Nokia, CNN announce plans for intel partnership

The US tv channel CNN and Nokia on Thursday announced a multi-level international collaboration where Nokia becomes a key part of CNN's roster of mapping providers, delivering its rich mapping services to the international news network. The collaboration harnesses the companies' strengths in global newsgathering, user-generated content, mapping technologies, and location-based services. The collaboration debuted with the use of Nokia's 3D Maps across CNN's platforms in its recent coverage of the British royal wedding.

"This collaboration is a great fit for us as both companies share a similar philosophy on connecting people beyond borders through the combination of compelling news content and highly sophisticated technology," said Tony Maddox, Managing Director, CNN International. "The international scale of each of our businesses makes the scope of the collaboration particularly exciting."

"Nokia and CNN share the belief that news is now mobile, powerfully democratic, and can immediately be shared by people around the world," said Jerri DeVard, Chief Marketing Officer, Nokia. "We are pleased that CNN wants to use Nokia's innovative mapping services for its international news platforms, and we are excited to work with CNN to deliver a compelling news service to users of Nokia phones."

The collaboration also includes the CNN App for Nokia which provides mobile access to CNN's world, business, sport, entertainment and technology reporting, as well as live streaming video. The app also allows users to share CNN's news via their own social channels, and participate in the reporting process with direct access to CNN's participatory news community, iReport. The CNN App for Nokia is available in Ovi Store.

Tight Gas Policy Approved

To overcome the prevailing energy crisis in the country, the Minister of Petroleum has approved the much-awaited ‘Tight Gas Policy (TGP)’.

The policy offers a price premium of 40-50% over the conventional wellhead gas prices in PP09 (Petroleum Policy 2009).  As per early estimates, country has Tight Gas (TG) reserves of approx. 40-50tcf (trillion cubic feet), separately from the recoverable balance reserves of 27tcf of the conventional gas.

On this count, we expect PPL (Pakistan Petroleum Ltd) and OGDC (Oil and Gas Development Co.) to be relatively well placed as compared to their peers. This is due to the fact that both have working interest in Sawan and Miano fields where the operator OMV has reported to have found traces of TG.

Estimated reserve of 40-50tcf

TG is a form of unconventional gas locked in extraordinarily impermeable, hard rock, making the underground formation extremely "tight." For this reason, TG requires more expensive unconventional drilling techniques and thus, requires higher incentives for E&P (exploration and production) companies to tap these reserves. 

Therefore, the recent promulgation of TGP, offering 40% premium over conventional gas prices as prescribed by PP09, has subdued a major hurdle in the development of TGR which are estimated to be around 40-50tcf in the basins stretching from lower Indus to Potwar region.

Furthermore, at current international oil prices level wellhead gas prices is estimated to be US$6.1-US$7.5 per mmbtu against PP09 levels of US$4.4-US$5.4 per mmbtu. Mover-over, per well CAPEX required is estimated to be US$19-20mn as compared to US$6-7mn for conventional drilling.

PPL & OGDC to benefit the most

The development will bode well for PPL on account of its working interest in OMV operated fields of Sawan and Miano, which has already reported discovery of TG. Furthermore, OGDC is also expected to benefit from the policy approval as it has 52% working interest in Miano field.  

However, we believe circular debt remains a major hurdle, which is refraining the companies to endeavor into high CAPEX exploration and development programs of TG. For this reason, we expect future Exploration & Development (E&D) activities to primarily focus on maximizing output from current fields rather than finding new hydrocarbon reserves.

Below Target E&D program in 10MFY11

During 10MFY11, OGDC is behind its current year target of 26 wells as the company has so far drilled 13 well during 10MFY11, while PPL has recently drilled its targeted 1 exploratory well target for the year. However, on account of firm oil prices along with augmented oil and gas production from existing fields, we maintain ‘Over-weight’ on the sector with ‘Buy’ on PPL and ‘Hold’ on OGDC,

Thanks T/L

Power Sector: FY12 budget expectation

With circular debt portraying itself as a major concern for energy sector along with current electricity shortages in the country, the budget FY11 will bode crucial importance for Power sector. In this report we present the expected measures for Power sector along with its impact on Hub Power Company, in upcoming ‘Budget FY12’. We expect the budget to be Neutral to Positive for the sector.

Expected Measures

§   We expect lower electricity subsidy of Rs170bn in the next budget compared to expected subsidy of Rs220bn during FY11 (target was Rs84bn). This is inclusive of interest on TFCs.

§   Government will maintain 17% GST on electricity.

§   Govt. would reaffirm its commitment to gradually phase out electricity subsidy and power sector restructuring in the upcoming budget as agreed with IMF.

Impact: Neutral to Positive

§         Despite the fact that government has raised electricity rates by 90% during last 3 years, cost of generation is still 35% higher than its selling rate due to higher oil prices.

§         Based on current oil and gas prices, cost of electricity is approx Rs10.4-Rs10.6kwhr (may vary due to inconsistent hydel power generation). While after adjusting for T&D losses the effective average consumer price is around Rs7.7kwhr.

§         In this situation, we expect the existing Rs100bn circular debt will grow to approx Rs220bn by the end of FY12 despite monthly 2% increase in electricity rates as planned by govt.

§         We believe complete elimination of electricity subsidy by 1HFY13. However, it can be eliminated earlier if there is a sharp decline in international oil prices. According to

our estimates if oil prices plunges to US$75-80 per barrel, the subsidy could be eliminated earlier.

§         For IPPs, their cash flows would be better in the beginning of the year but later on it will be affected due to accumulation of circular debt. 

   Outlook: ‘Over-weight’ maintained

In short-term, liquidity issues remain at the heart of power sector as we expect 70% of electricity shortfall is driven by circular debt led liquidity crunch. Currently, effective electricity capacity is 17500MW which after adjusted for transmission losses and idle hydel capacity stands at 14000MW. But due to fuel shortage amid liquidity concerns, the country is generating around 11000MW of electricity against an average demand of 15500MW.

However, during short to medium term government will continue to focus on new oil based power plants which would add expensive electricity to the national grid.  This will again set for another sequence of power tariff rate. Other wise, the circular debt will again grow unless oil price fall in global market.

IPPs earnings are based on fixed return formula under the pre-determined power purchase agreement. Resultantly, their profitability is not affected by any variation in fuel cost and the impact is passed on to Wapda. We maintain ‘Buy’ stance on Hubco which is offering Rupee IRR of 22% with dividend yield of 16% in FY12.

Thanks: T/L

Is Pakistan market closed?

Pakistan’s once vibrant and actively traded Karachi bourse that used to trade Rs40bn a day in cash (Rs28bn) and single stock futures (Rs12bn) on an average is on the verge of loosing its once famous slogan of most liquid market of Asia . This Rs40bn a day was ‘average’ of four years that is during 2005 and 2008. This period also saw an all time high volume of Rs216bn a day (US$3.7bn) on March 9, 2005.

According to the analyses of The Topline, the ground reality is that if recent trend of volumes continue it will take 6-months for brokers, exchanges, investors etc to see these volumes to surpass the record volume seen on one day on March 9, 2005. That is the revenue earned by the exchanges, brokers, government, etc on that particular day is now equal to revenue earned in 6 months.

Volumes are as low as when market floor was imposed

Interestingly the volume at Karachi market these days are as low as what investors used to trade when there was a three and a half month price floor in 2008. Though price discovery was an issue at the end of 2008 when regulators placed an infamous market floor, volumes in the off market were close to what it is now. That shows the depressing state through which local bourses are passing these days. In last 3 days average traded value at KSE was Rs1.7bn (in cash, off and derivatives market) compared to average volume of approx. Rs1bn at the time when market was practically closed down in Sep-Nov 2008 period.

CGT one of the main reason for low volumes

In FY11 which is coming to an end, the average volumes are Rs4.0bn in cash and Rs0.5bn in the futures market down 43% from FY10. The main reason for this lackluster activity is the imposition of CGT in July 2011 after a gap of more than 3 decades. Besides the fear of documentation, the complex computation method to arrive at the actual gain or loss is the major reason that has forced individual investors to leave the market. This can be verified from the fact that individual share in total trading has come to average 44% from around 54% before the imposition of CGT. And as a consequence of record low volumes many companies are deferring their plan to raise capital from the equity market evident by only one IPO in FY11 at the local bourse.

Turnover velocity one of the lowest in Asia

In terms of turnover velocity (volume divided by market cap) which is a better and relative measure of market depth, Pakistan’s turnover velocity last month was 22% compared to an average of Asian markets of more than 100%. Pakistan ’s turnover velocity in 2003 was at record 490% compared to Asian average of 80% making it one of the most actively traded markets at that time. These plummeting activities at capital markets have serious implications for capital formation and government’s objective to raise long term funds through the capital markets.

Directions for lauching drive against defaulters of electricity bills

The Federal Minister for Water and Power, Syed Naveed Qamar has asked all the power distribution companies (DISCOs) to start recoveries campaign and disconnect the electricity connection of the defaulters. He also asked the DISCOs to compile the consumer’s classification data and submit it to the Ministry within two days.

He made these directions while presiding over meeting of the CEOs of DISCOs held here today in the ministry.

             

The Minister imposed immediate ban on transfers’ postings of all categories in Pepco and DISCOs till further orders and asked for strict compliance, in order to improve the recovery at the end of the fiscal year, efficiency of the staff, to make proper distribution of electricity at the sub division level in the summer season. Mr. Qamar asked the Discos to provide maximum tube well connections in their respective regions without any discrimination as per their capacity. There should be no quota restrictions by the Pepco.       

The Minister also asked the CEOs to improve their efficiency, reduce line losses,  arrange proper stocks of low loss transformers  and there should be no complaints of non –availability of transformers by the consumers. He directed them to submit financial statements with aging of receivables and segregation into various categories of consumers.

The meeting also discussed various proposals for recoveries from the defaulters, financial affairs of the DISCOs and provision of new connections to the consumers.