Power Generation & Distribution: THE HUB POWER COMPANY LIMITED - Year Ended June 30, 2005 (Audited)
The Hub Power Company Limited (Hubco) was incorporated in Pakistan on August 1, 1991 as a public limited company. Hubco shares are listed on the Karachi, Lahore and Islamabad Stock Exchanges and its Global Depository Receipts are listed on the Luxembourg Stock Exchange.
The principle activities of Hubco are to own, operate and maintain an oil-fired power-station at Hub Chowki, Tehsil Hub, District Lasbella, Balochistan. The installed net capacity of the plant is 1,200 MW.
Hubco was promoted by Xenel Industries Limited, Saudi Arabia. Xenel's holding in Hubco on June 30, 2005 stood at12.12%. National Power International Holdings BV is considered the largest single investor with 16.58% holdings. Government of Balochistan, holding 0.03% shares, is among the original investors.
Hubco's paid up capital of Rs 11.572 billion is held by 17,855 shareholders, of which 17,575 are individuals owning 30.26 % of the shares. Other large shareholder categories include: Joint Stock Companies (35.03 %), Financial Institutions (18.52%), Investment Companies (5.31%), Insurance Companies (3.08%) and GDR Depository (6.91%).
The Hubco 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 directly coupled to a hydrogen cooled generator.
The design net available output is exported to the national grid via the power station's 500kv switchyard.
Both the plant configuration and the steam conditions represent conventional design based on proven technology. The plant is reportedly accredited with ISO 9002 for quality management systems & ISO 14001 certification for environmental management system.
Hubco is the first and the largest Independent Power Producer (IPP) in Pakistan. It sells all electric power generated to Wapda in bulk. It 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 claims to set the standards for the formulation of a private power framework in Pakistan which has elicited numerous responses from international investors.
In terms of the Power Policy, the IPPs including Hubco enjoy a number of incentives, some of which include: (i) Profit derived from electric power generation are exempt from income tax. The IPPs are also exempt from minimum tax on turnover; (ii) Energy Fee or Energy Purchase Price is recognised on transmission of electricity to Wapda, whereas Capacity Fee or Capacity Purchase Price (CPP) is billed and recognised on monthly basis.
CPP is linked to plant availability and the contractual net capacity of the power plant and mostly covers all fixed charges including return on equity as well as debt servicing in respect of the debt raised for implementation of the power generation facility.
CPP is payable in full as per contract even tough demand for electricity is low from Wapda. From investors' point of view, these features are the main attraction of the IPPs. Hubco has been making handsome net profit even though load factor has been very low, as shown in the table below:
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(Rs in million)
Years Load Factor Net profit
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FY01 68% 10,859
FY02 35% 7,286
FY03 26% 6,102
FY04 16% 5,463
FY05 19% 5,385
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During FY05 the power plant continued to run at an average low load factor of 18.79% dispatching 1,975GWh of electricity. However, power station maintained availability of 74.10% for the full year. It may be noted that the electricity produced by the plant is dependent on the load demanded by Wapda and the plant availability.
According to the Report of the Directors, Hubco team continues to work harmoniously with Wapda on matters of mutual interest. In this regard, Hubco has offered full assistance and co-operation in all operational and administration aspects of business especially in relation to the WAPDA interconnection project which will enable Wapda to supply Hubco generated electricity directly to Karachi without going through a longer route via Jamshoro.
Hubco has fully paid its senior debts amounting to Rs 23.9 billion, of which the last instalment was paid on July 11, 2005. As a result, all debt service reserve account balances have been released to the company. National Bank of Pakistan is now the sole long term lender to Hubco. The company is exploring various opportunities for investments and has reportedly applied for pre-qualification of IPP projects recently announced by the government.
Hubco has been maintaining satisfactory financial position throughout the period under review. Both the current ratio and debt/equity ratio are reasonable. With regular payment of long term loans, debt/equity ratio will improve further. Profitability is also attractive with ROE at 17% for the year under review (2004: 18%). Dividend payout in FY05 was 84% as against 74% for FY04. Performance statistics are given below.
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Performance Statistics (Million Rupees)
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Balance Sheet Audited Audited
As on June 30 2005 2004
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Capital-Paid-up: 11,572 11,572
Reserves: 20,100 18,070
Equity: 31,672 29,642
Surplus on Revalue of FA: 0 0
Shareholders Equity: 31,672 29,642
LT and deferred liabilities: 10,234 13,244
Capitalisation: 41,906 42,886
Current Liabilities: 4,730 8,894
Total Liabilities and Equity: 46,636 51,780
Tangible Fixed Assets: 35,503 36,976
LT Advances and deferred: 162 2,332
Current Assets: 10,971 12,472
Total Assets: 46,636 51,780
Contingencies & Commitments: 2,462 2,077
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Ratios:
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Current Ratio: 2.32:1 1.40:1
Debt-Equity Ratio: 24:76 31:69
Book Value per share - Rs: 27.37 25.62
Price Per Share (14-11-05)- Rs: 24.70 -
Price/Book Value Ratio: 0.90 -
Conting. & Commit/Equity: 0.08 0.07
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Income Statement
Year ended June 30 2,005 2,004
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Sales (net of sales tax): 16,978 16,003
Gross Profit: 7,157 7,896
Operating Profit: 6,963 7,665
Profit before Taxation: 5,386 5,463
Profit after Taxation: 5,386 5,463
Cash Dividends %: 39% 37%
Cash Dividend - amount: 4,513 4,281
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Ratios:
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Gross Profit/Sales: 42% 49%
Operating Profit/Sales: 41% 48%
Profit after Tax/Sales: 32% 34%
Net Profit/Equity: 17% 18%
ROA: 12% 11%
ROCE: 13% 13%
Dividend Payout Ratio: 84% 78%
Earnings Per Share - (Rs): 4.65 4.72
Inventory Turnover (times): 13.57 10.57
Receivable Turnover (times): 11.76 8.51
Price/Earning Ratio: 5.31 -
Asset Turnover (times): 0.36 0.31
Days Inventory: 27 35
Days Receivable: 31 43
Debt Service Cover (times): 1.42 1.50
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Cash flow Summary (12 M) 2,005 2,004
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Net Cash flow, Operations: 6,358 6,994
Net Cash flow, Investing: 1,196 576
Net Cash flow, Financing: -7,320 -8,244
Change in net Liquidity: 234 -674
Net Liquidity at beginning: 5,804 6,478
Net Liquidity at end of period: 6,038 5,804
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Capacity:
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Theoretical Max. Output-GWh: 10,512 10,540
Base Case - theoretical - GWh: 6,791 6,809
Actual Production-
Actual energy delivered- GWh: 1,975 1,647
Load Factor*: 18.79% 15.63%
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* Output is dependent on the load demanded by WAPDA.
COMPANY INFORMATION: Chairman: Mohamed A. Alireza, H.I.; Vice Chairman: Philip G. Cox; Director: Najam Farooqi; Chief Executive: Ashraf Tumbi; Finance Director: S. Khalid Masood; Chief Internal Auditor: Mrs Huma Pasha; Company Secretary: Arshad A. Hashmi; Auditors: M. Yousuf Adil Saleem & Co, Chartered Accountants; Legal Advisors: 1- Rizvi, Isa, Afridi & Angell, Karachi; 2- Kabraji & Talibuddin, Karachi; and 3- Linklaters & Alliance, London; Inter-Creditor Agent: National Bank of Pakistan, Karachi; Head Office: 3rd Floor, Islamic Chamber of Commerce Building, ST-2/A, Block-9, Clifton, Karachi-75600; Registrar & Registered Office: Ford Rhodes Sidat Hyder & Co, 75 West, Blue Area, Fazal-ul-Haq Road, Islamabad; Web Address: www.hubpower.com
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