Power shortage is a blessing only for a few and one of those groups is power producers. Hub Power Company (Hubco), the country’s largest independent power producer, saw its profits electrify 51% to an all-time high of Rs8.19 billion in fiscal 2012, a year marred by power outages.
The robust earning growth primarily comes from a one-time impact of Narowal project commissioning, said Topline Securities analyst Nauman Khan. The company’s Narowal power plant started commercial operations in April 2011 but its tariff – the price it will receive for generating electricity – was decided just a month ago. Narowal is one of the two new power projects Hubco has undertaken as part of its investment strategy. The plant is a 214MW-fuel fired project setup in district Narowal, Punjab.
The profit is in line with market estimate as analyst expected the bottom-line at Rs8.15 billion.
The other factor that played a role in earnings growth was the rupee falling 9% against the dollar to a record low during the year, added Khan. Hubco’s tariff payments are made in dollars, hence the depreciating rupee is an added advantage.
The company made Rs175 billion by selling electricity during the financial year 2012, a massive improvement of 42% from the preceding year’s Rs123 billion.
The only concern was finance costs that doubled to Rs7.1 billion due to interest on loan acquired to finance equity portion of Narowal project, interest charged by Pakistan State Oil on late fuel payments and increased short-term borrowings due to the circular debt.
The power producer announced a final dividend of Rs3.0 per share, taking the annual payout to R6 per share. Higher payout despite augmented levels of circular debt reaffirms company’s ability to maintain high distribution, said Khan.
For the final three months of the financial year, the company posted a profit of Rs3.23, representing an exorbitant growth of 183% on a yearly basis.
The financial year also saw the change in ownership of the company.
The two major foreign shareholders Xenel Industries of Saudi Arabia and National Power International Holdings BV decided to sell its entire stake with Dawood Group the major buyer.
The board room of the country’s largest independent power producer is likely to see a major change of directors in the election expected in September.
Published in The Express Tribune, July 19th, 2012.
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