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FY14 has turned out to be a sluggish year for Hub Power Company Limited. And the core reason behind this has been the maintenance costs, whether it is of the repair of Narowal plant or the main Hub plant through out the year.
The prolonged maintenance resulted in negative growth in revenues as production was affected by overhauls of the plants. And had it not been for the contribution from Laraib plant and the decrease in furnace oil prices, the revenues would have been slipped further. During FY14, gross margins of the Hub Power Company Limited dropped by 3.3 percentage points.
Bottom line of the firm skated by 30 percent year on year. Except for Laraib plant, which completed its first year of operations, both Narowal and the base plant at Hub, Balochistan, contributed to the attrition in the firms revenues and hence the earnings. During FY14, the company initiated refurbishment of two boilers, which resulted in unavailablity of the plant. This affected the level of efficiency and also enticed imposition of liquidated damages by NTDC.
The support from a reduction in the IPPs finance cost was also not enough to keep the firms profit from plunging. Nonetheless, finance cost fell sharply by 30 percent year on year during FY14.
Though IMFs recent aapproval of the next loan tranche is attached to four percent power tariff increase, which will prove beneficial for the firm and the power sector; it seems that IPPs recent cowed financial performance will continue its way in FY15 as due to a couple of reasons. First, the IPP is expected to conduct overhauls of remaining boilers at Hub plant in FY15, says a research note by Optimus Capital Management Limited. This will certainly restrict the profitability growth levels of Hub Power Company Limited in the next fiscal year.
Secondly, the firms performance and particularly the share price will continue to be impacted by the delays in switching the oil-fired power plants to coal.


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Hub Power Company Limited
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Rs (mn) FY14 FY13 YoY
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Turnover 161,807 167,236 -3%
Gross profit 11,737 17,692 -34%
Gross margin 7.3% 10.6%
General admin exp 661 415 59%
Other income 83 34 143%
Profit from operations 11,158 17,311 -36%
Operating margin 6.9% 10.4%
Finance cost 4,605 6,548 -30%
PAT 6,549 10,762 -39%
EPS (Rs/share) 5.66 8.11 -30%
Net margin 4.0% 6.4%
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Source: KSE announcement

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