HUBCO

MOHAMMED ARIFEEN
Sep 15 - 21, 2008

PROFILE:

Hubco was incorporated in Pakistan in 1991. It was established at a critical juncture when Pakistan was experiencing a severe power shortage. It is a publicly owned company listed on the Karachi, Lahore and Islamabad Stock Exchanges.

The major functions of the company are to own, operate and maintain an oil fired power station with a net capacity of 1,200 MW. At present it provides about 6 per cent of the country's total generation.

Hubco is the first and largest power station to be financed by the private sector in Southern Asia and one of the largest private power projects in the newly industrialized world.

It is a dynamic company whose business operations are firmly based on sustainable growth and development. The company actively pursues the Triple Bottom, Line of People, Planet and Profits.

Hubco's shareholders represent an integral part of the 'People' portfolio. It gives top priority in ensuring a fair and stable return to its shareholders. It assures a profitable return to its shareholders on an ongoing and sustainable basis. It consistently achieved targeted profits since its establishment.

Hubco recognizes that its employees are the most important resource. Employees are given extensive opportunity for self- development and career growth.

The Hubco power station is established in one of the most underdeveloped areas of the country, where people do not have access to adequate basic necessities of life i.e. health, education, employment, water, power, etc. Hubco after studying the deteriorating condition of this backward area launched a Social Action programme (SAP) to ameliorate the pathetic conditions of the people living there.

Hubco enacted a well uplift programme to ensure that its environmental footprint is fully complying to or better than the requirements of international standard. It has a sophisticated Environment Management System (EMS).

FINANCIAL PERFORMANCE:

During the fiscal year 2008-09, HUBCO's major customer WAPDA continuously witnessed financial constraints; as a result of this it was not able to fulfill its promise to HUBCO under the Power Purchase Agreement (PPA). Presently, an amount of Rs.27 billion is outstanding against WAPDA of Rs.22 billion which is classified overdue (payable immediately).

As a result of the severe financial constraints of WAPDA, it was also not able to renew its obligatory Letter of Credit to HUBCO under PPA for an amount of Rs.12.867 billion. WAPDA had made a formal request to HUBCO that it is making a prompt arrangement to send Letter of Credit for Rs.8.9 billion with furthermore commitment to make up the full amount. As a result of WAPDA outstanding of Rs.24 billion, HUBCO presently owes Rs.12 billion to Pakistan State Oil for Residual Fuel Oil (RFO).

During the review period HUBCO earned a net profit of Rs.2,061 million resulting in earnings of Rs.2.25 per share, compared to a net profit of Rs.2,654 million previous year and earning per share of Rs.2.29. Compared with last year operating costs are higher due to Residual Fuel Oil (RFO) cost.

FINANCIAL POSITION (YEAR ENDED JUNE)

(Rs. in million)

S.NO

DESCRIPTION

2008

2007

1)

Turnover

62,435

44,131

2)

Operating cost

57,685

39,967

3)

Profit

2,061

2,654

4)

Assets

62,697

44,994

5)

Basic Earning Per share (Rs)

2.25

2.29

6)

Load Factor (%)

68

69

7)

Generation (GWP)

7,205

7,214

OPERATIONS:

Hubco has a very cordial relationship with WAPDA. The power station is being operated to the highest international standards. The company continues to allot funds on various useful expenditures towards the ongoing modernization of the plant in order to ensure its long term integrity and maximum availability for WAPDA. For the review period, Hubco has planned to fund Rs.275 million toward this program.

During the review period, it continued to operate with an utmost efficiency, high load factor and dispatched 7,205 GWh of electricity to corresponding to a load factor of 68.4%.

FUTURE OUTLOOK:

Abiding by its motto of "growth through energy", Hubco is embarking on two new energy sector projects - 220 MW thermal power projects that will be established at a site in Narowal in the Punjab province. Its commercial operation will take place on March 2010.

In addition to this Hubco has acquired 75% controlling interest in the development of a hydroelectric power project known as Laraib New Bong Hydel anticipated to start commercial operation by early 2012. With this acquisition Hubco will become the first Hydel IPP in Pakistan.