Hub Power Company Limited (PSX: HUBC) announced a 4 percent year-on-year increase in its consolidated earnings for 9MFY19, all of which came only from controlled administrative expenses, lower operations and maintenance expenses and depreciation of rupee against the dollar.

The IPPs consolidated revenues declined by 40 and 31 percent year-on-year in 9MFY19 and 3QFY19, respectively, which was due to low dispatches to the power purchaser. HUBC’s base plant at Hub witnessed an average load factor of only 7 percent, while the Narowal plant generated at an average load factor of 23 percent, which is also lower than what it was in similar period last year. The decline in load factors was due to lower dispatches to the power purchaser largely coming from furnace oil curtailment. The IPP’s hydel plant, Laraib however generated higher electricity on a year-on-year basis, and its average load factor was 41 percent for 9MFY19.

HUBC’s earnings were also affected by higher finance cost, which apart from the adverse effects of the circular debt was also because of increased capital expenditure that the IPP is incurring on its coal-based power plants amid higher interest rate environment.

The company is aggressively going into coal. On April 1, it announced a rights issue of around 12 right shares for every 100 ordinary shares through which the company intends to raise around Rs7 billion to increase its equity stake in China Power Hub Generation Company (CPHGC) through Hub Power Holding Limited (HPHL) from 26 percent to 47.5 percent that include 1.5 percent share to be transferred to the Government of Balochistan. The projects consist of 2x660MW coal power plants, where one unit already synchronized with the national grid and expected to reach commercial operations before August 1, 2019; while the second will be synchronized soon.

HUBC also signed an inter creditor agreement with China for a 1x330MW coal based power plant in Thar Coal Block II, construction of which has already started and project is expected to reach financial close by July 2019, as per company accounts. Hence, HUBC’s lack of dividend announcement is being pegged to its increase expansion plans and capital expenditure.