March 12, 2020 (MLN): Pakistan’s largest Independent Power Producer (IPP), the Hub Power Company Limited (HUBC) has shown a remarkable performance during 1HFY20 by doubling its profits.
The aggressive revamping of its base business as well as growth plan over the past few years has marked a turning point for HUBC’s profitability. Additionally, zero payout spell for six consecutive quarters due to liquidity crunch is likely to end in FY21, as dividend inflows from associated companies and partial resolution of circular debt on the back of issuance of Rs 200 billion Energy Sukuk II which ECC has approved on 22 January’20, would allow the company to pay dividends, thereby, revitalizing investors’ interest in the company, a report by AKD Research said.
The report further highlighted that HUBC has achieved 95% of its equity investment requirements through a mix of right issue, leverage and internal cash generation and approximately Rs 7-8 billion investment remain to be undertaken for 2x330MW projects which will be catered through further leverage and delaying payouts.
This indicates that FY20 to remain another year for without dividends from the power giant, moreover, the portion of capacity payments from the outstanding of Rs 34 billion cleared in upcoming settlement will be a better indicator of HUBC’s payout capacity in FY21, the report underscored.
Going forward, the company’s profitability is expected to rise further as contribution from 1320MW imported coal fired power plant would result in higher earnings. In 1QFY20, the plant commenced its operations and contributed Rs 4.82 billion to the 1HFY20 EPS.
Another report from Ismail Iqbal Securities indicates that the company is all set to shine even brighter as HUBC has secured its cash flows till 2051 by investing into Thar Energy Limited (TEL) and Thal Nova Power Thar Limited (TNPTL).
