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified

requirements for the reporting of operational losses and proposed remedial action

development of contingency plans

training and professional development

ethical and business standards

risk mitigation, including insurance \.Vhcre this is effective

31.3.S Capitnl management

The objective of the Company when managing capital is to safeguard its ability to continue as a going concern. The Company is not exposed to any external capital requirement. As public interest entity financial support is nvnilnble to the Company from focdcral Government nnd W APDA in the form of delayed settleme~t of CPPA against electricity purchase, tariff revision and subsidy on purchases.

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32 Corresponding figures

Corresponding figures have been rearranged, wherever necessary, for the purpose of comparison, however, no significant reclassification has been made.

33 Number of employees

34

35

The Company has employed following number of persons including permanent and contractual staff:

- As at 30 June - A vcragc number of employees

Date of authorization for issue

2013 2012 (Number of persons)

13,191 13,284

13,376 13,413

These financial statements were authorized .for issuance by the Bonrd of Directors of the Company I

Fi1?ures

figures have been rounded off to the nearest rnpce except where stated.

Lahore Chief Executive

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