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Jordanian Electric Power Company (JEPCO) Cost of sales represents a primary item on the company’s income statement. This represents the cost of bought power from National Electric Power Company (NEPCO). It accounted for 80% of revenues in 2003, and 87% of revenues in the first 9 months of 2008. Other operating expenses accounted for 2.7% in the first 9 months of 2008. The gross profit margin stood at 10.3% for the first 9 months of 2008, compared to 12.2% in 9M 2007. Net profit amounted to JD 8.6 million in 2003 with a net profit margin of 4.6%. It increased to JD 11 million in 2007, with a net profit margin of 3.8%. In the first 9 months of 2008, net profit stood at JD 9 million with a net profit margin of 3%. The company reported preliminary revenues for 2008 of JD 426.23 million, compared to JD 315 million in 2007. This amount represents revenues from sales of energy; investment income; net other revenues; non operating revenues; write down of investments; and foreign exchange gain. The company has a non operating revenue item of JD 7.25 million from selling land to Greater Amman Municipality. Electricity Tariffs The Electricity Regulatory Commission (ERC) sets wholesale prices that electricity companies pay to NEPCO, and tariffs that end users pay to the distribution companies. In line with the increase in international oil prices in 2007, the ERC increased the wholesale prices that electricity distribution companies have to pay to NEPCO on July 1, 2007. Daytime and night time wholesale tariffs increased by 1.11 Fils/KWh, to reach 35.41 and 25.36 Fils/KWh respectively. This led to an increase in the cost of purchased power for JEPCO. In the last quarter of 2007, purchased power accounted for 89% of total revenues for the quarter, compared to 78% in 2004. Eight months later, on March 14, 2008, the ERC implemented an increase to prices that end users pay to electricity companies. The average increase to prices for end users stood at 34% versus an average of 3.9% increase on tariffs for electricity companies. (Please refer to the Appendix for details on tariffs.) The increase in electricity tariffs was translated into in an increase in the ratio of revenues to sold power. The ratio was 46.9 in 2003 and increased to 50.4 in 2007. The increase in usage is displayed in the increase in ratio of sold power per subscriber, which increased from 6 in 2003 to 7.3 in 2007. As a result of the increase in usage and tariffs, the electricity monthly Average Revenue per User (ARPU) for all segments of users combined increased from JD 24 in 2003 to JD 31.5 in 2007. We calculated the electricity ARPU based on revenues and the number of subscribers by segment reported by NEPCO, and the revenues by segment reported by JEPCO. The ARPU indicator is a common indicator in the telecom industry. Results show an increase in ARPU by segment, which is due to an increase in consumption in addition to an increase in tariffs. The agricultural segment has the highest ARPU compared to other segments. The Ministry of Agriculture is one of JEPCO’s subscribers, and it is in charge of pumping water to customers. There is a gap between the bought power from NEPCO, and the sold power to end users. The ratio of sold power to bought power declined from 89% in 2003 to 85% in 2007. In addition to losses in the system, there was an increase in electricity theft, which results in unpaid consumption of electricity. This accompanied the increase in oil prices, which led to substitution of traditional heating based on oil products, to electric heating. The percent of lost power reached 15.2% in 2007 compared to 12.4% in 2006. Furthermore, there is a difference in growth of bought power and sold power. Sold power readings are taken between mid of the month and the following month, while the bought power meters are taken on the first day of each month. Awraq Investments www.awraq.com Tel: 962 6 550 3803 Fax: 962 6 550 3801 Toll Free: 080022248 P.O. Box 925102 Amman 11110 Jordan [2]
Figure 2: Number of JEPCO’s Customers by Segment 2003 2004 2005 2006 2007 Domestic 538,839 570,180 605,638 640,594 689,722 Industrial 9,082 9,345 9,706 9,957 10,230 Commercial 98,279 102,794 107,919 113,770 119,010 Water Pumping 970 1,040 1,074 1,250 1,340 Governmental 5,762 5,998 6,489 6,864 4,147 Others 7,298 7,613 7,874 8,265 - Total Source: NEPCO 660,230 696,970 738,700 780,700 824,449 Figure 4: Average Revenue per User by Segment ARPU (JD) 2004 2005 2006 2007 Residential 13 14 15 16 Commercial 47 50 55 60 Industrial 348 395 419 463 Water pumping 1064 992 998 1082 Government, Street lighting 26 29 32 42 Other customers (hospitals, religeous) 104 106 115 Source: NEPCO, JEPCO, Awraq Investments Figure 6: Average Sold Power per Customer (MW) 2003 2004 Residential and public buildings 3.06 3.22 Commercial, Hotels, Broadcasting 8 9 Industrial 99.30 106.79 Water pumping 352 309 Government, Street lighting 17.24 18.32 Other customers (hospitals, religious) Source: JEPCO 23 21 2005 2006 2007 3.30 3.61 3.65 9 10 11 113.08 129.99 133.81 291 261 290 18.47 19.64 31.99 20 19 397 448 Jordanian Electric Power Company (JEPCO) Figure 3: Revenues by Segment Residential Revenues Commercial, Hotels, Hospitals, Religious, Broadcasting Industrial Agricultural 140 130 Governmental, Street lighting 115 120 Others, unread meters 99 96 100 89 79 84 80 60 67 73 60 45 49 56 34 39 40 20 12 13 13 14 17 1 0.3 2 0.4 2 0.7 3 2.7 3 1.3 - Sold Power Bought Power Sold power / Bought Power 8000 7000 6000 5000 89% 90% 4907 4396 88% 6157 88% 5431 4793 5393 7113 6030 90% 89% 88% 87% 4000 86% 3000 84.8% 85% Awraq Investments www.awraq.com Tel: 962 6 550 3803 Fax: 962 6 550 3801 Toll Free: 080022248 P.O. Box 925102 Amman 11110 Jordan JD Million Source: JEPCO Gigawatt Hour (GWH) 2000 1000 0 2003 2004 Figure 5: Sold Power versus Bought Power Source: JEPCO 2005 2006 2007 2003 2004 2005 2006 2007 84% 83% 82% [3]
Page 1: Figure 1: Ownership Structure Socia
Page 5 and 6: Figure 7: : JEPCO’s Revenues, Net
Page 7 and 8: Share Price Movement 8 7 6 5 4 3 2
Page 9 and 10: Valuation Our valuation for JEPCO i
Page 11 and 12: Figure 19: Number of Electricity Su
Page 13 and 14: Figure 21: Wholesale Electricity Ta

Awraq Investments www.awraq.com Tel: 962 6 550 ... - Menafn.com

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