Hubco plant: NEPRA approves final tariff after a year

Profits to receive a boost from the decision: analyst.

KARACHI: It took the National Electric Power Regulatory Authority (Nepra) one year and three months but they finally approved final tariff for Hub Power Company’s 214MW power plant at Narowal.

“The levelised tariff of 18.60 cents (Rs15.67) is inline with the price given to other Independent Power Producers,” BMA Capital analyst Nurali Barkatali told The Express Tribune.

The approval raises our earnings per share estimation to Rs7.15 per share from Rs5.7 per share for financial year 2012, said Barkatali.

On standalone basis, Narowal plant is likely to contribute 25% to 30% to Hubco’s earnings. Narowal is one of the two new power projects Hubco has undertaken as part of its investment strategy.  Narowal is a 214MW fuel fired project setup in district Narowal, Punjab.

Hubco till date was billing National Transmission & Despatch Company on pre COD-reference tariff. With approval of the final tariff, Hubco will raise a differential claim and adjust the difference.

Now that the tariff is out of the way, investors will shift their focus to the possibility of a proxy war ahead of the company’s board of directors election likely in September, says a KASB Securities research note.

Following divestment of stakes by two founding international sponsors – cumulative 30% – to mainly Dawood Group, representation on the Hubco’s board has assumed added importance. Meanwhile, the government may give Hubco Rs30 billion to 40 billion from likely Rs82 billion fund injection, adds the note.

The tariff also takes away lessens fears of delayed dividend payment following the power producer’s payment of Rs1.65 billion to the tax authorities.

Hubco last month availed tax benefit scheme launched by Federal Board of Revenue and paid its liability amounting to Rs1.65 billion. Consequently, Hubco was exempted from default surcharge and penalty for non-payment. The assessed liability had grown to Rs3.25 billion due to late payment penalty and interest charges.

“Incorporating the same, we expect the company to announce a final dividend of Rs2.5 per share, taking the total payout to a healthy Rs5.5 per share,” adds Barkatali.

Published in The Express Tribune, June 16^th, 2012.