It has a combined production capacity of over 1600 MW. Its main plant, the Hub Plant in Baluchistan is one of the most efficient steam turbine based thermal power plants in Pakistan that supplies electricity to the National grid. It is also the only IPP to go into expansion and has set up at 213 MW plant at Narowal. HUBCO also has renewable energy business namely Laraib Energy, which is a run-of-the river hydel based power project
Investments
The company has established wholly owned subsidiaries: Hub Power Holdings Limited (HPHL) has been incorporated to invest in the imported coal based 2x660 MW power project and future expansion initiatives, while Hub Power Services Limited (HPSL) has been incorporated to manage O&M of its existing power assets, its upcoming coal project and explore O&M business opportunities onshore and offshore. Another subsidiary Narowal Energy Limited has been incorporated to take over the assets and liabilities of Narowal plant post its de-merger.
HUBCO also has established a wholly-owned subsidiary Thar Energy Limited (TEL) to set up a 330 MW mine mouth power plant at Thar coal block II. It is also investing in Sindh Engro Coal Mining Company Limited (SECMC), a joint venture between Engro, Thal Limited, HBL, CMEC, Hubco and Government of Sindh, to develop a coal mine at Thar which has the seventh largest reserve of coal in the world.
Shareholding and stock performance
Dawood Hercules has been a major shareholder of HUBCO since 2012 when the IPP's initial sponsors Xenel International and National Power International exited from their 12.1 percent and 17.4 percent shareholding, respectively in 2012. At that time, Dawood Hercules Corporation and its affiliates bought most of this given up shareholding - 16.42 percent stake to be precise.
Hub's share performance of late can be linked to the expected changes in its shareholding pattern as it is likely to see its key shareholder and sponsor - Dawood Hercules divest soon as the latter has been considering to offload 14.91 percent shareholding in the IPP. This is not the only change HUBCO will take on; the IPP is also to divest it 40 percent stake in Thar Energy Limited; it has offered 30 percent stake to Fauji Fertilizer Company Limited (FFCL) and another 10 percent equity interest in the project to the China Machinery Engineering Company (CMEC), the EPC Contractor of TEL.
Operational & financial performance for FY15-FY16
During FY15, Hub Plant maintained an uninterrupted power supply to the national grid. However, it generated 6,810GWh of electricity compared to 7,087GWh in FY14, which is a load factor of 65 percent compared to 67 percent. The decrease in generation was caused by ongoing maintenance work on the boilers.
The Narowal plant generated 1,418GWh of electricity compared to 1,562GWh last year, which is a load factor of 76 percent versus 83 percent in FY14. Lower generation was attributed to the restriction imposed by the National Power Control Center.
The hydel plant Laraib generated 489GWh of electricity in FY15 compared to 470GWh in FY14, which is at a load factor of 66 percent compared to 64 percent previously due to better hydrology received from Mangla Power Plant and significant reduction in number of annual maintenance days.
In FY16, Hub Plant generated 7,547 GWh of electricity with a load factor of 72 percent, compared to FY15's load factor of 65 percent. Electricity generation during the year was higher than the last year mainly due to higher availability and utilization by power purchaser. In FY16, the Narowal Plant supplied 1,162 GWh of electricity to the national grid compared to 1,418 GWh last year, and operated at a load factor of 62 percent compared to 76 percent in 2015. The lower generation came from lower plant dispatch by the power purchaser.
Similarly, Laraib generated 545 GWh of green energy as compared to 489 GWh last year (11 percent more than FY15's generation). As a result, plant load factor of the hydro power complex enhanced to 74 percent compared to 66 percent in FY15 due to improved availability of the Complex as well as better hydrology from Mangla Powerhouse. HUBC's earnings over last few years have been dented by operations and maintenance (O&M) activity; however, the power company's decision to outsource O&M services to Hub Power Services in August 2015 did well to FY16's earnings.
Consolidated earnings per share for FY16 were Rs 10.29 compared to Rs 9.57 in FY15 - increase of 7.5 percent year-on-year - due to net effect of savings due to self-operation and maintenance of Hub and Narowal Plants, lower LEL revenue due to the impact of interim relief received and recognized by LEL, and share of loss from associate.
HUBC in 9MFY17
The firm saw lackluster performance of its bottom-line in 9MFY17. Even though the top line of the firm saw an increase in revenue, yet a more than proportionate increase in operating costs led the gross profit to decline by six percent year-on-year. This was because of the overhauling expenditure at HUBCO's Narowal plant that led to a higher operating expenditure as compared to the previous year.
The company's finance cost saw a marginal decrease of two percent year-on-year, whereas the share of loss from associates went down by 95 percent. Resultantly, the company posted a decline of seven percent in its profit for the period. The gross margin fell by more than two percent, whereas the net margin saw a decrease of almost 1.5 percent as compared to the previous year.
The company also announced an interim cash dividend of Rs 2 per share (20%) making total payout for 9MFY17 Rs 5 per share. HUBCO reported earnings from Narowal as discontinued operations following the approval of de-merger of the plant into HUBC's wholly owned subsidiary Narowal Energy Limited.
Outlook
It should be noted that the majority of IPPs are facing liquidity crunch because of rising circular debt, which has also affected HUBCO. With the likelihood of changes in the key shareholding, there will be a change of ownership, which would lead to a change in HUBCO's chairman. And will somehow also impact the ongoing expansion projects undertaken by HUBCO, especially those that are expected to materialise soon. HUBCO is currently aiming for additional capacity with 2x660MW coal power plants in CPHGCL (CPEC project), 330MW in Thar Energy Limited (TEL), and around six percent share in SECMC.
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The Hub Power Company Limited
Shareholders holding as of June 30, 2016
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DAWOOD HERCULES CORPORATION LIMITED 14.91%
ALLIED BANK LIMITED 9.68%
COMMITTEE OF ADMIN. FAUJI FOUNDATION 8.50%
NATIONAL BANK OF PAKISTAN 5.00%
Total 38.09%
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Source: Company accounts
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Hub Power Company Limited Financial Ratios
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FY11 FY12 FY13 FY14 FY15 FY16
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Profitability Ratios
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Gross Profit margin % 7.47 8.96 9.84 7.25 10.94 17.11
Net Profit margin % 4.40 4.69 5.66 4.05 7.49 13.4
Operating cost to turnover % 92.53 91.04 90.16 92.75 89.06 82.89
Fuel cost to turnover % 87.70 86.80 85.03 86.6 81.97 73.27
Return on Equity (%) 18.27 27.17 29.63 20.58 31.44 39.1
Return on Capital Employed (%) 15.49 25.99 27.71 19.72 26.76 28.85
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Liquidity Ratios
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Current Ratio Times 1.04 1.04 1.18 1.06 1.08 1.03
Quick / Acid Test Ratio Times 0.99 1.02 1.05 1.01 1.01 0.97
Cash to Current Liabilities Times 0.018 0.003 0.396 0.032 0.006 0.037
Working capital Rs (mn) 3,152 5,835 7902 5086 6,296 2,352
Activity/Turnover Ratios
Inventory Turnover Times 42.78 57.34 49.67 45.22 39.98 23.75
Receivables Turnover Times 1.62 1.47 1.89 3.09 1.72 1.15
Payables Turnover Times 1.75 1.53 1.82 3.00 1.86 1.04
Total Assets Turnover Times 0.84 0.84 1.67 1.19 1.04 0.64
Fixed Assets turnover Times 2.52 3.79 3.82 3.93 3.39 2.36
Working capital turnover Times 39.12 29.94 20.99 31.81 20.88 36.75
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Investment/Market Ratios
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Earnings Per Share Rs. 4.69 7.08 8.11 5.66 8.51 10
Price Earning Ratio Times 8.00 5.92 7.6 10.28 11 12.01
Dividend Yield % 14.67 14.32 12.98 11.18 10.15 9.16
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Capital Structure Ratios
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Financial Leverage Ratio Times 0.99 0.91 0.79 0.76 0.71 0.76
Weighted Average Cost of Debt % 15.21 15.44 16.31 12.5 11.77 8.3
Debt to Equity Ratio Ratio 0.5 0.48 0.44 0.43 0.42 0.43
Interest Cover Ratio Times 2.60 2.16 2.43 2.42 3.21 4.77
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Source: Company Accounts
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Hub Power Company Limited
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Rs(Mn) 9MFY17 9MFY16 YoY
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Sales 74140 69752 6%
Operating costs -61709 -56505 9%
Gross profit 12431 13246 -6%
General and admin expenses -980 -875 12%
Other income 143 131 9%
Other operating expenses -59 -415 -86%
Profit from operations 11535 12087 -5%
Finance costs -3083 -3148 -2%
Share of loss from associates -152 -3148 -95%
Profit before tax 8301 8829 -6%
Profit for the period 8064 8676 -7%
EPS (Rs) 6.59 7.21 -9%
Gross margin 16.8% 19.0% down 222 bps
Net margin 10.9% 12.4% down 156bps
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Source: PSX Notice
Copyright Business Recorder, 2017