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Jordanian Electric Power Company (JEPCO) Balance Sheet Total assets stood at JD 421.7 million at the end of September 2008, representing a 15.6% growth over total assets for September 2007 which stood at JD 364.7 million. Total assets include subscriber contributions and rural fils contributions after depreciation. The company reports subscriber contributions at both sides of the balance sheets under non current assets and non current liabilities. In order to address customers’ needs for electricity that is above the specific load provided by the network, subscribers pay amounts required to install assets such as: transformer stations, cables, electric poles and others. Should inventory be used for the project, the amount used moves into projects in progress. Once 80% of the project is completed, the amounts move into subscriber contributions, which are depreciated at 4% annually. The increase in construction activity in 2006 and 2007 was reflected in an increase in subscriber contributions assets. Subscriber contributions assets amounted to JD 63 million in 2003, constituting 25.4% of total assets, and reached JD 124 million at the end of September 2008, constituting 29.4% of total assets. Subscriber contributions are not refunded to customers. JEPCO has a liquidity challenge, as current assets do not cover current liabilities. The gap between current assets and current liabilities has been widening over the years, leading to a negative working capital. The current ratio, calculated by dividing total current assets by total current liabilities, is less than 1. It decreased from 75% in 2003 to 60% at the end of September 2008. The company’s current assets stood at JD 116.7 million at the end of September 2008 compared to current liabilities of JD 195 million. The quick ratio stood at 0.46 at the end of September 2008. The net working capital ratio stood at -19%; and the cash flow liquidity ratio was 25.6%. A key driver for the company’s excess current liabilities, is the “subscribers’ refundable deposits”. The amount is refunded to the subscribers when the service is disconnected. Taking into consideration that electricity is a vital utility with the company being the only distributor for electricity in its coverage area; the amounts refunded are expected to be limited if not zero. Should a subscriber disconnect the service for moving to another place, another subscriber would request reconnection of the service and deposit the amount required. Consequently, we deducted this amount from current liabilities when calculating the adjusted working capital. This had a positive impact on working capital. However, for 2007 and 9M 2008, the working capital is still negative even after deduction of the refundable deposit. Cash Flow Statement Cash flow from operations reached JD 42 million for the first 9 months of 2008, compared to JD 32 million in 2007. Cash flow from investments increased in the first 9 months of 2008, to reach JD 41 million, compared to JD 32 million for 2007. Cash flow from financing activities amounted to JD 8.2 million in the first 9 months of 2008, versus JD 4.4 million for end of 2007. Jordan Electric Power Company has been maintaining its dividend distribution policy. The company distributed JD 0.12 dividends per share for 2007 in addition to 6.06% as stock dividend. On March 3, 2009, the company announced that it will distribute cash dividends amounting to 10% of the nominal value (JD 0.10 per share) for the year 2008, in addition to 9% stock dividends. According to the company’s concession agreement, dividends per share including income tax should be between 7.5% and 16% of the nominal value. The dividend yield is 3.14% as of March 19, 2009. 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 [4]
Figure 7: : JEPCO’s Revenues, Net Profit and Net Profit Margin JD Million Source: JEPCO Figure 9: Assets, Liabilities and Shareholders Equity JD million 350 300 250 200 150 100 50 Total Assets Total Liabilities Shareholders Equity 500 400 300 200 100 - - Source: JEPCO Total Revenues Net Profit Net Profit Margin 4.6% 4.7% 4.7% 186 209 232 248 186 278 297 5.9% 269 316 208 214 225 62 70 82 91 304 3.8% 9 10 11 16 12 2003 2004 2005 2006 2007 362 305 266 3.0% 422 327 96 95 2003 2004 2005 2006 2007 9M 2008 9 9M 2008 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Jordanian Electric Power Company (JEPCO) Figure 8: JEPCO’s Quarterly Revenues and Cost of Bought Power 60.8 63.0 75.4 80.0 72.3 69.9 51.8 52.5 60.2 57.8 63.0 85.5 87.3 69.9 76.1 60.4 97.6 88.2 78.5 70.1 67.4 60.4 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 140 120 100 80 60 40 20 0 Source: JEPCO 50 40 30 20 10 0 -10 -20 -30 -40 -50 Source: JEPCO Revenues Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Figure 10: Cash Flow Cash Flow Operating 29 38 32 Bought Power 120.3 Investing Financing 98.8 -9.9 2003 -10.9 2004 -8.3 2005 -11.1 11.1 2006 -6.6 2007 9M 2008 -16.4 -18.2 -25.5 -32.0 13 32 4.4 36 -41.8 8.2 [5]
Page 1 and 2: Figure 1: Ownership Structure Socia
Page 3: Figure 2: Number of JEPCO’s Custo
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

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