HUB POWER COMPANY LTD.

S.KAMAL HAYDER KAZMI,
Research Analyst
, PAGE
Sep 21 - Oct 04, 2009

Hub power station was the first power station in South Asia financed by private sector and one of the largest private power projects in the newly industrialized world.

Hub power station was the first project to be successfully co-financed by several governments, the World Bank as well as international private sector lenders and investors. It set the standards for the formulation of a private power framework in Pakistan and set trends of investment in power sector by international investors. Several medium sized projects have since completed their financing, construction and now are in operation.

Today, the Hub Power Company which is listed on Karachi, Lahore, Islamabad, and Luxembourg Stock Exchanges has the largest market capitalization as compared to any other private company in Pakistan and has over 17,000 Pakistani and international shareholders.

Hubco's main customer WAPDA continued to face financial therefore it was unable to discharge its obligations to Hubco under its power purchase agreement (PPA).

In March 2009, the company received Rs35 billion from WAPDA through the circular debts settlements arranged by the government. In accordance with the settlement procedure, Rs 30 billion was released to PSO in settlement for the fuel oil supply.

In addition, WAPDA is unable to renew its contractual letter of credit to Hubco under PPA for 2009-10 for an amount of Rs 12.31 billion. The obligations of WAPDA under PPA are now only secured through the sovereign from the federal government of Pakistan under its implementation agreement of Hubco.

FINANCIAL HIGHLIGHTS
(RS 000)

INDICATORS FY09 FY08
Turnover 82,783,924 62,434,557
Operating costs (76,687,113) (57,684,623)
Gross Profit 6,096,811 4,749,934
Other income 138,279 105,390
Admin expenses (359,599) (288,770)
Financial cost (2,094,500) (1,965,971)
Profit After Tax 3,780,991 2,600,583
Earning Per Share (Rs) 3.27 2.25
Source: Hubco

The company's turnover during FY09 was Rs 82.784 billion as compared to Rs 62.435 billion in FY09 and operating costs were Rs 76.69 billion (Rs 57.68 billion in FY08 ) resulting in a gross profit of Rs 6.097 billion compared to Rs 4.750 billion last year. The company's net profit increased to Rs 3.781 billion resulting in earning per share of Rs 3.27 compared to net profit of Rs 2.601 billion and earning per share of Rs 2.25 last year.

The increase in profit is attributable to currency devaluation, efficiency gain, and higher tariff profile. Total output from the company stood at 7,205 GWh in 2008 as against 7,214 in 2007.

PLANT CAPACITY & PRODUCTION

Hub power plant consists of four generating units each rated at 323 MW gross output, with an oil-fired single re-heat boiler and tandem compound, two cylinder condensing steam turbines coupled with a hydrogen cooled generator. The design net available output is exported to WAPDA's national grid via the power station's 500kv switchyard.

Both the plant configuration and the steam conditions represent conventional design based on proven technology. Hub power plant is one of the most efficient oil fired thermal plants, and can meet 10% of country's electricity demand.

PLANT CAPACITY & PRODUCTION

  2008 2007
Theoretical Maximum Output 10,541 GWh 10,512 GWh
Total Output 7,205 GWh 7,214 GWh
Load Factor (Base Case 64.6%) 68.40% 68.63%

OPERATION

The plant continues to operate at optimal efficiency and high load factor and dispatches 8,257 GWh of electricity corresponding to a load factor of 78.6% which is a record output. The power plant maintains high availability of 84.3% for the full year.

ELECTRICITY USAGE

The growth in electric energy use in Pakistan is expected to remain high for many years to come, and, by 2030 total demand is expected to increase 5.6 to 8.2 times over 2009 level i.e. 19,754 MW. This implies average annual growth rates of between 7.8% and 9.6% of the low and high scenarios of demand respectively. Demand for electric energy will grow at an annual rate of 8.8% during 2009 to 2030.

PROVINCE WISE SHARE IN ENERGY SALE

KESC 13%
Sindh excluding KESC 7%
NWFP 12%
Balochistan 6%
Punjab 62%

OUTLOOK

Hubco's 220MW Narowal oil-fired power project has achieved financial closure in March 2009, while hydro project i.e. Laraib Energy of 84MW (subsidiary of Hubco) is expected to be completed by September 2009.

However, the Narowal project is expected to come online by March 31, 2010. The company entered into Power Purchase Agreement for 25 years on November 20, 2008, with WAPDA. Moreover, the company also renewed its agreement with O&M International Power Global Development for further 12 years.