Balance Sheet: As at June 30, 2007

Balance Sheet
as at June 30, 2007

Note 2007 2006 (Rupees in thousand)
EQUITY AND LIABILITIES CAPITAL AND RESERVES Authorised capital 3,600,000,000 (2006: 3,600,000,000) ordinary shares of Rs 10 each Issued, subscribed and paid up capital 880,253,228 (2006: 880,253,228) ordinary shares of Rs 10 each Capital reserve Unappropriated profit
36,000,000
36,000,000
5 6
8,802,532 444,451 9,616,465 18,863,448
8,802,532 444,451 10,874,854 20,121,837
NON-CURRENT LIABILITIES Long term loan-unsecured Long term advances Deferred liabilities 7 8 9 6,946,906 14,414 3,575,932 10,537,252 7,846,620 3,418,353 11,264,973
CURRENT LIABILITIES Current portion of long term liabilities Finances under mark-up arrangements - secured Creditors, accrued and other liabilities Provision for taxation 10 11 12 902,121 6,431,343 2,152,227 44,635 9,530,326 1,007,216 1,801,611 82,145 2,890,972
CONTINGENCIES AND COMMITMENTS
13 38,931,026 34,277,782
The annexed notes 1 to 39 form an integral part of these financial statements.
Syed Rizwan Ali Shah (Chief Executive)
38
Note
2007 2006 (Rupees in thousand)
ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets Capital work-in-progress Long term loans and deposits 14 15 16 17 21,174,460 2,674 90,724 20,217 21,288,075 CURRENT ASSETS Stores and spares Stock-in-trade Trade debts Loans, advances, deposits, prepayments and other receivables Cash and bank balances 21 22 1,546,408 208,999 17,642,951 420,511 4,366,054 11,503,767 18 19 20 2,553,701 1,759,459 11,574,384 2,472,538 1,129,664 3,115,000 22,695,516 245 60,420 17,834 22,774,015
38,931,026
34,277,782
Vince R. Harris OBE (Director)
39
Profit and Loss Account

for the year ended June 30, 2007
Sales Cost of sales Gross profit Administrative expenses Other operating income Profit from operations Finance cost Profit before tax Taxation Profit for the year Earnings per share Rupees
23 24
37,086,650 (28,343,289) 8,743,361
32,833,378 (22,998,341) 9,835,037 (200,901) 427,874 10,062,010 (1,465,498) 8,596,512 (3,279,150) 5,317,362 6.04
25 26
(289,613) 457,322 8,911,070
27
(1,327,430) 7,583,640
28
(2,592,231) 4,991,409
36
5.67
Appropriations have been reflected in the statement of changes in equity. The annexed notes 1 to 39 form an integral part of these financial statements.
40
Cash Flow Statement

Cash flows from operating activities Cash generated from operations Finance cost paid Taxes (paid)/recovered Staff retirement benefits paid Net cash (used in)/from operating activities Cash flows from investing activities Purchase of property, plant and equipment Income on bank deposits received Net (increase)/decrease in long term loans and deposits Sale proceeds of property, plant and equipment Net cash from investing activities Cash flows from financing activities Repayment of long term loan Dividend paid Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at the end of the year 35 (1,007,215) (6,218,325) (7,225,540) (10,588,398) 4,366,054 (6,222,344) (2,102,271) (7,764,500) (9,866,771) 603,589 3,762,465 4,366,054 (85,208) 143,402 (2,383) 4,540 60,351 (685,151) 282,206 669,947 67,718 334,720 34 324,471 (1,242,702) (2,503,787) (1,191) (3,423,209) 11,533,370 (1,468,957) 72,653 (1,426) 10,135,640
41
Statement of Changes in Equity

Un-approCapital priated reserve profit (Rupees in thousand) Share capital
Total
Balance as on June 30, 2005 Final dividend for the year ended June 30, 2005 - Rs 4.50 per share Profit for the year Interim dividend - Rs 4.00 per share Balance as on June 30, 2006 Final dividend for the year ended June 30, 2006 - Rs 4.10 per share Profit for the year Interim dividend - Rs 3.00 per share Balance as on June 30, 2007
8,802,532
444,451
13,039,645
22,286,628
8,802,532
444,451
(3,961,140) 5,317,362 (3,521,013) 10,874,854
(3,961,140) 5,317,362 (3,521,013) 20,121,837
8,802,532
444,451
(3,609,038) 4,991,409 (2,640,760) 9,616,465
(3,609,038) 4,991,409 (2,640,760) 18,863,448
42
Notes to the Financial Statements

1. Legal status and nature of business Kot Addu Power Company Limited ('The Company'), was incorporated in Pakistan on April 25, 1996 as a public limited company under the Companies Ordinance, 1984. The Company was listed on April 18, 2005 on the Karachi, Islamabad and Lahore Stock Exchanges. The principal activities of the Company are to own, operate and maintain a multi-fuel fired power station with fifteen generating units with a nameplate capacity of 1,600 MW in Kot Addu, District Muzaffargarh, Punjab, Pakistan. 2. 2.1 Basis of preparation These financial statements have been prepared in accordance with the requirements of the Companies Ordinance, 1984 and International Accounting Standards (IAS) as applicable in Pakistan. Approved Accounting Standards comprise of such IASs as notified under the provisions of the Companies Ordinance, 1984. Wherever, the requirements of the Companies Ordinance, 1984 or directives issued by the Securities and Exchange Commission of Pakistan (SECP) differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives take precedence. Standards, Interpretations and amendments to published approved accounting standards
2.2
2.2.1 Amendments to published standards effective in 2006 IAS 19 (Amendment) - 'Employees Benefits' is mandatory for Company's accounting period beginning on July 1, 2006. Its adoption by the Company only impacts the format and extent of disclosures presented in the financial statements. 2.2.2 Amendments to published standards not yet effective Certain amendments to IAS 1 'Presentation of financial statements' - Capital Disclosure have been published that are applicable to the Company's financial statements covering annual periods, beginning on or after July 01, 2007. Adoption of these amendments would impact the nature and extent of disclosures made in the future financial statements of the Company. 3. Basis of measurement These financial statements have been prepared under the historical cost convention except for recognition of certain employee retirement benefits at present value. The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires 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 expectations of future events that are believed to be reasonable under the circumstances. The areas involving a higher degree of judgments or complexity or areas where assumptions and estimates are significant to the financial statements are as follows: a) b) c) Staff retirement benefits - (note 4.2, note 9.2, note 24.1) Provision for taxation - (note 28) Residual values of property, plant and equipment - (note 4.3, note 14)
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4. Significant accounting policies The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 4.1 Taxation Current Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year if enacted. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years. Previously, income of the Company derived from the power station upto June 27, 2006 was exempt from income tax under clause 138 of the Part-I of the Second Schedule to the Income Tax Ordinance, 2001. The Company was also exempt from minimum tax under clause 13(A) of Part IV of the Second Schedule to the Income Tax Ordinance, 2001 for the period it continued to be entitled to exemption under clause 138 of the Part I of the Second Schedule i.e. upto June 27, 2006. Deferred Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences, unused tax losses and tax credits can be utilised. Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement, except in the case of items credited or charged to equity in which case it is included in equity. 4.2 Staff retirement benefits The main features of the schemes operated by the Company for its employees are as follows: (a) The Company operates an approved funded defined benefit pension scheme for all employees with a qualifying service period of ten years. Monthly contribution is made to the fund on the basis of actuarial recommendation. However, no contribution was made in the current year keeping in view excess balance in pension fund. The latest actuarial valuation was carried out as at June 30, 2007. The actual return on plan assets during the year was Rs 98 million. The actual return on plan assets represents the difference between the fair value of plan assets at beginning of the year and end of the year after adjustments for contributions made by the Company as reduced by benefits paid during the year.
44

The future contribution rate includes allowances for deficit and surplus. Projected unit credit method, using the following significant assumptions, is used for valuation of the scheme: Discount rate 10 percent per annum. Expected rate of increase in salary level 10 percent per annum. Expected rate of return 10 percent per annum.
Plan assets include long-term Government bonds, term fiance certificates of financial institutions and term deposits with banks. Return on Government bonds and debt is at fixed rates. The Company is expected to contribute Rs 15.579 million to the pension fund in the next year ending June 30, 2008. The Company's policy with regard to actuarial gains/losses is to follow minimum recommended approach under IAS 19 'Employee Benefits'. (b) The Company also operates an approved funded contributory provident fund for all employees. Equal monthly contributions are made by both the Company and the employees to the fund. The Company provides medical facilities to its retired employees and eligible dependant family members alongwith free electricity. Provisions are made annually to cover the obligation on the basis of actuarial valuation and are charged to income currently. The latest actuarial valuation was carried out as at June 30, 2007. Projected unit credit method, using the following significant assumptions, is used for valuation of these schemes: Discount rate 10 percent per annum. Expected rate of increase in medical cost 7 percent per annum. Expected rate of increase in electricity benefit 10 percent per annum.
(c)
Retirement benefits are payable to all regular employees on completion of prescribed qualifying period of service under these schemes.
45

4.3 Property, plant and equipment Property, plant and equipment except freehold land are stated at cost less accumulated depreciation and any identified impairment loss. Freehold land is stated at cost less any identified impairment loss. Cost represents the acquisition price of assets transferred to the Company in accordance with the Transfer Agreement signed between Pakistan Water and Power Development Authority (WAPDA) and the Company on June 26, 1996 based on a valuation by M/s Stone and Webster using depreciated replacement cost basis. Depreciation on all property, plant and equipment is charged to profit on the straight line method so as to write off the depreciable amount of an asset over its estimated useful life at the annual rates mentioned in note 14. The assets' residual values and estimated useful lives are reviewed at each financial year end and adjusted if impact on depreciation is significant. Depreciation on additions to property, plant and equipment is charged from the month in which an asset is acquired or capitalised while no depreciation is charged for the month in which the asset is disposed off. The Company assesses at each balance sheet date whether there is any indication that property, plant and equipment may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognised in income currently. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Where an impairment loss is recognised, the depreciation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life. Major plant modifications and improvements are capitalised. Overhauls, maintenance and repairs are charged to income as and when incurred. The gain or loss on disposal or retirement of an asset, represented by the difference between the sale proceeds and the carrying amount of the asset, is recognised as an income or expense. Blades for Gas Turbines are considered a separate category of assets with useful life span of 10 years. All blades are depreciated regardless of whether they are in use or not. Refurbishment costs are accrued and charged to profit and loss account. 4.4 Intangible assets Expenditure incurred to acquire computer software are capitalised as intangible assets and stated at cost less accumulated amortisation and any identified impairment loss. Intangible assets are amortised using the straight line method over a period of five years. Amortisation on additions to intangible assets is charged from the month in which an asset is acquired or capitalised, while no amortisation is charged for the month in which the asset is disposed off.
46

The Company assesses at each balance sheet date whether there is any indication that intangible asset may be impaired. If such indication exists, the carrying amount of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognised in income currently. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Where an impairment loss is recognised, the amortisation charge is adjusted in the future periods to allocate the asset's revised carrying amount over its estimated useful life. 4.5 Capital work-in-progress Capital work-in-progress is stated at cost less any identified impairment loss. 4.6 Leases The Company is the lessee: Finance leases Leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases. At inception finance leases are capitalised at the lower of present value of minimum lease payments under the lease agreements and the fair value of the assets. The related rental obligations, net of finance charges, are included in liabilities against assets subject to finance lease. The liabilities are classified as current and long term depending upon the timing of the payment. Assets acquired under a finance lease are depreciated over the useful life of the asset on a straight-line method. Depreciation of leased assets is charged to profit and loss account. Depreciation on additions to leased assets is charged from the month in which an asset is acquired while no depreciation is charged for the month in which the asset is disposed off. Operating leases Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit on a straight-line basis over the lease term. 4.7 Stores and spares Usable stores and spares are valued principally at weighted average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon. Refurbishable items are valued at the lower of cost and net realisable value. Cost of refurbishment is charged to the profit and loss account as it is incurred. The item is charged to the profit and loss account when, upon inspection, it cannot be refurbished.
47

4.8 Stock in trade Stock in trade except for those in transit are valued at lower of cost based on FIFO and net realisable value. Materials in transit are stated at cost comprising invoice value plus other charges paid thereon. Net realisable value signifies the estimated selling price in the ordinary course of business less costs necessarily to be incurred in order to make a sale. Provision is made in the financial statements for obsolete and slow moving stock in trade based on management estimate. 4.9 Financial instruments Financial assets and financial liabilities are recognised at the time when the Company becomes a party to the contractual provisions of the instrument and de-recognised when the Company loses control of contractual rights that comprise the financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on derecognition of financial assets and financial liabilities is included in the profit and loss account currently. Financial instruments carried on the balance sheet include loans and deposits, trade and other debts, cash and bank balances, borrowings, long term advances, trade and other payables, accrued expenses and unclaimed dividends. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. 4.10 Offsetting of financial assets and liabilities Financial assets and liabilities are offset and the net amount is reported in the financial statements only when there is a legally enforceable right to set off the recognised amount and the Company intends either to settle on a net basis or to realise the assets and to settle the liabilities simultaneously. 4.11 Trade debts Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified. 4.12 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cash equivalents comprise cash in hand, demand deposits, other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value and finances under mark up arrangements. In the balance sheet, finances under mark up arrangements are included in current liabilities. 4.13 Borrowings Borrowings are initially recorded at the proceeds received. In subsequent periods, borrowings are stated at amortised cost using the effective yield method. Finance costs are accounted for on an accrual basis and are included in creditors, accrued and other liabilities to the extent of the amount remaining unpaid.
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4.14 Creditors, accrued and other liabilities Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the consideration to be paid in the future for the goods and / or services received, whether or not billed to the Company. Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. 4.15 Derivative financial instruments These are initially recorded at fair value on the date a derivative contract is entered into and are remeasured to fair value at subsequent reporting dates. 4.16 Foreign currencies All monetary assets and liabilities in foreign currencies are translated into rupees at exchange rates prevailing at the balance sheet date. Transactions in foreign currencies are translated into rupees at the spot rate. All nonmonetary items are translated into rupees at exchange rates prevailing on the date of transaction or on the date when fair values are determined. Exchange differences are included in income currently. 4.17 Borrowing costs Mark up, interest and other charges on borrowings are capitalised upto the date of commissioning of the related property, plant and equipment, acquired out of the proceeds of such borrowings. All other mark up, interest and other charges are charged to income. 4.18 Revenue recognition Revenue on account of energy is recognised on transmission of electricity to WAPDA, whereas on account of capacity is recognised when due. Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and the applicable rate of return. 4.19 Dividend Dividend distribution to the Company's shareholders is recognised as a liability in the period in which the dividends are approved.
49

5. Issued, subscribed and paid up capital 2007 2006 (Number of shares) 253,000 253,000 Ordinary shares of Rs 10 each fully paid in cash Ordinary shares of Rs 10 each issued as fully paid for consideration other than cash 2007 2006 (Rupees in thousand)
2,530
2,530
880,000,228
880,000,228
8,800,002 8,802,532
8,800,002 8,802,532
880,253,228
880,253,228
2007 2006 (Number of shares) Ordinary shares of the Company held by associated undertakings are as follows: Pakistan Water and Power Development Authority (WAPDA) National Power (Kot Addu) Limited (a wholly owned subsidiary of International Power plc) 402,563,562 402,563,562
316,891,159 719,454,721
316,891,159 719,454,721
6.
Capital reserve This represents the value of fuel stock taken over by the Company at the time of take over of Kot Addu Gas Turbine Power Station from WAPDA. The value of stock was not included in the valuation of assets at the time of take over.
7.
Long term loan - unsecured Lender Currency 2007 2006 Rate of interest per annum No of semi annual installments Interest payable
(Rupees in thousand)
WAPDA Related party Less: Current maturity
PKR
7,846,621
8,853,836
14%
22, ending June 2018.
Semi annually
899,715 6,946,906
1,007,216 7,846,620
50

2007 2006 (Rupees in thousand) 8. Long term advances Advances against lease Less: Payment to date Less: Current portion shown under current liabilities 16,820 16,820 2,406 14,414 -
These represents advances against lease facility from financial institution and carry mark up at Re 0.3025 per Rs 1,000 per diem to finance the assets which are included in capital-work-in-progress. The balance would be transferred to liabilities against assets subject to finance lease on receipt of the respective assets. 2007 2006 (Rupees in thousand) 9. Deferred Liabilities Deferred taxation Staff retirement benefits - note 9.1 - note 9.2 3,288,955 286,977 3,575,932 3,163,000 255,353 3,418,353
9.1
Deferred taxation The liability for deferred taxation comprises of timing differences relating to:
Accelerated tax depreciation Provision for store obsolescence Provision for doubtful debts
3,308,356 (14,326) (5,075) 3,288,955
3,176,292 (13,292) 3,163,000
9.2
Staff retirement benefits These are composed of: Pension Medical Free electricity - note 9.2.1 - note 9.2.2 - note 9.2.2 (10,464) 120,306 177,135 286,977 (21,715) 110,588 166,480 255,353
51

2007 2006 (Rupees in thousand) 9.2.1 Pension The amounts recognised in the balance sheet are as follows: Present value of defined benefit obligation Fair value of plan assets Unrecognised actuarial gains Asset ceiling (Asset) as at June 30 (Asset) as at July 1 Charge/(credit) to profit and loss account Contribution by the Company (Asset) as at June 30 The movement in the present value of defined benefit obligation is as follows: Present value of defined benefit obligation as at July 1 Service cost Interest cost Benefits paid Experience loss / (gain) Present value of defined benefit obligation as at June 30 The movement in fair value of plan assets is as follows: Fair value as at July 1 Expected return on plan assets Benefits paid Experience gain Fair value as at June 30 524,958 (590,283) 54,861 (10,464) (21,715) 11,251 (10,464) 401,056 (498,170) 72,282 3,117 (21,715) (16,108) (5,607) (21,715)
401,056 21,139 36,618 (5,978) 72,123 524,958
383,998 18,060 35,038 (8,863) (27,177) 401,056
498,170 44,901 (5,978) 53,190 590,283
427,351 38,771 (8,863) 40,911 498,170
%age Plan assets are comprised as follows: Debt Cash
%age
99% 1% 100%
98.6% 1.4% 100%
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The present value of defined benefit obligation, the fair value of plan assets and the surplus or deficit of pension fund is as follows: 2007 2006 2005 2004 (Rupees in thousand) 2003
As at June 30 Present value of defined benefit obligations Fair value of plan assets (Surplus)/deficit Experience adjustment on obligation (loss) / gain Experience adjustment on plan assets gain
524,958 (590,283) (65,325)
401,056 (498,170) (97,114)
383,998 (427,351) (43,353)
325,106 (366,576) (41,470)
340,663 (301,658) 39,005
-18% 11%
7% 10%
-5% 9%
-7% 11%
4% 5%
9.2.2 Medical 2007 Free electricity 2006 2007 2006 (Rupees in thousand)
The amounts recognised in the balance sheet are as follows: Present value of defined benefit obligation Unrecognised actuarial gains Liability as at June 30 Liability as at July 1 Charge to profit and loss account Payments by the Company Liability as at June 30 The movement in the present value of defined benefit obligation is as follows: Present value of defined benefit obligation as at July 1 Service cost Interest cost Benefits paid Experience loss / (gain) Present value of defined benefit obligation as at June 30 101,335 18,971 120,306 110,588 10,558 (840) 120,306 88,005 22,583 110,588 108,578 2,754 (744) 110,588 134,189 42,946 177,135 166,480 11,006 (351) 177,135 107,247 59,233 166,480 166,210 952 (682) 166,480
88,005 3,501 8,041 (840) 2,628 101,335
88,968 3,965 8,155 (744) (12,339) 88,005
107,247 4,645 9,826 (351) 12,822 134,189
125,488 6,050 11,533 (682) (35,142) 107,247
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The present value of defined benefit obligation, the fair value of plan assets and the surplus or deficit of post retirement medical is as follows: 2007 2006 2005 2004 Post Retirement Medical (Rupees in thousand) 2003
As at June 30 Present value of defined benefit obligation Fair value of plan assets Deficit Experience adjustment on obligation (loss) / gain
101,335 101,335
88,005 88,005
88,968 88,968
83,302 83,302
112,922 112,922
-3%
14%
5%
21%
0%
The present value of defined benefit obligation, the fair value of plan assets and the surplus or deficit of post retirement electricity is as follows: 2007 2006 2005 2004 Post Retirement Electricity (Rupees in thousand) 2003
As at June 30 Present value of defined benefit obligation Fair value of plan assets Deficit Experience adjustment on obligation (loss) / gain
134,189 134,189
107,247 107,247
125,488 125,488
140,975 140,975
152,469 152,469
-12%
33%
27%
3%
0%
A one percentage point change in medical cost trend assumption would have the following effects: One percent One percent point decrease point increase (Rupees in thousand)
Effect on the aggregate of the service cost and interest cost Effect on the defined benefit obligation
2,075 18,103
(2,088) (18,044)
54

2007 2006 (Rupees in thousand) 10. Current portion of long term liabilities Long term loans - unsecured Long term advances - note 7 - note 8 899,715 2,406 902,121 1,007,216 1,007,216
11.
Finances under mark up arrangements - secured Short term running finances available from various commercial banks under mark up arrangements amount to Rs 7,015 million (2006: Rs 1,200 million). The rate of mark-up range from Re 0.2638 to Re 0.3214 per Rs 1,000 per diem or part thereof on the balances outstanding. In the event, the Company fails to pay the balances on the expiry of the quarter, year or earlier demand, mark up is to be computed at the rate of Re 0.5479 per Rs 1,000 per diem or part thereof on the balances unpaid. Of the aggregate facility of Rs 840.400 million (2006: Rs 1,577.400 million) for opening letters of credit and Rs 1,500.000 million (2006: Rs 1,007.309 million) for guarantees, the amount utilised as at June 30, 2007 was Rs 213.930 million (2006: Rs 295.481 million) and Rs 1,273.256 million (2006: Rs 1,007.309 million) respectively. The aggregate running finances, letters of credit and guarantees are secured by charge on stores, spares, stock-in-trade and trade debts upto a limit of Rs. 9,486 million and charge on property, plant and equipment upto a limit of Rs. 8,606 million. 2007 2006 (Rupees in thousand)
12.
Creditors, accrued and other liabilities Trade creditors Accrued liabilities Liquidated damages Markup accrued on: - Long term loan - unsecured - Finances under markup arrangements - secured Deposits - interest free repayable on demand Workers' Welfare Fund Workers' Profit Participation Fund Differential payable to WAPDA Unclaimed dividends Others - note 12.1 16,641 1,290,858 768 12,039 86,273 909 151,673 379,182 74,665 136,573 2,646 2,152,227 17,398 1,654,135 599 13,584 832 6,723 105,100 3,240 1,801,611
- note 12.2 - note 25.2
12.1 Trade creditors include amount due to related parties Rs 0.605 million (2006: Rs 1.103 million).
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12.2 The Company has accounted for an amount of Rs 379.182 million as contribution payable to Workers' Profit Participation Fund under the Companies Profit (Workers' Participation) Act, 1968 (the Act), for the year ended June 30, 2007, in accordance with the amendments introduced in the Finance Act, 2006 relating to the Act. According to the legal advice sought by the Company on its applicability, with the change introduced by the Finance Act, 2006, the establishment of the fund has become mandatory and is to be set-up within nine (9) months of the close of the current financial year, to which contribution based on future profits of the Company are to be made. As this is a pass through item under section 14.2(a) of Part III of Schedule 6 to the Power Purchase Agreement, the Company has accounted for the above amount as receivable from WAPDA. Consequently, this contribution does not have any financial impact on the profits of the Company. As fully explained in note 13.1(i), the company has not made any provision for Workers' Profit Participation Fund for the years upto June 30, 2006, based on a legal advice and in view of a constitutional petition pending adjudication in Sindh High Court. 13. Contingencies and commitments
13.1 Contingencies
(i)
The Company had obtained legal advice in connection with the establishment of Workers' Profit Participation Fund under the Act. The legal advisor advised the Company that since it did not employ any person who fell under the definition of Worker as defined in the Act of 1968, the Company was not required to establish the Fund under the Act. As a consequence the Company was not required to make contributions to the Fund established pursuant to Workers' Welfare Fund Ordinance, 1971. Furthermore, the question whether a company to which the Act of 1968 and its scheme applies but which does not employ any Worker is nevertheless obliged to establish and pay contributions into the Fund under the Act and thereafter transfer the same to the Fund established under the WWF Ordinance, 1971 is pending adjudication in Sindh High Court at Karachi on a constitutional petition filed by another company in December 2003. The issue of WPPF was also taken up by the Government and a meeting took place involving Ministry of Water & Power, Private Power Infrastructure Board (PPIB), WAPDA Power Privatization Organization (WPPO), Ministry of Labour, HUBCO and the Company to formally discuss the issue. A strong case was put up by PPIB, supported by WPPO, HUBCO and the Company. The Ministry of Water & Power supported the case and stated that they would request the Ministry of Finance to exempt Independent Power Producers (IPPs), who had no workers under the Act, from the payment of WPPF. The matter was then referred to Economic Coordination Committee (ECC). ECC formed a sub committee to look into the matter and to give recommendations. Certain amendments have been introduced in Finance Act 2006, to relax the conditions of payment of interest and penalty for companies defaulting in creating Fund under the Act. If it is established that Workers' Profit Participation Fund is applicable to the Company and Company makes the principal payment on or before the date which is to be decided by the Federal Government, no such penalty may be imposed and the Company may not be liable to pay interest. Moreover the payments made by the Company will be recoverable from WAPDA as a pass through item under the provisions of the Power Purchase Agreement.
56

In case this liability materializes, the cumulative amount of contributions to WPPF would be Rs 3.463 billion (2006: Rs 3.463 billion). Further, if it is established that interest is also applicable, in case of non compliance with the above said amendments in the act, the liability for interest would amount to Rs 10.067 billion (2006: Rs 7.738 billion) as on the date of these financial statements. However it is not certain presently whether or not any penalties payable in connection with this contribution would also be recoverable from WAPDA under the Power Purchase Agreement. In view of the foregoing, the Company has not made any provision for Workers' Profit Participation Fund and interest thereon in the financial statements upto June 30, 2006. (ii) Claims against the Company not acknowledged as debts Rs 58.576 million (2006: Rs 58.576 million).
(iii) The Company has provided following guarantees in favour of: Sui Northern Gas Pipelines Limited on account of payment of dues against gas sales etc., amounting to Rs 1,248.618 million (2006: Rs 983.169 million). Custom Authorities for import of professional equipment, tools etc., amounting to Rs 0.638 million (2006: Rs Nil). 13.2 Commitments (i) (ii) 14. Contracts for capital expenditure Rs 7.801 million (2006: Rs 37.161 million). Letters of credit other than for capital expenditure Rs 213.930 million (2006: Rs 259.485 million).
Property, plant & equipment

Cost as at June 30, 2006 Additions/ (deletions) (adjustment) Cost as at June 30, 2007 Accumulated depreciation as at June 30, 2006 Depreciation charge for the year/ (deletions) (adjustment) (Rupees in thousand) Accumulated depreciation as at June 30, 2 007 Book value as at June 30, 2007 Rate %
Freehold land Buildings on freehold land Plant and machinery Gas turbine blading Auxiliary plant and machinery Office equipment Fixtures and fittings Vehicles
46,285 679,038 34,207,863 2,818,829 153,680 63,212 15,856 73,091
5,864 1,037 40,899 11,252 3,250 (147) 2,987 (1,806) 3,541 (1,669)
46,285 684,902 34,208,900 2,859,728 164,932 66,315 17,037 74,963
260,682 13,382,536 1,523,346 93,187 48,277 11,832 42,478
28,249 1,274,372 249,838 20,611 6,515 (71) 1,503 (1,019) 7,509 (1,243)
288,931 14,656,908 1,773,184 113,798 54,721 12,316 48,744
46,285 395,971 19,551,992 1,086,544 51,134 11,594 4,721 26,219
4 - 6.28 4 - 6.10 10 20 20 20 25
2007 2006
38,057,854 37,506,140
6 8,830 (3,622) 658,763 (107,440) 391
38,123,062 38,057,854
15,362,338 13,826,603
1,588,597 (2,333) 1,589,933 (53,427) (771)
16,948,602 15,362,338
21,174,460 22,695,516
57

14.1 Disposal of property, plant & equipment Particular of Assets Sold to Cost Accumulated Book value depreciation (Rupees in thousand) 71 76 Sales proceeds Mode of Disposal
Office Equipment
Ex-employee Mr Malcolm P . Clampin
147
76
Negotiation
Furniture and fixture
Ex-employee Mr Malcolm P . Clampin Local schools
786
95
691
691
Negotiation
898
824
74
Community initiative
Vehicles
Ex-employee Mr Muhammad Yaseen Ex-employee Mr Abdul Qayyum Butt 867 122 3,622 607 100 2,333 260 22 1,289 415 3,033 4,540 Company Policy 802 636 166 325 Company Policy
Other assets with book value less than Rs 50,000
15.
Intangible assets Accumulated Accumulated Cost as at amortisation Amortisation amortisation June 30, as at June charge as at June 2007 30, 2006 for the year 30, 2007 (Rupees in thousand)
Cost as at June 30, 2006
Additions
Book value as at June 30, 2007
Computer software (acquired) 2007 2006
21,031 21,031 21,031
2,893 2,893 -
23,924 23,924 21,031
20,786 20,786 20,702
464 464 84
21,250 21,250 20,786
2,674 2,674 245
15.1
The depreciation/amortisation charge for the year has been allocated as follows: Depreciation Amortisation Total 2007 2006 (Rupees in thousand)
Cost of sales Administration and selling expenses
- note 24 - note 25
1,551,338 37,261 1,588,599
464 464
1,551,802 37,261 1,589,063
1,553,784 36,233 1,590,017
58

2007 2006 (Rupees in thousand) 16. Capital work-in-progress Civil works Plant and machinery Others 36,460 868 53,396 90,724 23,279 4,447 32,694 60,420
17.
Long term loans and deposits Loans to employees - considered good Security deposits Less: Receivable within one year 22,941 1,682 24,623 4,406 20,217 22,916 22,916 5,082 17,834
These represent unsecured loans to non-executive employees for the purchase of plot, car, construction of house etc. and are repayable in monthly installments over a maximum period of 120 months. These loans carry interest of 9% per annum (2006: 9% per annum). 2007 2006 (Rupees in thousand) 18. Stores and spares Stores and spares including in transit Rs 13.860 million (2006 : Rs 25.140 million) Less: Provision for store obsolescence
- note 18.1 - note 18.2
2,594,632 (40,931) 2,553,701
2,510,514 (37,976) 2,472,538
Stores and spares include items which may result in fixed capital expenditure but are not distinguishable. 18.1 Included in stores are items valuing Rs 102.066 million (2006: Rs 120.441 million) which are being held by the following suppliers: 2007 2006 (Rupees in thousand) Siemens AG Germany Middle East Engineering Company (MEELSA) Wood Group Heavy Industrial Turbines Limited Scherzinger Pump Technology, Germany MJB International, UAE Alstom Power Service, Germany Siemens Pakistan Engineering Limited Gas Turbine Technologies SPA, Italia 14,794 45,282 8,900 1,287 17,716 14,087 102,066 56,800 36,383 1,613 16,445 9,200 120,441
59

2007 2006 (Rupees in thousand) 18.2 Provision for store obsolescence Opening balance Add: Provision for the year Less: Stores written off against provision 37,976 19,588 57,564 16,633 40,931 64,583 64,583 26,607 37,976
19.
Stock in trade Furnace oil Diesel 1,450,921 308,538 1,759,459 890,083 239,581 1,129,664
20.
Trade debts Trade debts Less: Provision for doubtful debts 11,588,884 14,500 11,574,384 3,115,000 3,115,000
These are receivable from WAPDA and are unsecured and considered good. These are in the normal course of business and are interest free, however, a penal mark-up of SBP discount rate plus 4% is charged in case the amounts are not paid within due dates. It also includes an amount Rs 173.269 million (2006: Rs Nil) receivable from WAPDA on account of price differential between imported Low Sulpher Furnace Oil (LSFO) and High Sulpher Furnace Oil (HSFO). 2007 2006 (Rupees in thousand) 21. Loans, advances, deposits, prepayments and other receivables Loans to employees - considered good Advances to suppliers - considered good Claims recoverable from Government - Sales tax Insurance claim receivable Prepayments Income receivable on bank deposits Claims recoverable from WAPDA for pass through items Workers' Welfare Fund Workers' Profit Participation Fund Security deposits Other receivables 4,406 792,354 197,455 2,043 2,889 930 158,289 379,182 537,471 1,568 7,292 1,546,408 5,082 267,274 97,161 26,611 1,774 4,272 6,723 6,723 1,958 9,656 420,511
- note 21.1 - note 21.2
- note 21.3 - note 21.4
60

21.1 Advances to suppliers include amounts due from WAPDA Rs Nil (2006: Rs 1.770 million). These are in the normal course of business and are interest free. 21.2 Sales tax recoverable includes an amount of Rs 16.994 million, which represents refund for input tax on purchase of diesel for start-up. This refund was withheld by Deputy Collector (Refunds) and has also been adjudicated against the Company by Collector of Customs, Federal Excise & Sales Tax against which the Company intends to file an appeal before the Customs, Excise and Sales Tax Appellate Tribunal. Pending the outcome of the appeal the amount has been shown recoverable as according to the management of the Company, there are meritorious grounds that the ultimate decision would be in its favour. 21.3 Under section 14.2(a) of Part III of Schedule 6 to the Power Purchase Agreement (PPA) with WAPDA, payments to Workers' Welfare Fund and Workers' Profit Participation Fund are recoverable from WAPDA as pass through items. 21.4 Other receivables include amounts due from International Power plc Rs 0.057 million (2006: Rs 0.012 million). 2007 2006 (Rupees in thousand) 22. Cash and bank balances At banks on: - Current accounts - Savings accounts In hand
- note 22.1
138,476 70,444 208,920 79 208,999
106,552 4,259,343 4,365,895 159 4,366,054
22.1 Included in these are total restricted funds of Rs 0.357 million (2006: Rs 73.830 million) held by banks under lien as margin against letters of credit. The balances in saving accounts bear mark up which ranges from 0.5 percent per annum to 10 percent per annum. 2007 2006 (Rupees in thousand) 23. Sales Energy purchase price Capacity purchase price 26,337,276 10,749,374 37,086,650 21,106,984 11,726,394 32,833,378
23.1 Energy purchase price is exclusive of sales tax of Rs 3,982.009 million (2006: Rs 3,145.658 million).
61

2007 2006 (Rupees in thousand) 24. Cost of sales Fuel cost Salaries, wages and benefits Selective Voluntary Severance Scheme (SVSS) Plant maintenance Gas turbines overhauls Repair and renewals Depreciation on property, plant and equipment Amortisation on intangible assets Liquidated damages Provision for stores obsolescence 25,572,789 390,394 140,011 430,064 237,873 1,551,338 464 768 19,588 28,343,289 20,402,527 340,621 104,135 144,210 280,806 171,659 1,553,700 84 599 22,998,341
- note 24.1
- note 15.1 - note 15.1 - note 18.2
Cost of sales include Rs 329.745 million (2006: Rs 248.176 million) for stores and spares consumed. 2007 2006 (Rupees in thousand) 24.1 Salaries, wages and benefits Salaries, wages and benefits include following in respect of retirement benefits: Pension Current service cost Interest cost for the year Expected return on plan assets Amortisation of gain Recognition of curtailment gain Share of unrecognised gain in respect of curtailed employees Asset ceiling 21,139 36,618 (44,901) (1,605) 11,251 18,060 35,037 (38,771) (19,569) (3,481) 3,117 (5,607)
Medical Current service cost Interest cost for the year Amortisation of actuarial gain Recognition of curtailment gain Share of unrecognised gain in respect of curtailed employees
3,501 8,041 (984) 10,558
3,965 8,155 (765) (6,845) (1,756) 2,754
Free electricity Current service cost Interest cost for the year Amortisation of actuarial gain Recognition of curtailment gain Share of unrecognised gain in respect of curtailed employees
4,645 9,826 (3,465) 11,006
6,050 11,533 (2,012) (9,418) (5,201) 952
In addition to above, salaries, wages and benefits also include Rs 11.090 million (2006: Rs 10.774 million) in respect of provident fund contribution by the Company.
62

2007 2006 (Rupees in thousand) 25. Administrative expenses Traveling Motor vehicles running Postage, telephone and telex Legal and professional charges Computer charges Auditors' remuneration Printing, stationery and periodicals Repairs and maintenance infrastructure Training expenses Rent, rates and taxes Depreciation on property, plant and equipment Infrastructure cost Differential payable to WAPDA Education fee Donations Bad debts written off Advances written off Provision for doubtful debts Other expenses 8,667 13,924 10,065 28,448 5,392 1,267 7,586 17,459 4,391 4,175 37,261 13,708 74,665 19,578 210 12,723 14,500 15,594 289,613 11,367 11,364 11,104 16,644 6,986 1,092 5,647 15,559 7,106 4,362 36,233 8,719 1,173 53,579 956 475 8,535 200,901
- note 25.1
- note 15.1 - note 25.2 - note 25.3
- note 20
25.1 Auditors' remuneration The charges for auditor's remuneration include the following in respect of auditors' services for: Statutory audit Half yearly review Employees pension fund and provident fund audit Out of pocket expenses 970 110 80 107 1,267 880 100 80 32 1,092
25.2 This represents income tax differential payable to WAPDA in accordance with clause 6.7 and 6.15(a) of Part I of Schedule 6 of Power Purchase Agreement (PPA) on account of difference in income tax rate as provided for in the PPA and the current tax rate as applicable to the Company. 25.3 None of the directors and their spouses had any interest in any of the donees during the year.
63

2007 2006 (Rupees in thousand) 26. Other operating income Income from financial assets Income on bank deposits Interest on loans to employees Interest on late payment - WAPDA Exchange gain
140,060 1,943 278,385 420,388
268,438 2,435 199 271,072
Income from non-financial assets Profit on disposal of property, plant and equipment Colony electricity Provisions and unclaimed balances written back Others
3,251 1,662 4,010 28,011 36,934 457,322
13,705 960 133,581 8,556 156,802 427,874
27.
Finance cost Interest and mark up including commitment charges on - long term loan from WAPDA - finances under markup arrangements Exchange loss Bank and other charges
1,202,739 115,590 1,486 7,615 1,327,430
1,456,817 8,681 1,465,498
28.
Taxation For the year - Current - Deferred Prior years - Current - Deferred
2,491,738 162,455 2,654,193 (25,462) (36,500) (61,962) 2,592,231
116,000 337,000 453,000 150 2,826,000 2,826,150 3,279,150
64

2007 %age 28.1 Tax charge reconciliation Numerical reconciliation between the average effective tax rate and the applicable tax rate Applicable tax rate Tax effect of exempt income referred to in note 4.1 Effect of change in prior year's tax Average effective tax rate 29. Directors' remuneration 35.00 (0.82) 34.18 35.00 (29.73) 32.88 38.15 2006 %age
29.1 The aggregate amount charged in the financial statements for the year for remuneration including certain benefits to the chief executive, full time working directors including alternate directors and executives of the Company is as follows: Executives Chief Executive 2007 2006 2007 2006 (Rupees in thousand) Managerial remuneration including bonus and other allowances Contribution to provident & pension funds and other retirement benefit plans Leave passage
16,147
25,236
52,142
39,833
1,615 17,762
1,670 26,906 1
5,092 1,834 59,068 32
4,334 887 45,054 24
Number of persons
The Company also provides the chief executive and some of the executives with Company transport and telephones.
65

29.2 Remuneration to other directors Aggregate amount charged in the financial statements for the year for fee to 6 directors (2006: 6 directors) was Rs 0.225 million (2006: Rs 0.220 million). 30. Transactions with related parties The related parties comprise associated undertakings, key management personnel and post retirement benefit plans. The Company in the normal course of business carries out transactions with various related parties. Amounts due to/from related parties are shown under payables and receivables and remuneration of the key management personnel is disclosed in note 29. Other significant transactions with related parties are as follows: 2007 2006 (Rupees in thousand) 1,016 37,086,650 1,202,739 278,385 12,723 3,562 32,833,378 1,456,817 -
Relationship with the Company i. Associated undertakings
Nature of transaction Purchase of services Sale of electricity Interest expense Interest income on late payment Bad debts written off Expense charged/ (income accrued) Sale of property, plant and equipment Consultancy charges
ii. Post retirement benefit plans
32,815
(1,901)
iii. Key management personnel
767 11,206
Sale and purchase transactions with related parties are carried out on commercial terms and conditions. Interest is charged between associated undertakings on the basis of mutually agreed terms. 31. Proposed dividend The Board of Directors of the Company have proposed a final dividend for the year ended June 30, 2007 of Rs 3.00 (2006: Rs 4.10) per share amounting to Rs 2,640.760 million (2006: Rs 3,609.038 million) at their meeting held on August 30, 2007 for approval of members at the Annual General Meeting to be held on October 22, 2007. These financial statements do not reflect this dividend payable. 2007 MWh 32. Capacity and production Annual dependable capacity (Based on 8,760 hours) Actual energy delivered 11,755,920 8,183,241 11,755,920 8,292,056 2006 MWh
Capacity for the power plant taking into account all the planned scheduled outages is 10,709,371 MWh (2006: 10,979,339 MWh). Actual energy delivered by the plant is dependent on the load demanded by WAPDA and the plant availability.
66

33. Rates of exchange Liabilities in foreign currencies have been translated into Rupees at USD 1.6502 (2006: USD 1.6570), EURO 1.2186 (2006: EURO 1.3029), GBP 0.8217 (2006: GBP 0.9032) and YEN 203.2520 (2006: YEN 190.2225) equal to Rs. 100. 2007 2006 (Rupees in thousand) 34. Cash generated from operations Profit before tax Adjustments for : - Depreciation on property, plant and equipment - Amortisation on intangible assets - Profit on disposal of property, plant and equipment - Income on bank deposits - Bad debts written off - Provision for stores obsolescence - Provision for doubtful debts - Staff retirement benefits accrued - Finance cost Profit before working capital changes Effect on cash flow due to working capital changes - (Increase) in stores and spares - (Increase)/decrease in stock-in-trade - (Increase) in trade debts - (Increase)/decrease in loans, advances, deposits, prepayments and other receivables - Increase/(decrease) in creditors, accrued and other liabilities 7,583,640 1,588,599 464 (3,251) (140,060) 12,723 19,588 14,500 32,815 1,327,430 10,436,448 8,596,512 1,589,933 84 (13,705) (268,438) (1,901) 1,465,498 11,367,983
(100,751) (629,795) (8,486,607) (1,129,239) 234,415 (10,111,977) 324,471
(39,610) 1,492,183 (784,006) 638,044 (1,141,224) 165,387 11,533,370
35.
Cash and cash equivalents Cash and bank balances Finances under mark up arrangements 208,999 (6,431,343) (6,222,344) 4,366,054 4,366,054
36.
Earnings per share
36.1 Basic earnings per share Profit for the year Weighted average number of ordinary shares Earnings per share 36.2 Diluted earnings per share There is no dilution effect on the basic earnings per share of the Company as the Company has no such commitments. Rupees in thousand Numbers Rupees 4,991,409 880,253,228 5.67 5,317,362 880,253,228 6.04
67

37. Financial assets and liabilities
Interest/mark up bearing Maturity upto one year Maturity after one year Sub total Non interest bearing Maturity upto one year Maturity after one year Sub total 2007 2006 2007 2006 Total Credit risk
(Rupees in thousand) Financial assets On balance sheet Long term loans and deposits Trade debts Loans, advances, deposits, prepayments and other receivables - Insurance claim receivable - Profit receivable on bank deposits - Security deposits - Others receivables Cash and bank balances 930 70,444 75,780 Off balance sheet Total Financial liabilities On balance sheet Long term loan - unsecured Long term advances Finances under markup arrangement - secured Creditors, accrued and other liabilities 7,333,464 Off balance sheet Guarantees Contracts for capital expenditure Letters of credit other than for capital expenditure Total On balance sheet gap Off balance sheet gap 7,333,464 213,930 1,495,347 3,116,155 213,930 1,495,347 213,930 1,495,347 259,485 1,303,955 7,801 7,801 7,801 37,161 1,273,616 1,273,616 1,273,616 1,007,309 1,620,808 1,620,808 1,620,808 1,620,808 1,794,888 6,961,320 14,294,784 1,620,808 15,915,592 10,648,724 6,431,343 6,431,343 6,431,343 899,715 2,406 6,946,906 14,414 7,846,621 16,820 7,846,621 16,820 8,853,836 75,780 18,535 18,535 930 70,444 1,568 1,751 138,555 1,568 1,751 138,555 930 1,568 1,751 208,999 4,272 1,958 1,615 4,366,054 930 1,568 1,751 4,272 1,958 1,615 2,043 2,043 2,043 26,611 2,043 26,611 4,406 18,535 22,941 1,682 1,682 24,623 22,916 24,623 22,916
- 11,574,384
- 11,574,384 11,574,384
3,115,000 11,574,384 3,115,000
208,920 4,365,895
94,315 11,718,301 -
1,682 11,719,983 11,814,298 -
7,538,426 11,814,219 7,538,267 -
94,315 11,718,301
1,682 11,719,983 11,814,298
7,538,426 11,814,219 7,538,267
6,961,320 14,294,784
3,116,155 17,410,939 11,952,679 (4,101,294) (3,110,298)
(7,257,684) (6,942,785) (14,200,469) 10,097,493 (1,495,347)
1,682 10,099,175
- (1,495,347) (1,495,347) (1,303,955)
The effective interest/mark-up rates for the monetary financial assets and liabilities are mentioned in respective notes to the financial statements.
68

37.1 Financial risk management objectives The Companys activities expose it to a variety of financial risks, including the effects of changes in foreign exchange rates, market interest rates such as State Bank of Pakistans repo rate and treasury bills rate, credit and liquidity risk associated with various financial assets and liabilities respectively as referred to in note 37. The Company finances its operations through equity, borrowings and management of working capital with a view to maintaining a reasonable mix between the various sources of finance to minimise risk. Taken as a whole, risk arising from the Company's financial instruments is limited as there is no significant exposure to market risk in respect of such instruments. (a) Concentration of credit risk Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties failed completely to perform as contracted. The Company's credit risk is primarily attributable to its trade debts and its balances at banks. The credit risk on liquid funds is limited because the counter parties are banks with reasonably high credit ratings. The Company believes that it is not exposed to major concentration of credit risk and the risk attributable to trade debts is minimal. Out of the total financial assets of Rs 11,814.298 million (2006: Rs 7,538.426 million), the financial assets that are subject to credit risk amounted to Rs 11,814.219 million (2006: Rs 7,538.267 million). (b) Interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Company usually borrows funds at fixed and market based rates and as such the risk is minimised. (c) Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises mainly where receivables and payables exist due to transactions with foreign buyers and suppliers. Payables exposed to foreign currency risks are not covered through any forward exchange contracts or through hedging. (d) Liquidity risk Liquidity risk reflects an enterprise's inability in raising funds to meet commitments. The Company follows an effective cash management and planning policy to ensure availability of funds and to take appropriate measures for new requirements.
69

37.2 Fair value of financial assets and liabilities The carrying value of all financial assets and liabilities reflected in the financial statements approximate their fair values. Fair value is determined on the basis of objective evidence at each reporting date. 38. Date of authorization for issue These financial statements were authorised for issue on August 30, 2007 by the Board of Directors of the Company. 39. Corresponding figures Corresponding figures have been re-arranged, wherever necessary, for the purpose of comparison. Significant re-arrangements made are as follows: (Rupees in thousand) Administrative expenses - Other expenses re-arranged as infrastructure cost - Other expenses re-arranged as education fee 8,719 1,173
The above figures have been re-arranged as the re-classification made is considered more appropriate for purposes of presentation.
70
Proxy Form
I/We of being a shares , who is also a Member
Member of Kot Addu Power Company Limited (the Company) holding hereby appoint of
of the Company, as my/our proxy to vote for me/us, and on my/our behalf at the Eleventh (11th) Annual General Meeting of the Company to be held on October 22, 2007 and at any adjourment thereof.
Signed this
day of
2007. CDC Account No. Participant I.D. Account No.
Folio No.
Witnesses: 1. Signature Name CNIC Address 2. Signature Name CNIC Address Note 1. This Proxy, duly completed, signed and witnessed, must be deposited at the offices of the Companys Registrar, THK Associates (Private) Limited, Ground Floor, State Life Building No. 3, Dr. Ziauddin Ahmed Road, Karachi, 75530 not later than forty-eight (48) hours before the time appointed for the Meeting. No person shall be act as proxy who is not a Member of the Company (except that a corporation may appoint a person who is not a Member). If a Member appoints more than one proxy and more than one instruments of proxy are deposited by a Member with the Companys Registrar, all such intruments or proxy shall be rendered invalid. The Proxy shall produce his original CNIC or original passport at the time of the Meeting. In case of individual CDC Account holders, attested copy of CNIC or passport (as the case may be) of the beneficial owner will have to be provided with this Proxy. In case of a corporate entity, the Board of Directors Resolution/Power of Attornery with speicmen signature of the nominee shall be submitted alongwith this Proxy (unless it has been provided earlier).
The signature should agree with the specimen signature registered with the Company.
Revenue Stamp Rs. 5/-
2.
3.
4. 5.
6.
71
AFFIX CORRECT POSTAGE
THK Associates (Private) Limited Registrar for Kot Addu Power Company Limited Ground Floor, State Life Building No. 3 Dr. Ziauddin Ahmed Road Karachi 75530, Pakistan

Balance Sheet: As at June 30, 2007

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Balance Sheet: As at June 30, 2007

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Balance Sheet

as at June 30, 2007

8,802,532 444,451 9,616,465 18,863,448

8,802,532 444,451 10,874,854 20,121,837

CONTINGENCIES AND COMMITMENTS

The annexed notes 1 to 39 form an integral part of these financial statements.

Syed Rizwan Ali Shah (Chief Executive)

2007 2006 (Rupees in thousand)

Vince R. Harris OBE (Director)

Profit and Loss Account

37,086,650 (28,343,289) 8,743,361

(289,613) 457,322 8,911,070

Syed Rizwan Ali Shah (Chief Executive)

Vince R. Harris OBE (Director)

Cash Flow Statement

The annexed notes 1 to 39 form an integral part of these financial statements.

Syed Rizwan Ali Shah (Chief Executive)

Vince R. Harris OBE (Director)

Statement of Changes in Equity

(3,961,140) 5,317,362 (3,521,013) 10,874,854

(3,961,140) 5,317,362 (3,521,013) 20,121,837

(3,609,038) 4,991,409 (2,640,760) 9,616,465

(3,609,038) 4,991,409 (2,640,760) 18,863,448

The annexed notes 1 to 39 form an integral part of these financial statements.

Syed Rizwan Ali Shah (Chief Executive)

Vince R. Harris OBE (Director)

Notes to the Financial Statements

Notes to the Financial Statements

Notes to the Financial Statements

Notes to the Financial Statements

Notes to the Financial Statements

Notes to the Financial Statements

Notes to the Financial Statements

Notes to the Financial Statements

WAPDA Related party Less: Current maturity

22, ending June 2018.

Notes to the Financial Statements

3,308,356 (14,326) (5,075) 3,288,955

3,176,292 (13,292) 3,163,000

Notes to the Financial Statements

401,056 21,139 36,618 (5,978) 72,123 524,958

383,998 18,060 35,038 (8,863) (27,177) 401,056

498,170 44,901 (5,978) 53,190 590,283

427,351 38,771 (8,863) 40,911 498,170

%age Plan assets are comprised as follows: Debt Cash

98.6% 1.4% 100%

Notes to the Financial Statements

524,958 (590,283) (65,325)

401,056 (498,170) (97,114)

383,998 (427,351) (43,353)

325,106 (366,576) (41,470)

340,663 (301,658) 39,005

88,005 3,501 8,041 (840) 2,628 101,335

88,968 3,965 8,155 (744) (12,339) 88,005

107,247 4,645 9,826 (351) 12,822 134,189

125,488 6,050 11,533 (682) (35,142) 107,247

Notes to the Financial Statements

Notes to the Financial Statements