Hub Power Company (PSX: HUBC) held its analyst briefing to apprise Investors about its Recent performance and future outlook. To recall,

Hub Power Company (HUBC) unveiled its financial performance for the fourth quarter of FY23, showcasing robust results that exceeded industry expectations. The company reported a remarkable profit to equity owners of Rs23.9 billion, translating to an impressive earnings per share (EPS) of Rs18.4, marking a substantial 241% year-on-year (YoY) growth.

For the entire fiscal year FY23, HUBC achieved a historic milestone by recording Net Profit of Rs57.6 billion, resulting in an EPS of Rs44.4. This figure represents the highest annual earnings in the company’s history.

In addition to these stellar financial results, HUBC declared a final cash dividend of Rs6 per share, bringing the total dividend for FY23 to Rs30 per share. This dividend payout is also the highest in the company’s history, reflecting its commitment to delivering value to its shareholders.

A noteworthy contributor to HUBC’s exceptional 4QFY23 results was the substantial increase in its share of profit from associates and joint ventures, surging by an impressive 128% quarter-on-quarter (QoQ) to Rs14.8 billion. This surge can be attributed to the full impact of the ThalNova Power Plant, which commenced commercial operations in February 17, 2023. Additionally, higher earnings contributions from the China Power Hub Generation Company (CPHGC) were noted, likely amplified by the rupee’s depreciation against the US dollar. More details on this matter are expected to be revealed in upcoming corporate briefings and the annual report.

Current status and Future Outlook

Hub Power Company Limited (HUBC) stands as Pakistan’s foremost Independent Power Producer (IPP), boasting a substantial presence throughout the energy value chain. As of June 2023, HUBC’s impressive portfolio encompasses a power generation capacity of 3,581 megawatts (MW), a mining capacity of 7.6 million tons per annum (pa), and an exploration and production (E&P) capacity of 10.7 million barrels of oil equivalent (MMBOE). The composition of HUBC’s power generation mix comprises Residual Fuel Oil (RFO) at 42%, Imported Coal at 37%, Thar Coal at 18%, and Hydropower at 2%.

In the fiscal year 2023, HUBC celebrated a series of significant milestones. Three Thar-based projects achieved commercial operations, namely: i) 330MW Thar Energy Limited, boasting an 87% availability post-COD and generating 1,465 gigawatt-hours (GwH), securing a spot among the top 5 in merit order; ii) 330MW ThalNova Power, which achieved an impressive 98% availability post-COD and generated 1,159 GwH, also ranking in the top 5 in merit order; iii) An expansion of mining capacity to 7.6 million tons pa for SECMC Phase-II, accompanied by a reduction in coal prices from USD 65/ton to USD 46/ton.

Furthermore, HUBC’s subsidiary, China Power Hub Generation Company (CPHGC), successfully completed its project, resulting in the release of HUBC’s obligation to maintain a USD 150 million Standby Letter of Credit (SBLC). This achievement opens the door for dividend payments, expected to commence in FY24.

HUBC’s acquisition of ENI’s assets concluded, with management control now resting in the hands of former ENI employees. A turnaround project, completed in June 2023, is anticipated to prolong the life of existing fields and augment total recoverable reserves. Additionally, Prime International secured the bid for a new onshore exploratory block, SW Miano III, in June 2023.

The company’s plants maintained commendable availability rates, surpassing Power Purchase Agreement (PPA) requirements. Unconsolidated profitability faced headwinds from reduced load factors and heightened finance costs, but these were offset by increased dividend income. In contrast, consolidated earnings enjoyed substantial growth due to higher profit shares from CPHGC, USD indexation receipts from insurance claims, and the initiation of profits from various subsidiaries.

Notably, HUBC informed stakeholders that the PPA for the base plant was set to expire in April 2027, and although receivables decreased year-on-year, overdue receivables still stood at approximately PKR 45 billion on a standalone basis.

The tariff for Thar coal was estimated to range between USD 48-50/ton. It’s important to note that dividends from investments like SECMC were subject to taxation at rates ranging from 15% to 25%.

Regarding capital allocation, while no buyback plans were on the horizon, any surplus reserves after accounting for future capital expenditures would be distributed in the form of dividends. HUBC also expressed active involvement in the West Karachi Water Recycling Plant project and was prequalified for KE’s 200MW wind/solar hybrid project, signaling a commitment to furthering renewable energy initiatives. Additionally, the company was evaluating various other renewable energy-related projects.

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