Hub Power Company (Hubco), the largest independent power producer, profits surged by 16% in the first nine months of the current financial year on the back of higher revenues.
Net profit stood at Rs4.97 billion during July 2011 to March 2012 against Rs4.28 in the same period last year, according to a notice sent issued on Thursday.
Revenues grew by 55% primarily due to pass through of higher furnace oil prices and the start of Narowal project.
The Project Company Equity (PCE) guarantees an uptick in tariff by 5% in the second half of the financial year, according to analysts. Under the power purchase agreement, the company electricity tariff increase every year for the remaining project life. In addition, other factors behind bottom-line growth are the rupee depreciation against the US dollar and inflation index, said Topline Securities analyst Nauman Khan. Hubco’s tariff payments are dollar-based, hence the depreciating rupee is an added advantage to the investors.
Finance cost swelled by 185% to Rs5.42 billion against Rs1.9 billion in the same period last year.
“The massive increase in financial charges is expected mainly due to funding for company’s Narrowal project coupled with the short-term borrowing for working capital as the circular debt is still one of the main reasons behind the immense rise in working capital requirement,” added Khan.
Published in The Express Tribune, April 27th, 2012.