Internship Report (Fahad Nasir) 2

BENEFICIENT,
MOST MERCIFUL
Praise To Be Allah, Lord Of The
World,
The Beneficent, The Merciful,
Owner Of The Day Of Judgments,
Thee (alone) We Worship; Thee
(alone) We Ask For Help.
Show Me The Right Path,
The Path Of Those, Whom Thoa Hast
Favored,
Not (the path) Of Those Who Earn
Thins Anger
Nor Of Those Who Go Astray.
Kot Addu Power Company Pvt (Ltd.) 1

practical field in a true manner
Internship is that the student
theoretical study framework.

Administration, Internship is an
The most important point in
should spend their time ion

To students in practical field
and with the spirit to learn

important matter which gives
practical orientation of
PREFACE
In bachelor of Business
ACKNOWLEDGMENT
opportunity
I am very thankful to Almighty Allah who has all the powers

in the world and who also give us power to perform the
assigned task, which otherwise we can’t perform.
I am also obliged to the favors and co-operations made by the
respected Mr. Zubair Aslam (Manager Tax &Treasury)and all
sub ordinates which helped and guided me in an efficient
manner and were always there for me during my period of
learning. Without their humble help it was not easy.
I am very thankful to all my friends and

teachers who provided me great guideline in
this effort.
Table of Contents
1.

3) Treasury Bills...................................................................................17
4) TFC (Term Finance Certificates).......................................................18
2. Share capital structure & liability of shareholders……………………………6

3. Vision Statement……………………………………………………………7
4. Mission Statement………………………………………………………….7
5. Core Values………………………………………………………………..7
6. Objectives of studying the organization…………………..…………………….7
7. Board of Directors………………………………………………................8
8. Management Hierarchy & Divisions of KAPCO……………………………..9

9. Departments………………………………………………………………..9
9.1 Human Resource Department…………………………………………...9
9.2 Operations Department…………………………………………………9
9.3 Finance Department…………………………………………………….9
9.4 Information Technology Department……………………………………
10
10. Finance & Accounting Operations…………….
…………………………….10
10.1 Financial Hierarchy…………………………………………………11
10.2 Power Station Finance………...………………………………………11
10.2.1 Payment Section…………………………………………………..12
10.2.2 Cash Section……………………………………………………....13
10.2.3 Tax and employee’s welfare section………………….....................13
10.2.4 Payroll Section……………………………………………………14
11. Corporate Finance System Of The Organization…………………..
………….14

11.1 Mobilization of Funds……….……………………………………….14
11.2 Generation of Funds................................................................................…...15
11.3 Sources of Funds……..……………………………………………...15
12. Contract & Procurement
Department……………………………………..17
13. SWOT
Analysis…………………………………………………………..20

1. INTRODUCTION
Kot Addu Power Plant (the "Power Plant") was built by the
Pakistan Water and Power Development Authority ("WAPDA") in five phases between
1985 and 1996 at its present location in Kot Addu, District Muzaffargarh, Punjab. In
April 1996, Kot Addu Power Company Limited ("KAPCO") was incorporated as a
public limited company under the Companies Ordinance, 1984 with the objective of
acquiring the Power Plant from WAPDA. The principal activities of KAPCO include the
ownership, operation and maintenance of the Power Plant.
Kot Addu Power Company Limited ("KAPCO") was incorporated in 1996 with the
purpose to contribute economical power to the national grid. KAPCO has shown
exceptional results in the area of plant maintenance, availability, quality standards and
financial performance. In April 2005 KAPCO was formally listed on all the three Stock
Exchanges.
KAPCO is committed to contributing to Pakistan's economy by powering the lives of its
people by continuously improving its performance through efficient systems, capable
workforce and good governance.
2. Share Capital Structure & Liability of Shareholders
On June 27, 1996, following international competitive bidding by the Privatization

Commission Government of Pakistan (the "Privatization Commission"), the management
of KAPCO was transferred to National Power (now International Power) of the United
Kingdom, which acting through its subsidiary National Power (Kot Addu) Limited
("NPKAL"), bought shares representing a 26% stake in KAPCO. Later, NPKAL bought
a further 10% shareholding in KAPCO increasing its total shareholding to 36%.
The other majority shareholder in KAPCO is WAPDA with a present shareholding of
46%.

3. Vision Statement
To be a leading power generation company, driven to exceed shareholders' expectations

and meet customer’s requirements.
4. Mission Statement
 To be a responsible corporate citizen

 To maximize shareholders' 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

5. Core Values
The core values of the organization are profitability, corporate social responsibility,
recognition and reward, excellence, integrity and respect for each other.
6. OBJECTIVES OF STUDYING THE ORGANIZATION
The following are objectives of studying the organization,
1. What are the theoretical concepts the Finance Department of the organization
under is playing?
2. What accounting system is being used in the organization?
3. What is the finance system of the organization?
4. What are the sources and uses of funds?
5. How they raise money to run their business and budgets and what are the
investment avenues of the organization for placement of their funds to gain the
maximum return.
1. How management of the organization uses the theoretical concept of finance in
their decision making for investment purposes and generation of funds.
2. How the organization is using electronic data in decision-making.

7. Board of Directors
Mr. Imtiaz
Anjum
Mr.Chairman
Syed Rizwan Ali Shah
Chief
Executive
Chief
Executive
Officer
Mr. Malcolm Peter Clampin Dr. Abdul
Mr. Aftab Hameed
Mr. Vince R. Harris Director
Mahmood Butt
Director Director
Director
Director Director
8. Management Hierarchy & Divisions Of KAPCO

9. DEPARTMENTS
9.1 Human Resource Department
Human Resource Department deal in recruitment of fresh employees of functioning of

organization, arrange trainings for them, , appraise their performance annually, awards
them and penalize to the delinquent ones. The Manager HR is the competent authority
who subordinate and operative person of all functions and task of the department.
9.2 Operations Department
All operational functions are being performed by this department in the organization,
purchasing of new equipment by calling tenders and auction of old one is carried out by
this department. The Manager operations are competent authority of this department and
manage all functions of the department.
9.3 Finance Department
This is the most important department of the organization as it has to take decision about
the major resource which is funds of the organization being invested in different sectors
of economy. This department compiles the annual financial reports for presentation to
Controlling Govt. agencies, to share holders, to supplier to internal and external
customers of the organization. The department also responsible for the revenue and
capital budgets for the banks on yearly basis.
9.4 Information Technology Department
With the start of Globalization and automation, the organization has also established IT
department in order to compete the market. Whole organization is connected by net
working. This department is managed by the Manager IT, System Administrators, system
support staff. The main function of this department is to purchase /design software for the
organization and maintain the system for smooth operation.

10. FINANCE & ACCOUNTING OPERATIONS
The main function of Finance Department in the Kapco is to summarize all the business
transactions recorded, classified and communicate the information contained in the
system to decision makers.
 It formulates the annual budgets according to the informations.
 It provides informations about economic resources, claims to resources and

changes in resources.
 It provides information useful in assessing amount, timing and uncertainty of

future cash flows.
The accounting operations are being done at unit level. It is computer based accounting
operation system as there are large numbers of transactions which are not possible in
manual accounting system. Professionally skilled persons are doing these operations.
10.1 Financial Hierarchy
Mr. Mohtashim
Aftab
GMF/CFO
Chairman
Mr. Junaid
Asghar
Financial
Controller
Mr. Rabnawaz Mr. Anas

Anjum Mr. Azeem Asif Farhan
(Asst.Manag
Mr. Zubair Aslam Assistant
Manager er Tax) & Mr.
Manger Tax Reporting Financial Rizwan Butt
& Treasury Controller (Asst.Manag
er Treasury)
Director

There are two types of finance operating in KAPCO which are as follows,
1. Corporate Finance
2. Power Station Finance
10.2 POWER STATION FINANCE
The accounting system of the organization consists of double entry system in which
vouchers are passed for each entry in the system reflecting its credit and debit amount for
each head of account being involved for accomplishment of a transaction. In the entry,
the account assistant enters the transaction by vouching entries and same are
authenticated by manager operations or any other authorized officer after ascertaining its
genuineness and correctness. The system then automatically segregates them according
to Income/Expenditure which is executed at the end of weak after completion of all
transactions from each terminal. The print of these reports is taken at day end step on
daily basis in order to check wrong impact of any entry and necessary correction entries
are passed on after calling all the working of the day by the manager operations and
account assistants. There are following sections to control the financial operations of the
power station.
10.2.1 Payment Section
The following operations are performed in payment section of the organization related to
thermal or plant financing,
 Purchase Order
The plant or power station financing starts when Contracts & Procurement department
issue a purchase order of some supplying material to different suppliers against demand
from Power Station Authority. The supplier supply the related material and send invoice
of payment of material to Contracts & Procurement department which after inspection of

material and authorization of payment send to finance department for payments. The
major contents of the purchase order are as follows,
• Order description Quantity
• Order reference Unit cost
• Quotation reference Price detail
 Payment Invoice
The account assistant receives payment of purchase invoice and prepares a payment
invoice under instructions of payment order. After prepare a payment invoice, account
assistant verify it and send to assistant manager of costing for further verifications and
for approval of payments. The major contents of purchase ledger invoice are,
• Doc number PO number
• Creditor number Invoice number
• Supplier name/address Account code
• Description Amount payable
 Issue of cheques of payments
After approval and verification of payments, account assistants prepare A/C payable
cheques against suppliers to credit their accounts. The financial controller sign different
cheques of payments after verification of account assistant and assistant manager of
costing.
 Invoice Register
After issuing and signing, cheques are send to suppliers by mail to debit payment A/C
and payment invoices are send to invoice register for record in case of disputes in future
in terms of payments or auditing.

10.2.2 Cash Section
In cash section, the petty cash is used for transaction of small payments lower than
RS.5000. Moreover, payments of different utility bills of the KAPCO employee’s
residential colony are also facilitate in this department.
10.2.3 Tax and employees welfare section
The amounts of WHT, Sales tax are deal in this section according to the terms &
conditions of the FBR. Moreover employees’ welfare programmes such as
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.
Pension Scheme
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. Moreover
• EP Fund
• Social Welfare Fund
• Advance Loan Scheme

All these programmes are deal in this section.
10.2.4 Payroll Section
Payroll section prepares the pays slips of all employees of Kapco according to their pay
scales. Moreover all type of bonuses, increments and all type of deductions are also done
in this section.
11. CORPORATE FINANCE SYSTEM OF THE ORGANIZATION
From the accounting information, the corporate finance makes decisions to invest the
funds generated. These investments are in corporate sector, in capital and money
markets. The treasury department and shares department makes decisions about
investment of funds generated.
11.1 MOBILIZATION OF FUNDS
The treasury department mobilizes the funds by introducing various profit and losses
sharing saving schemes. The funds are mobilized from following sources.
 Individuals (self employed, salaried persons and other private individuals)
 From corporate bodies
 Govt. enterprises and departments
 Corporations
 Commercial banks and non bank’s financial institutions
11.2 GENERATION OF FUNDS
The funds are generated in shape of interest income/profit earned by portfolio of

investments, on interest income from different employee’s funds, brokerage, other

miscellaneous heads and investment in different sectors of economy such as corporate
investment in shares, Mutual Funds, Ordinary Shares of listed Companies, Mudarba,
Pakistan Market Treasury bills, Pakistan Investment Bonds, TFC’s etc.
11.3 SOURCES OF FUNDS
The sources of funds of KAPCO are share capital, Reserves and liabilities created from
deposits and borrowing from financial institutions.
According to their financial functions, Kapco categorized their investments into two
categories:
A) Primary Market
B) Secondary Market
PRIMARY MARKET
The primary market is part of the capital markets that deals with the issuance of new
securities. Companies, governments or public sector institutions can obtain funding
through the sale of a new stock or bond issue.
In the primary market, Kapco purchases financial instruments which are issued for the
first time. State bank of Pakistan is main primary dealer who issues Treasury bills and
PIB’s.
Following are the primary dealers which are working with Kapco other than the State
Bank of Pakistan:
a) Habib Bank Limited

b) National Bank of Pakistan
c) Standard Chartered Bank
d) United Bank Limited
e) MCB Bank Limited

f) Citi Bank
g) RBS formerly ABN Amro Bank
h) Pak Oman Investment Company Limited
i) JS Bank Limited
SECONDARY MARKET
Secondary Market refers to a market where securities are traded after being initially
offered to the public in the primary market and / or listed on Stock Exchange. Kapco
invested in different securities of the secondary market according to the different terms
and conditions as follows,
1) Debentures
Kapco purchased bonds issued by a company bearing a fixed rate of interest usually
payable half yearly on specific dates and principal amount repayable on particular date
on redemption of the debentures. Debentures are normally secured / charged against the
asset of the company in favour of debenture holder.
2) Bond
Kapco purchases a debt security generally issued by a company, municipality or

government agency. Kapco lends money to the issuer and in exchange, the issuer
promises to repay the loan amount on a specified maturity date. The issuer usually pays
Kapco periodic interest payments over the life of the loan.
3) Treasury Bills
Kapco purchases short-term (up to 91 days) bearer discount securities issued by the
Government as a means of financing its cash requirements and in turn pays profit/interest
according to the different terms as agreed.

4) TFC (Term Finance Certificates)
Kapco purchases these TFC’s issued by different banks. Usually they are for long-term
periods and profit on these certificates is paid on semi-annually basis.
Comments on Organizational Structure
The above mentioned structure shows that it is vertical organization structure. The
powers have been decentralized in said structure. All decision making up to extent of
their powers is being done in each functional level. Each level makes its own planning,
business strategy. The integration of all levels results in achievement of strategic goals of
organization.
12. Contracts & Procurement Department
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.
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.
The purchasing procedure of KAPCO consists of following steps.
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)
9) Maintaining records of performance
1) Call off orders
The specification should clearly make reference to the fact that the
order will operate as a call off order, and should clearly define the duration of the order.
2) Urgent /Emergency Purchase
As the KAPCO is in production industry and a lot number of machines are

used at the plant and always there is danger to happen any emergency regarding the
working of these machines. So for this the engineers are allowed to submit emergency
purchase order.
3) Reorder level
It is the level of different items which is set by the engineers with the
negotiation of the purchase department. In simple words it is that quantity at which the
engineer will give requisition for new purchase.
4) Reorder quantity
It is the quantity the engineer can ask at reorder level. For example if
reorder level of any item is 2 and reorder quantity is 10 than the engineer is allow to send
the requisition of 10 items when the 2 items are remain in the store.
5) 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
30,000 inventory level, which is controlled by software, named as Q4w stock.
6) 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.
7) Received Items in Stores
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.
13. SWOT Analysis

Strengths
 Kapco has the hardworking, cooperative and trained staff. As well as very
friendly environment.
 The turnover ratio is very low because it is offering best packages to its
employees.
 The HR dept is working for the increasing communication and computer skills of
lower staff.

 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
 .Health and safety department has ensured complete safety and security to
workforce.
 The price of the share of the Kapco is always high than the price of share issue 1st
time.
 It has the biggest store in Pakistan.
 Easy access to the top management
Weaknesses
 As the Wapda is the only buyer of electricity so the company is bound to give
supply according to the choice of Wapda.
 After 2006 it is paying taxes while the 1st ten years it was exempt from this.
 During the last ten years no expansion has been made for power generation.
 The fear of inquiries is always there as the new government has changed the some
points of power purchase agreement.
Opportunities
 All the expansion programs of KAPCO is free of tax.

 As the whole country is facing the problem of electricity the importance of this
power plant has much increased and it is affecting its share price.
Threats
 As the wapda is the only buyer of the electricity in Pakistan and company is
bound to sale electricity to wapda, so it is totally depending on wapda for
payments.
 The Kapco has to import the machinery and spare parts as well as the services of
experts from abroad so the security conditions in Pakistan is very important.

 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.
Submitted To: HR Department
Submitted By: Hafiz Fahad Nasir (BBC-08-32)

Institute of Management Sciences
Bahauddin Zakariya University
Multan

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BENEFICIENT,

Praise To Be Allah, Lord Of The

The Beneficent, The Merciful,

Owner Of The Day Of Judgments,

Thee (alone) We Worship; Thee

(alone) We Ask For Help.

Show Me The Right Path,

The Path Of Those, Whom Thoa Hast

Not (the path) Of Those Who Earn

Nor Of Those Who Go Astray.

Kot Addu Power Company Pvt (Ltd.) 1

theoretical study framework.

The most important point in

should spend their time ion

and with the spirit to learn

I am very thankful to Almighty Allah who has all the powers

I am very thankful to all my friends and

Kot Addu Power Company Pvt (Ltd.) 3

4) TFC (Term Finance Certificates).......................................................18

2. Share capital structure & liability of shareholders……………………………6

8. Management Hierarchy & Divisions of KAPCO……………………………..9

Kot Addu Power Company Pvt (Ltd.) 4

Kot Addu Power Company Pvt (Ltd.) 5

On June 27, 1996, following international competitive bidding by the Privatization

Kot Addu Power Company Pvt (Ltd.) 6

To be a leading power generation company, driven to exceed shareholders' expectations

 To be a responsible corporate citizen

Kot Addu Power Company Pvt (Ltd.) 7

6. OBJECTIVES OF STUDYING THE ORGANIZATION

The following are objectives of studying the organization,

Kot Addu Power Company Pvt (Ltd.) 8

8. Management Hierarchy & Divisions Of KAPCO

Kot Addu Power Company Pvt (Ltd.) 9

9.1 Human Resource Department

Human Resource Department deal in recruitment of fresh employees of functioning of

9.2 Operations Department

9.3 Finance Department

9.4 Information Technology Department

Kot Addu Power Company Pvt (Ltd.) 10

 It formulates the annual budgets according to the informations.

 It provides informations about economic resources, claims to resources and

 It provides information useful in assessing amount, timing and uncertainty of

10.1 Financial Hierarchy

Mr. Rabnawaz Mr. Anas

Kot Addu Power Company Pvt (Ltd.) 11

2. Power Station Finance

10.2 POWER STATION FINANCE

10.2.1 Payment Section

Kot Addu Power Company Pvt (Ltd.) 12

• Order description Quantity

• Order reference Unit cost

• Quotation reference Price detail

• Doc number PO number

• Creditor number Invoice number

• Supplier name/address Account code

• Description Amount payable

 Issue of cheques of payments

Kot Addu Power Company Pvt (Ltd.) 13

10.2.3 Tax and employees welfare section

It is contributed by the employee and equal contribution is made by the employer. In

• Social Welfare Fund

• Advance Loan Scheme