Corporate results: HUBCO calms unsettled nerves

KARACHI:

The country’s largest independent power producer Hub Power Company (Hubco) managed to calm the uncertainty in the market by posting better than expected net profits as investors got nervy after a co-founder sold significant shareholding in the company.

The country’s largest independent power producer’s unconsolidated net profit grew by 5% to Rs3.00 billion during July to December 2011 on the back of a bonus received on higher production levels and operations of the new plant, said IGI Securities senior analyst Sana Abdullah. Quarterly earnings include a production bonus to the tune of Rs0.32 per share, added Abdullah.

Hubco is entitled to receive generation bonus for achieving higher utilisation levels of above 65% for Hub plant. Utilisation level for generation is calculated on calendar year basis and bonus is booked in second quarter of every fiscal year.

The entire stake of Xenel International — a co-founder of Hubco –was sold in October 2011 with the foreign investor walking away with $60 million. According to talks, another co-founder National Power International Holding is also considering to offload it 17.4% holding.

Revenues increased by 61% to Rs79,448 million in the first half of fiscal 2012 on the back of initiation of the Narowal expansion. Hub Power Company’s 200-megawatts Narowal project began commercial operations in April 2011.

Moreover, since Hubco tariff payments are dollar-based and US CPI adjusted, this is an added advantage to the investors in the current depreciating rupee environment.

Financial charges tripled to Rs3.7bn during the period under review due to higher interest payments amid establishment of Narowal power plant and swelling circular debt.

Alongside the result, Hubco declared a first interim cash dividend of Rs3 per share, slightly higher than market expectations again. Earnings were supplemented by a rising currency and inflation factor and likely production bonuses in 1HFY12.

Half yearly earnings were understated by 0.90 per share, as the final tariff determination of Narowal is still pending with the National Electric Power Authority. Release of the final tariff of Narowal could result in upward earnings adjustment during the second half of the financial year, added Abdullah.

Published in The Express Tribune, February 9^th, 2012.