Internship Report

An INTERNSHIP REPORT on Kot Addu Power Company LTD

Submitted To: Muhammad Nawaz Chatta

HR Manager KAPCO
Submitted By: Basit Saeed

ACKNOWLEDGEMENTS

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In the name of Allah, Most Gracious, Most Merciful

Firstly I am extremely thankful to Allah Almighty, who helped me a lot in

completing this difficult task, gave me the courage and fortitude to complete this
report in time.

I would devote my all effort and my efficiencies to my Teachers, Trainers and

Respected colleagues who guide me to in KAPCO internship program that
cause my experience and knowledge about work.

Parents are more important for me to encouragement reach at higher level

education and also guide me to enter in MBA and other skill based programs.

EXECUTIVE SUMMARY:

Until 1996, Government of Pakistan had monopoly over power generation and
transmission all over the country. Government ran this business through State
owned “Water and Power Development Authority” (WAPDA). In 1996, the then
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Government decided to privatize WAPDA in different stages. Because of

excessive in-efficiencies in the operation of WAPDA’s and to encourage inward
investment into Pakistan.
Kot Addu Power Company came into existence in June 1996 when the
Government privatizes its 26% shares to International Power England through
open bidding with an option to purchase another 10%. This 10% was also
purchased by International Power England. Therefore, in June 1996 a new
company named “Kot Addu Power Company” came into existence.
The power complex is spread over 280 acres of land. It has three independent
blocks and each block has machines of different make where different
technology is used. Production department operates the plant and maintenance
department is responsible for up keep of the plant through preventive
maintenance, trouble shooting and major/minor overhauling after
predetermined period.
Forecasting of the company is entirely dependent upon the forecasting received
from WAPDA. Mainly forecasting is done for various maintenance operations.
Forecasting is also done for the provision of raw material supplies i.e. Furnace
Oil, High Speed Diesel and Spare Parts for the plant machinery.
The company maintains an inventory of 21 days for Furnace Oil and High
Speed Diesel. It also maintains a huge inventory of spare parts. A fairly good
Supply Chain Management System exists within the organization.
The company’s basic business is to produce required amount of power
according to the customer demand with No liquidated damages. The company
believes in quality by maintaining high efficiency level of its operations. There is
ISO certification obtained by the company.
The company is shifting its existing manual information system to modernized
information technology based system in which approximately 120 new
computers along with a server had already been installed.

TABLE OF CONTENTS:

Introduction to Organization...........................................................05
Power Plant Overview…………………………………………...……06
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Introduction to All Blocks................................................................07

Heat Recovery Steam Generating System………………………….08
Organization Structure....................................................................09
Vision and Mission Statement.........................................................09
Inventory Management………………………………………………...10
Quality Management……………………………………………..........10
Contract & Procurement Department………………………………...11
Procurement Steps…………………………………………………….12
Procedure to Issue items from store…………………………………11
Finance Department……………………………………………….......17
Introduction of Finance……………………………………………......17
Functions of Department……………………………………………...17
Preparation of Financial Statements…………………………………19
Tax Management…………………………………………………...….22
Investments……………………………………………………………..23
Pension………………………………………………………………….23
EOBI………………………………………………………………….….24
EPF………………………………………………………………………24
BESOS…………………………………………………………………..25
SWOT Analysis……………………………………………………..….28

INTRODUCTION TO THE ORGANIZATION:

PAKISTAN is one of the developing countries, where always remaining the
deficiency of the power like those of other developing countries, so for this
purpose KOT ADDU THERMAL POWER STATION project was initiated in 1987
by WAPDA with the purpose to fulfill the increasing demand of electricity in
Pakistan. Installing the latest technology completed this power project.

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The KOT ADDU Power Company (KAPCO) runs a 1600 MW combined cycle
Power plant at KOT ADDU, a small town, in the middle of Pakistan. The
company came into privatization in the June of
1996 when the Water and Power Development
Authority (WAPDA) the state run power
generation utility of Pakistan, privatized the
plant by offering 36% stake to strategic investor
“International Power” of U.K along with
management control.
KOT ADDU site is situated in District
Muzaffargarh, 100 KM north east of Multan on the left bank of river INDUS at a
distance of 16Km from TAUNSA BARRAGE. The area is surrounded by
agricultural land stretched on the north and west side of KOT ADDU. There are
some adjacent areas covered with windblown sand dunes which were formed
with the passage of time. These sand dunes too are being gradually converted
into agricultural land.
Apart from above, there were very little educational facilities available in the
area prior to setting up of this Power Station which has now almost been
doubled and now “The City School” is working within the boundary of KAPCO.
The essential amenities are also now made available to the residents.
POWER PLANT OVERVIEW:
KAPCO plant comprises on 15 generating units (10 gas turbines and 5 steam
turbines) of different makes. It was built in 5 project phases between 1980 and
1997.
KAPCO is managed by a board of directors representing the 2 shareholders
and the CEO. The power station is run by a management steam appointed the
board of directors and comprise:
• CEO
• General Manager Finance
• General Manager Administration and Human Resources
• General Manager Engineering

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AN INTRODUCTION TO All BLOCKS:

Block 1 is equipped with six turbines in total. In which four are Gas Turbine
(GT1, GT2, GT3, and GT4) and other two are Steam Turbines (STG 9 and
STG 10).
Gases Turbines (GT1, GT2) are German made and are manufactured by
Siemens engineering co. Ltd. They have overall thermal efficiency 28% and
having rated capacity of 100MW. Rated speed is 50s -1. Steam Turbines (STG 9,
STG 10) are manufactured by ABB. As there is not any kind of compressor,
which uses about 60% energy of GT, so its efficiency is increased up to 50%.
The whole system is based on combined cycle. Where two gas turbines and
one Steam Turbine are equipped with separate generators. These components
work together to form a combined cycle and produce electricity of almost 100
MW.
In block 2, there is also same construction of machines but they are all made of
ABB. Their rating and efficiency is same as that of block 1. All these machines
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are synchronized directly with the bus bar i.e. at 220 kV to attach with bus bar.
Block 3 is equipped with three turbines in total. In which two are Gas Turbine
(GT13, GT14) and other one is Steam Turbine (STG15).
Gases Turbines (GT13, GT14) are German made and are manufactured by
Siemens engineering co. Ltd. They have overall thermal efficiency 28% and
having rated capacity of 100MW. Rated speed is 50s -1. Steam Turbines (STG
15) are German made and also manufactured by Siemens.
The whole system is based on combined cycle. Where two gas turbines and
one Steam Turbine are equipped with separate generators. These components
work together to form a combined cycle and produce electricity of almost 100
MW.
These are the only machines in KAPCO, which are synchronized at 11kv i.e.
with unit auxiliary transformer. Supply is taken from the bus bar by converting it
from 220 kV to 11 kV. So they are synchronized with each other at unit auxiliary
transformer point.

Heat Recovery Steam Generating System:

The gas turbines, despite of their low installation cost, easy and speedy
erection and high loading rate could not win the deserving popularity over the
steam turbines due to the poor efficiency of the former. In the conventional gas
turbine unit, substantial amount of heat energy was lost through the turbine
exhaust gases which leave the turbine at about 580 Deg. Centigrade. To make
use of this wasteful energy, an innovative concept of combined cycle plant, now
has been introduced by the gas turbine manufacturers. Under this design, the
exhaust of the gas turbine is made to pass through a conduction type boiler
(commonly called as HEAT RECOVERY STEAM GENERATOR).High-pressure
steam so generated is then used to run the steam turbine, which thus produces
power without any fuel. This raises the plant efficiency to nearly 49% against
the 28% of the conventional gas turbine.

Agreements between WAPDA & KAPCO:

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WAPDA entered into an agreement with KAPCO for the purchase of the power
for next 25 years from this plant. The tariff covered two kinds of payments viz.
capacity and energy payment. The capacity payment is made on the available
capacity of the plant and is mainly used by the company to meet the fixed
expenses and 756 million dollar debt liability that it inherited from WAPDA. The
energy payment is done on the actual dispatch from the plant. It covers the fuel
cost and there is hardly and saving from this part.
The agreement allows 36 complex days for the scheduled outages and 500
complex hours for the unscheduled / forced outages. In case the accumulated
outage period over the year exceeds the agreed allowance, the company is
liable to pay the liquidated damages at a rate of 1.6 times of what it gets as
capacity payment.
The first year of the business went very well. WAPDA was prompt in making
payments, but it did not lost very long. WAPDA as well as Government of
Pakistan were in financial crises because of corruption and in efficiencies.
Ultimately WAPDA engaged KAPCO and National Power in a complicated legal
battle over the tariff issue by filing petitions in the high court. The court finally
passed an interim order in October 1998 that restricts KAPCO to receive Rs.
1.98 per KWh of electricity. The objective behind this legal wrangling was to
pressurize KAPCO / International Power to agree and out of court settlement
for deduction of tariff. With the incoming of present Government the matters
have been solved to fair extent.

Organizational Structure:
The powerhouse complex is spread over 280 acres. As stated earlier there are
three independent blocks and each block is independent in itself.
Each block has machines of different make where different technology is used.
Production department operates the plant and maintenance departments are
responsible for up keep of the plant through preventive maintenance, trouble
shooting and major / minor overhauling after predetermined period. At the face,
it is a functional structure. The specialist functions like finance, procurement, IT,
H.R, CS, Legal / Administration are common and provide service which
Production and maintenance departments need to carry out their work. The
production department has its own centralized structure.
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Each block has its separate maintenance department that is further subdivided
into three sections with respect to functions Viz. electrical, mechanical, and
‘instrument and control’. A senior engineer heads each function. Resident
Engineer 1 heads block 1 maintenance department whereas resident engineer
2 is responsible for block 2 and 3 maintenance teams. However there is an
additional position of Assistant Resident Engineer at block 3 who is responsible
to resident Engineer. The senior engineer of this block report to both resident
engineer and assistant resident engineer.

Vision Statement:
To be a leading power generation company, driven to exceed our shareholder’s
expectations and meet our customer’s requirements.

Mission Statement:
To be a responsible corporate citizen.
To maximize shareholder’s return.
To provide reliable and economical power for our customer.
To excel in all aspects relating to safety, quality and environment.
To create a work environment which fosters pride, job satisfaction and equal
opportunity for career growth for the employees.

Inventory Management:
Inventory Management is an important concern for managers in all types of
businesses. For companies which operate on relatively low profit margins, poor
inventory management can seriously undermine the business. The challenge
isn’t to reduce costs or to have plenty around to satisfy all demands, but to
have the right amount to achieve the competitive priorities for the business
most efficiently.

Power Purchase Agreement ("PPA"):

The PPA is between WAPDA and KAPCO. Inter alia, the PPA determines the
tariff structure and principles of operating the Power Plant. The PPA includes an
implicit return built into the tariff provided. KAPCO maintains its available
capacity at the contractual level identified in the PPA. KAPCO has robust and
effective engineering, financial, procurement and HR strategies in place to

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ensure that contractual capacity levels are maintained. Over the last two years,
dependable capacity levels have been significantly above the contracted levels.

Gas Supply Agreement ("GSA"):

The GSA is between Sui Northern Gas Pipelines Limited ("SNGPL") and
KAPCO. Inter alia, the GSA guarantees a certain quantity of gas deliveries

during off peak months from SNGPL.

The OSA is between KAPCO and Pakistan State Oil Company Limited (PSO).
PSO is the largest oil marketing company in Pakistan and is engaged in the
nationwide storage, distribution and marketing of various petroleum, oil and
lubricant products. Inter alia, the OSA covers the supply to KAPCO of fuel,
diesel, oil, greases, lubricants and additives for the requirement of the Power
Plant.

QUALITY MANAGEMENT:
Quality can be defined in a various ways. In a general sense, quality may be
defined as meeting or exceeding the expectations of the customer. For practical
purposes, it is necessary to be more specific. Quality has multiple dimensions
in the mind of the customer, and one or more of the following definitions may
apply at any one time.

Quality can be defined in terms of:

➢ Conformance and specification
➢ Value
➢ Fitness for use
➢ Support
➢ Psychological impressions
One of the important elements of quality (TQM) is employee’s involvement in
totality. Good quality or total quality can pay off in terms of high profits. The new
and latest concept of quality is continuous improvement or exceeding the level
of customer’s satisfaction.

CONTRACT AND PROCUREMENT DEPARTMENT:

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Procurement is the acquisition of goods or services at the best possible total

cost of ownership, in the right quantity and quality, at the right time, in the right
place for the direct benefit or use of governments, corporations, or individuals.
Purchasing refers to a function in business whereby the enterprise obtains the
inputs for what it produces, as well as other goods and services it requires. In
larger businesses, the function is frequently carried out in a purchasing
department, headed by a purchasing manager.
Purchasing is the informal name of the department in Procurement responsible
for issuing Purchase Orders for goods, including material and equipment. In
most US Corporations, Purchasing Agents are typically referred to as
"Purchasing Specialists" or simply as "Buyers".
Simple procurement may involve nothing more than repeat purchasing.
Complex procurement could involve finding long term partners – or even
'codestiny' suppliers that might fundamentally commit one organization to
another.
Even simple purchasing can involve trade-offs. What is the quality required?
Are there advantages buying fewer or more items? The timing can be critical.
Each supplier may have different attributes, capabilities and values. The total
cost of acquisition should be considered alongside the total lifetime cost, not
just the purchase price. The physical handling of any products should be
considered, with links to methods of transport, logistics and warehousing. If
good data is available it is good practice to make use of economic analysis
methods such as cost-benefit analysis or cost-utility analysis.
An important distinction is between analysis made without risk and those with
risk. Where risk is involved, either in the costs or the benefits, the concept of
expected value should be employed.
Procurement may also involve a bidding process i.e. tendering. A company may
want to purchase a given product or service. If the cost for that product/service
is over the threshold that has been established (e.g.: Company X policy: "any
product/service desired that is over Rs.1,000 requires a bidding process"),
depending on policy or legal requirements, Company X is required to state the
product/service desired and make the contract open to the bidding process.
Company X may have ten submitters that state the cost of the product/service
they are willing to provide. Then, Company X will usually select the lowest
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bidder. If the lowest bidder is deemed incompetent to provide the desired

product/service, Company X will then select the submitter who has the next
best price, and is competent to provide the product/service.

Procurement Steps:
Global sourcing is a procurement strategy aimed at exploiting global efficiencies
in production. While a global sourcing process is usually initiated as a
mechanism of exploiting cross-geographic arbitrages (simply put, identifying
cheaper global sources), it is now a standard step in the global expansion of
firms. Global sourcing advantages extend to identifying alternate supplier
sources, utilizing buffer capacities and taking advantage of specific
geographical talent pools
Procurement life cycle in modern businesses usually consists of seven steps:
➢ Information Gathering: If the potential customer does not already have
an established relationship with sales/ marketing functions of suppliers of
needed products and services (P/S), it is necessary to search for
suppliers who can satisfy the requirements.
➢ Supplier Contract: When one or more suitable suppliers have been
identified, Requests for Quotation (RFQ), Requests for Proposals (RFP),
Requests for Information (RFI) or Requests for Tender (RFT) may be
advertised, or direct contact may be made with the suppliers.

Working Process in Purchase Department in Kapco

Different activities are performed during the purchase process in KAPCO, which
are like these: 1) Identification of Requisition
2) Stock verification of Inventory in stores
3) Selecting potential suppliers or contractors
4) Invitation for tender
5) Tender opening and analysis of offers.
6) Authorization from Technical Engineer and Finance manager for budget
purpose.
7) Placement of order
8) Payment (including taxes)
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9) Maintaining records through software.

All employees of KAPCO shall conduct themselves in a manner that ensures
maximum benefit to KAPCO. Therefore no employee commits to buy anything
regarding plant without involving procurement department.

1. Identification Of Requisition:
This is the very basic step for the procurement process. The purchase demand
requisition contains a full detail of quality and quantity of commodities required.
It also contains price detail of goods purchased previously .Whenever there is
any requirement related to plant, then Technical officer of the individual block
prepare a requisition on a predefine “purchase requisition Form” and after it,
send this form to purchase manager for further process. The “purchase
requisition form” contains number of items; quantity required description about
purchase, commodity code, estimated cost, suggested suppliers or contractors
and signatures of the relevant officer etc.

2. Stock Verification:
As requisition received and reviewed, then staff member verify the stock in
stores through software named as Q4W stock. And also new Enquiry number is
issued for further process.

3. Selecting Suppliers or Contractors:

Selecting suppliers or contractors is much important task for KAPCO and the
procurement manager asses the suppliers on their experience and quality
control issues etc.

4. Invitation for tender:

Procurement department will issue the enquiries to different tenderers. These
will be sent through courier service’s-mail enquiry can be sent in urgent
requirement. During this process it’s the responsibility of purchase department
that all tenderers are treated equally. Tender will also include terms and
conditions.

5. Tender opening and analysis of offers:

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On receiving the tender in a closed envelop, they will be placed in the tender
box. Two locks will secure the tender box and Finance department and
purchase department will hold the keys for these. Tender panel will open the
tenders twice in a weak or by their mutual agreement. The tender panel will
stamp and sign the tender. After it procurement manager will prepare the
analysis comparison statement.

6. Authorization from Technical Engineer and Finance manager for

budget:
The comparison statement is then sent to technical officer who analyze the
technical issues and with previous purchase rates and also checks the make of
which company. Then send his report with comments to procurement
department for further action. The purchase manager then negotiate with
supplier or contractor for reducing the rates and finalize the terms and
condition. Then file is transferred to the assistant of purchase department for
allocation of codes of budget, if purchase is newly, then new codes are allotted
and if purchase is old or repeated then old stock codes are given to each item.
After allocation of budget codes then file is transferred to Finance department
to get the authorization of budget for payments

7. Placement of order:
Whenever negotiation has done and finance department gave authorization of
budget, then purchase department place the order to the selected best supplier.
Purchase order consists of lead time, payment terms, Inco terms (Ex-work,
C&F, and FOB) and delivery station.
8. Payment Approval/Authorization Process:

Cheques are signed by the authorized signatories after checking of

accompanying bank payment voucher (BPV). BPVs are authorized for
payments by either the Financial Controller or the General Manager Finance.
Bank instructions for payments to be made other than through cross-cheques
(E.g. fund transfer, demand drafts etc.) Are also signed by the authorized
signatories and are authorized by either the Financial Controller or the General
Manager Finance. Once signed, bank instructions for payments are faxed and
also couriered to the concerned bank for execution. Cheques once signed are

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sent to the supplier/vendor under a covering letter, a copy of which is attached

with the bank payment voucher.

Import/Export Section:
Import/Export section is the major part of the procurement department because
whenever order is placed to the supplier and if the supplier is foreign, then
import section completes the process of delivery, custom clearance etc.
Similarly when the KAPCO sends its machinery for the overhauling purpose to
the foreign countries, then this process is called export cum re-import. And all
this process is done by the import/export section.

Stores Process:
Procurement department is managing seven stores. Three storekeepers
manage all stores with their assistants and a store manager supervises all
these stores. The stores names are alphabetically from A to G.These stores
contain about 3,145,198,445/- inventory level, which is controlled by software,
named as Q4w stock. Each store is containing inventory approximately as:

Procedure To Issue Items From Store:

In KAPCO, store department had issued an ‘ISSUE BOOK’ to every
department. The requisitioning department fills the store issue note and gets
approval from the store manager. The stores issue the required goods to the
specified department. The storekeeper at that time makes required entries in
the issuance register as well as in software. Three copies of store issue note
are prepared, one copy is kept in department, second copy is sent to accounts
and the third copy is kept in store record.

Procedure of Store Issue:

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When goods and material are received in the stores, the relevant storekeeper
requests an inspection of the goods and material by the engineer. The Engineer
will check and verify the material in quantity and quality. In case of rejection of
material, supplier will be notified immediately.
In KAPCO, store department has issued an issue book to every department.
The repositioning department sends the store issue note and signs it from
departmental head and store manager. The storekeeper issues the goods to
the specified department and makes an entry in issue computer. Three copies
of store issue note are prepared. One copy is kept in relevant department,
second copy is sent to the Finance department and third copy is kept in store
record.

Certification of ISO:
KAPCO is certified by the international standards organization rules and in this
year KAPCO has successfully completed the three year certification of different
criteria’s just like of Quality control ISO 9001-2000, occupational health and
safety OHSAS 18001, and environmental ISO 14001.
✓ Quarterly report is prepared by the department to analyze the
performance of the department and also annual report is also prepared
to check the overall performance of company.
✓ Call off contracts is also contracted in procurement department, in which
price remains fix throughout the decided period.
✓ Single Tender Action is recommended, when purchase is below
10,000.
✓ Petty cash purchases are designed for low value incidental purchase.

FINANCE DEPARTMENT:

INTRODUCTION TO FINANCE:
Finance is an art and science of managing the money and accounting is the art
or science of interpreting, measuring, and communicating the results of
economic activities whether you are paying your phone bill, balancing your
checkbook, preparing your income tax return or managing an international
corporation, you are working with accounting. Accounts Manager makes the

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important financial decisions with consultation of Director and Chief executive

of company.
Record of all departments like import department, Export department, Purchase
and sale department, are maintained here. So this department feels a burden of
work. Accountant is very much busy person who gives instructions to six
members of finance department and checks their work time-to-time .His tenyear
experience has made the work easier for him. All types of tax rates, recent
changes in tax policies, different codes, companies’ names are on his
fingertips.
The accounts department is responsible for the entire accounting process of the
organization regarding the recording of transactions, designing the accounting
policies and accounting system, preparing financial statements and computer
application. If we consider a company a cell then we can say that accounts
department has role of nucleus.
Without accounts department there is no possibility of doing business even
sight weaknesses on the part of accounts department can badly affect the
performance of whole organization.

Functions of the Department:

Finance Manger is supervising the all activities of this department. Financial
Controller is responsible for accounting procedure and Tax & treasurer is
responsible about the matters of taxation, and investment.
➢ VOUCHING:
Very first and an important function of finance department is recording the
business transactions on vouchers. This is also called process of vouching.
This is made for internal record keeping. Auditors specifically audit vouchers.
Wrong vouching will lead to error in the system and ultimately create problems.
From vouchers information is recorded in daybook and cashbook. As each
voucher along with its invoice, PO and other necessary documents are kept in
the record room so daybook is one that can give information about parties DR
and name of account CR along with amount.
➢ LEDGER:
In order to see accounts in condense form ledger is used. From daybook all the
entries are posted in ledger. Ledger represents DR or CR balance of each

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party. So from ledger we can see amount that is to be paid to a party or the
amount that is to be received and the balance at the end of the month.
➢ TRIAL BALANCE:
After this all the DR balances and CR balances of all the parties are posted in
trial balance. The trial balance must be equal at both sides. Otherwise there is
any error in recording the transactions.
Now trial balance becomes the source of profit and loss and balance sheet.
This department also designs the accounting policies. All the work in this
department is being take place on accrual basis.
The department prepares trial balance at the end of every three months and
Profit and loss accounts and balance sheet are prepared at the end of year.
The financial year ends on june30 of each year. The financial statements are
presented to shareholders.

Preparation of Financial Statement:

Different financial statements such as Balance sheet and income statement are
prepared to show the working of the business. The account department
prepares the trial balance of the company every month. And then accounts
manager prepares the other financial statement.

Profit and Loss Account For the year ended

June 30, 2022

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2022 2021
Note (Rupees in thousand)

Sales 24 136,599,624 69,636,395

Adjustment to Capacity Purchase Price – (19,287,369)

Net sales 136,599,624 50,349,026

Cost of sales (128,067,519) (45,098,016)

Gross profit 8,532,105 5,251,010

Administrative expenses (976,701) (952,620)

Other expenses (277,451) –

Other income 12,618,768 13,220,591

Operating profit 19,896,721 17,518,981

Finance cost (4,373,107) (3,108,239)

Profit before tax 15,523,614 14,410,742

Taxation (5,629,994) (4,181,318)

Profit for the year 9,893,620 10,229,424

Earnings per share - basic and diluted Rupees 11.24 11.62

Balance Sheet
As at June 30, 2022
2022 2021

(Rupees in thousands)
EQUITY AND LIABILITIES

CAPITAL AND EXPENSES

Authorized capital

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3,600,000,000 (2021: 3,600, 000,000)

Shares of Rs 10 each 36,000,000 36,000,000

Issued, subscribed and paid up capital

880,253,228 (2021: 880,253,228) ordinary
Shares of Rs 10 each 8,802,532 8,802,532
Capital reserve 444,451 444,451
Unappropriated profit 59,348,925 55,976,628
68,595,908 65,223,611

NON-CURRENT LIABILITIES

Lease Liabilities - 3,443

Contract Liabilities - 4,613,061
Deferred liabilities 1,882,190 9,223,790
1,882,190 13,840,294

CURRENT LIABILITIES

Current portion of lease liabilities 3,434 7,105

Current portion of contract Liabilities 4,613,061 14,515,237
Finances under mark-up arrangements-secured 37,370,346 36,257,334
Trade and other payables 21,470,058 17,177,916
Provision for taxation-Net 1,855,133 - Unpaid
Dividend - 4,401,266
Unclaimed Dividend 971,233 810,833
66,283,265 73,169,691
CONTINGENCIES AND COMMITMENTS

136,761,363 152,233,595

ASSETS
2022 2021
(Rupees in thousands)
Non Current Assets

Property, plant and equipment 2,237,359 3,068,225

Intangible assets 1,720 3,529
Right of use Assets 2,220 7,455
Long term deposits 21,128 6,419
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Staff Retirement benefits 721,960 435,286

2,984,387 3,520,914
CURRENT ASSETS

Stores and spares 3,698,057 3,181,423

Stock-in-trade 6,235,956 5,921,887
Trade debts 62,154,482 104,622,431
Investment at fair value 54,067,311 25,670,360
Income Tax due from Govt - 1,504,400
Loans, advances, deposits, prepayments 6,602,988 6,528,658 And
other receivables
Cash and bank balances 1,018,182 1,283,523

133,776,976 148,712,682

136,761,363 152,233,596

Tax Management:
KAPCO itself was income tax exempted for ten years up to 2006, and this was
the last year of tax exemption. However in last ten years KAPCO was only
collecting withholding tax from its suppliers and was paying to Government.
Following books are maintained in Finance department:
• General Journal
• Payments
• Purchase Book
• Supplier Ledger
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• Cash Book
• Bank Book
• Payroll section

DIFFERENT TAX RATE ARE APPLIED ON EXPENSES:

Different tax rate are applied on different expenses
By the finance department foreign material other machinery parts are
purchased.
These tax rates are as follows:

EXPENSES TAX
RATE
Input Sale Tax 18%
Services 13-16%
Communication 19.5%
Transportation 3%
Rice(Edible Oil) 2.5%
Media(Advertisement Ascent) 10%
Supplies 18%
Holding Tax 5-20%
LTP(Long Tax Payer Unit) If Deliver Late 5%

Investments:
Finance department is also investing in different types of term deposits.
Defense saving certificates, term financing certificate(TFCs), WAPDA
investment bonds, Pakistan investment bonds(PIBs) for the benefit of company.

Investment details of KAOCO in other companies are as follows

Investment at cost
PIB (Pakistan Investment Bonds) 50%
T Bills (Treasury Bills) 24%
NSB (National Saving Bonds) 2%

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TFC (Term Finance Certificates)

Allied Bank Limited 3%
Pak Arab Fertilizer Limited 1%
Engro Chemical Pakistan Limited 2%
Pakistan Mobile Communication Limited 8%

Investment At Market Value

AKD-Investment 2%
JS-Principal Secure Fund 3%
AKD- Opportunity Fund 0%

Pension:
In KAPCO the pension is calculated as per company policy which varies from
year to year. The employees are able to get this facility after the 25 year of
service. In case of death of the employee his family can get pension amount
but the employee must have completed 10 year of service. The pension is paid
50 percent in lump sum at the time of retirement of the employee and balance
is commutated.
• If employee has 60 year age and get retirement then he received the
6month salary in lumsum.
• If employee has more than 30 year and get retirement then he received
the 2% additional pension.

Pension Calculation:
Company uses the following procedure for calculation of pension.
Gross Pension = Pensionable Salary*Service Factor
Net Pension = Gross Pension
2
Service Factor = 25 Year Service*175
300
Commutation = Gross Pension*.5*12

EOB: (Employee Old Age Benefits)

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Minimum Wage Act May 2012

EOB = Wages 9000 *6% = 540
Contribution
9000 * 1% by Employee = 90
9000 * 5% by employer = 450
This Amount Add on EOB 540

EPF :( Employee Provident Fund)

It is contributed by the employee and equal contribution is made by the
employer. In KAPCO the ratio is different for the contribution of the provident
fund. It may be 3 percent, 6 percent and 10 percent. The employees can take
loan from this fund but maximum installment for repayment is 48 and also
interest is charged on the outstanding loan.
Company maintains the EPF for the employees. Company contributes the
same amount of percentage in EPF which are contributed by the employees.
These percentages are 6%,8% or 10%.

BESOS :( Benazir Employees Stock Option Scheme)

As approved by the cabinet on 5th August, 2009

Applicable on 14 August 2009 Salient

Features:
Empowerment of employees of SOEs (Stock on Equity) other GOP share
holding through transfer of 12% of the GOP share holding and a seat on Board.
1) All permanents employees and contractual employees (with minimum
service of 5 years)
2) Are eligible for BESOS and can only exit on retirement or otherwise
ceasing to be employee of the SOE.

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3) Twelve percent (12%) of the GOP share holding to be transferred for

free.
4) The shares of respective SOE to be transferred to trust.
5) The BESOS to be implemented by the Privatization Commission in
coordination with
6) The line ministry/ holding corporation/ respective SOE.
7) Funding Arrangements.
8) Trust to make payments for surrender units.
9) Surrendered units to be returned by the trust to the Federal Government.

Procedure of BESOS:
Total Numbers of Shares (48307627)
Length of Service
Minimum = 1 unit = 5018 Shares
Maximum = 20 unit 100360 shares
Amount transferred To Trust= Total Shares*Par value*Tax Rate (Zakat)* with
Holding Tax 48307627*10*2.5%*7.5%*
Privatization Commission 50
Remaining Amount hand over to share holders.

EXACT SOFTWARE:
KAPCO is using accounting software named as EXACT. This software helps in
preparing the final annual statements.
The Finance department of KAPCO is responsible for the entire accounting
process of the organization and for an efficient handling of the accounts. The
accounts department mainly performs the following functions:

Preparation Of Purchase Account:

The assistant accountant is responsible for the entire accounting process to
record the purchase made. When the delivery is completely done, then store
manager informs to finance department for payment. Finance department
prepares the checks for the supplier.

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Audit:
All the public limited companies have their own chartered accountants, who
audits the company account at the end of the respective financial year and offer
their reports to the shareholders and government for taxation purposes. But a
company also arranges for internal audit to make their accounts fair and to
control the chances of fraud. In account department of KAPCO is outsourcing
the internal audit by Yousaf Adil chartered Accountants. He checks all the
accounts. So in this way an effective internal system is existed here.
External Audit is done by the Ferguson Company.

RATIO ANALYSIS:
An index that relates two accounting numbers and is obtained by dividing one
number by the other.
To evaluate a firm’s financial condition and performance, the financial analyst
needs to perform “checkups” on various aspects of the firm’s financial health. A
tool frequently used during these checkups is a financial ratio, or, index, which
relates two pieces of financial data by dividing one quantity by the other. Why
bother with a ratio? Why not simply look at the raw numbers themselves? We
calculate ratios because in this way we get comparison that may prove more
useful than the raw numbers themselves. For example, suppose that a firm had
a net profit figure this year of $1 million. That looks pretty profitable. But what if
the firm has $100million invested in total assets. Dividing net profit by total
assets, we get$1M/$100M= .01, the firms return on total assets. The .01 figure
means that each dollar of assets invested in the firm earned a 1 percent return.
A saving account provides a better return on investment than this, and with less
risk. In this example the ratio proved quite informative.

Expression of Ratios:
Ratios can be expressed in the following ways:
Actual ratios are arrived at by dividing one number by another e.g. current
assets to current liability is 2:1
Ratio between two numerical facts usually over a period of time e.g. Stock
turnover is three times a year.
Ratio between two numerical may be expressed in percentage.

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Advantages of Ratio Analysis:

Through ratio analysis we can evaluate the financial health, operation efficiency
and profitability.
It gives a chance of inter firm comparison to measure efficiency and helps
management to resort some remedial measures. Trend analysis helpful toward
planning and forecasting.
It provides good help in decision making for investors and to the financial
institutions.

SWOT Analysis:
STRENGHTS:
• KAPCO is operating a combine cycle power plant, which is considering
one of the best power plants in Pakistan.
• ISO 9001, 14001, 18001 under the umbrella of IMS through SGS has
been accomplished.
• All manual procedures have been computerized.
• Modern software’s are in use for quick and efficient system.
• The organization possesses hardworking and sharp minded workforce.
• Health and safety department has ensured complete safety and security
to workforce.

WEAKNESSES:
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• Q4W stock software is not completely automated.

• Deficiencies in communication skills and lack of computer knowledge in
lower staff.

OPPORTUNITIES:
• The only future concern for KAPCO is the technological changes that will
shape the future organization structure. Because in the future those will
survive who will successfully exploit the technology.

THREATS:
• In Pakistan, Several other projects are coming up in power generation.
So KAPCO management will face numeral challenges in technical
workforce, because new competitors will offer better packages.
• The ever changing conditions of country may impact on the working
environment of organization.

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