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Financial review of HUBCO

Economic experts say that Pakistan’s power generation capacity has posted a notable rise as a result of an enhanced power strategy climate over the previous few years with notable investments by local and international players in the country’s energy sector. Despite this, the persistence of an inappropriate energy mix in Pakistan and the lack of investment on renewable energy solutions has unluckily given rise to a much higher cost of power generation than the country’s regional peers. They have also said that the energy industry at large also needs to handle loopholes in distribution and transmission also recover revenue that is largely lost to power theft.

Economic experts say that having one of the fastest population growth rates globally, Pakistan’s future development is critically dependent on robust water and power infrastructure. Both the interdependent sectors have yet to evolve to their full potential. In view of the above, Pakistan’s largest Independent Power Producer, The Hub Power Company Limited (HUBCO), has proclaimed a capital investment of US$3,930,000 by China Machinery Engineering Corporation (CMEC) into its subsidiary Thar Energy Limited. The Company has organized Thar Energy Limited (TEL), to set up 33MW mine-mouth lignite-fired power plant. Sources also revealed that the company inked a Shareholders’ Agreement with Fauji Fertilizer Company Limited (FFCL) and CMEC TEL Power Investments Limited (CMEC Dubai) for equity investment of 30 percent and 10 percent respectively in the project. No doubt, The Hub Power Company presently produces 1601MW by its 3 plants in Hub, Narowal and Azad Kashmir. HUBCO is the only power producer in the country with interests in 3 projects listed in the China Pakistan Economic Corridor (CPEC), namely imported coal-based China Power Hub Generation Company (Private) Limited (CPHGC) at Hub, Sindh Engro Coal Mining Company Limited developing Block II of Thar Coal Field and Thar Energy Limited.

HUBCO: Profitability Ratios (%)
Details 2018 2017 2016 2015 2014
Gross Profit margin 12.78 11.86 17.11 10.94 7.25
Net Profit margin 11.17 10.50 13.40 7.49 4.05
Operating cost to turnover 87.22 88.14 82.89 89.06 92.75
Return on Equity 43.57 35.08 39.10 31.44 20.58
Source: HUBCO

In the annual report June 2018, the financial experts of the company mentioned that the consolidated net profit of HUBCO during the year 2018 was Rs. 11,057 million resulting in earnings per share (EPS) of Rs. 9.56 as against to net profit of Rs. 10,689 million and EPS of Rs. Rs. 9.24 last year. The rise in profits is mostly because of lower repair and maintenance expenditure at Hub and Narowal Plants, partly offset by lower profits of Laraib, higher financing costs and administrative expenses. The financial experts of HUBCO also calculated that unconsolidated net profit earned through the company during the year under review is Rs. 8,565 million, resulting in EPS of Rs. 7.40 as against to a net profit of Rs. 9,600 million and EPS of Rs. 8.29 last year. The fall in unconsolidated profit is chiefly because of demerger of Narowal Plant with effect from April 1, 2017 after which the results of Narowal are recorded in Narowal Energy Limited (NEL), lower generation bonus, higher administrative expenses, higher financing costs partly offset by lower repair and maintenance expenditure.

 

HUB Plant

It is reported that the Hub Plant supplied reliable and uninterrupted electricity to the National Grid. During the year the Plant generated 5,201 GWh of electricity with a load factor of 49.5 percent. Major reason for low load factor has been lower electricity demand from Power Purchaser. The Hub Complex fruitfully demonstrated the ‘Complex Dependable Capacity’ in December 2017. The company officials also stated that the test was conducted in the presence of CPPA-G for 6 hours. The net complex capacity, an average of continuous running of 6 hours, of 1207.67MW Net has been demonstrated. The test went quite well, and the demonstrated capacity was the highest in the history of the plant.

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Narowal Plant

The company’s sources also urged that the Narowal Plant supplied 1,200 GWh of electricity (2016-17: 1,334 GWh) to the National Grid. The Plant operated at a load factor of 64 percent. The Plant has been vigorously continuing its efforts for operational excellence to optimize thermal efficiency and availability. Availability factor for the year was 93 percent. Main reason for low load factor was lower electricity demand from power purchaser. Major overhaul of 3 engines and 7 alternators have been carried out during the year and major overhauls of 2 engines and 2 alternators are planned for FY2019.

Laraib Plant

It is also mentioned that the average availability of Laraib Plant was 98.96 percent, reflecting operational reliability of the Complex. Net Electrical Output (NEO) was 381 GWh. Furthermore, comparatively lower generation for FY2018 is chiefly because of lower average hydrology received from Mangla Power Plant. The Annual Maintenance for FY2018 was completed in 40 days vs 56 days plan, showing the pursuit towards continuous improvement and outage excellence. The Complex completed its 5th Agreement Year (AY) in March 2018 generating 398 GWh of green energy against 470 GWh Annual Target under the Power Purchase Agreement because of lower hydrology. The year also marked the successful takeover of operations and maintenance (O&M) of Laraib Power Plant by HPSL from TNB Remaco.

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