Hub Power Company, the largest IPP is back in operation and is providing electricity to the national grid after the country faced a massive blackout on February 24. The transmission system tripped when the frequency for the unit dropped below the safe operating limit. But all seems to have straightened out as the IPP clarified that the system frequency is not controlled by the power station but the national grid, NPCC.
Whatever speculations were circling, alls well that ends well. Not only restoring the power supply nationwide, the largest IPP announced its 1HFY13 results on Wednesday, and they were stupendous; reporting a massive 58 percent year-on-year increase in after-tax profits.
The top line grew by 13 percent YoY in 1HFY13 to Rs89 billion as generation has improved due to Narowals addition. The growth in the top line together with multiple factors translated in an impressive bottom line performance as well.
Though average plant utilisation has been more or less equal to 1HFY12, indexation during 1HFY13 did the real trick which has earned the Company a generation bonus. Recall that Hubco is entitled to a generation bonus upon producing electricity above the threshold, and this is calculated for the calendar year.
According to the analysts at Topline Securities, the earnings spurred on the commissioning of Narowal Project. Also the indexation factors played an impressive role with depreciation of rupee around nine percent during the six month period.
Finance cost, which has usually been on the higher side due to the circular debt crisis and the resulting non-payment by concerned parties, acted as a major supporting tool and slipped by more than five percent year-on-year in 1HFY13.
Going forward, with the entire burden of circular debt passed onto PSO from Hubs old plant and some normalisation in payments to the IPPs during the election year, FY13 seems perky for Hubco.
Where the challenges to the sector remain the same - circular debt and gas shortages, the growth prospects for the Company seem brighter in years to come. First it was Narowal project and now the hopes are pinned on Laraib, the first hydel IPP of the country. With the returns from Narowal kicking in marvelous growth in Hubcos earnings in FY12 and FY13, Laraib could impel growth in FY14.
The Company continued with its hefty payout policy where it announced an interim cash dividend for FY13 of Rs3.5 per share. And why not? The Companys hefty profits with opportunity shining through its second attempt - Lariab hydel power plant definitely allow it to reward its investors handsomely.
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Hub Power Company Limited
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mn Rs 1HFY13 1HFY12 YoY 2QFY13 2QFY12 YoY
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Turnover 89,959 79,448 13% 41,643 38,730 8%
Gross Profit 8,444 6,871 23% 4,425 3,779 17%
Finance Cost 3,516 3,716 -5% 1,697 1,938 -12%
PAT 4,741 2,998 58% 2,627 1,757 50%
EPS (Rs) 4.10 2.59 58% 2.27 1.52 49%
Gross Margin 9.4% 8.6% 10.6% 9.8%
Net Margin 5.3% 3.8% 6.3% 4.5%
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Source: KSE Announcement
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