The board of directors also approved a final cash dividend of Rs2.5 per share in the company meeting, according to unconsolidated financial results sent to the Karachi Stock Exchange on Monday.
This growth is mainly attributed to a predetermined up-tick in the company’s power tariff which has already entered the acceleration phase, where the tariff under the power purchase agreement is set to increase every year for the remaining project life, according to analysts.
The net profit growth for the company is based on the return on equity (ROE), which is up by 31 per cent on yearly basis. Furthermore, ROE is indexed to the currency depreciation and US CPI which then forms part of the tariff structure governed by the Power Purchase Agreement, according to BMA Capital.
The rupee has depreciated 16 per cent against the dollar on yearly basis and the US CPI has also gone up, which has helped in increasing the company’s profit, said analysts.
The company also earned a production bonus during April to June 2010, according to JS Global Capital. The earnings per share increased to Rs4.8 from last year’s Rs3.27.
Net sales for Hubco rose by 20 per cent to Rs100 billion primarily due to higher furnace oil prices and higher capacity utilisation, said BMA Capital analyst Nurali Barkatali.
Despite the inter-corporate debt issue, the company is expected to have operated at 85 per cent load factor during the last quarter of 2010 on the back of higher demand for electricity from Water and Power Development Authority (Wapda) compared to an average of 77 per cent during the first nine months, Barkatali added.
The company’s 220MW Narowal project is expected to come online by 1st October, 2010. Hubco’s subsidiary Laraib Energy Limited’s 84MW hydropower project achieved financial close in December 2009 and the EPC contractors have begun construction at the site.
Laraib is currently expected to come online by the end of 2012. This is expected to bode well for the company, said analysts.
Published in The Express Tribune, August 10th, 2010.
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