HUBCO’s profit up 50% in 2015 after plant overhaul

Earnings stand at Rs9.8b, dividend of Rs5.5 per share also announced

KARACHI: Soon after Pakistani investor Hussain Dawood bought the controlling stake in Hub Power Company three years ago and put in place his own people to run the country’s largest private electricity producer, it emerged that something was amiss.

Gradually, it became apparent that the previous foreign sponsors had been delaying a key overhaul of plant and machinery, which had worn out since production started in 1997.

Hence, one of the initial actions taken by CEO Khalid Mansoor, soon after taking office in May 2013, was launching a capital intensive refurbishing of generators.

But while repairs were being carried out on boilers, which had suffered corrosion due to use of residual fuel oil, power output had to be slashed. This consequently led to drop in profitability in 2014.

As most of that work gets done, the company has started to reap the benefit. In the fiscal year, which ended June 2015, Hubco recorded a 50% growth in net profit over the previous year. More importantly, its gross profit margin at 11% was one the highest ever.

Its profit clocked in at Rs9.8 billion for the year. The company also announced a cash dividend of Rs5.5 per share, which was in addition to the interim dividend of Rs4 per share paid earlier in April.

“This (result) was a combination of many things like the efficiency of boilers, which were fixed,” said Mansoor. “Now we are looking to the future investment on two 660-megawatt coal-based power plants.”

Hubco’s load factor, which reflects utilisation of the power plant, was around 65% in 2015, two percentage points less than last year.

But Mansoor said it was primarily the result of lesser off-take of electricity by the national grid. “Our plant availability was very good.”

Overall revenue of the company was down because of steep decline in price of furnace oil, which makes up the largest part of the power tariff and cost of generating it.

The company also recorded other income of Rs1.5 billion, which according to Shajar Capital’s analyst Sidrah Azmat Khan, was the interest income against delayed payments.

Hubco has four power units with 325MW capacity each. While boilers of three plants have been worked on, the fourth one will undergo an overhaul later this year. 

Published in The Express Tribune, August 21^st,  2015.

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