HUBC – diversification paying off!

Diversification has been paying off well for Hub Power Company Limited’s (PSX: HUBC) and the same is showing in the company’s consolidated profitability. The power company does not completely depend on the base plant at Hub; its coal investment, China Power Hub Generation Company under CPEC has been driving profitability since FY20. Then, the company achieved COD for all its Thar-based in the ongoing fiscal year (FY23). Also TEL was commissioned in the recent quarter – 2QFY23. HUBCO’s SECMC project also achieved COD for the second phase during the period.

HUBC’s consolidated revenues during the latest quarter - 2QFY23 witnessed an increase of 26 percent year-on-year due to higher dispatches of electricity and higher furnace oil prices. The dispatches were up by around 30 percent year-on-year as Thar Energy Limited was commissioned during the quarter. In 1HFY23, the revenues increased by 18 percent year-on-year again on the back of higher furnace oil prices. However, due to weaker dispatches in 1QFY23, the overall dispatches were down in 1HFY23. Load factors of all plants were low during the period under review on a year-on-year basis as furnace oil and imported coal plants ranked lower on the merit order.

While the topline played its part in bolstering the bottmline, other drivers of profitability for HUBC’s earnings in 1HFY23 were the partial insurance claims of CPHGC against transformer damage and currency devaluation. The reimbursement of insurance can be seen in the whopping jump in share of profits from associates in 2QFY23 and then 1HFY23. The company’s earnings however were cut short by the significant boost in finance cost, which according to the company was due to loan facilities acquired for the construction of the Thar coal plants.

Overall HUBC’s consolidated earnings were up by 83 percent and in 1HFY23 and by 177 percent in 2QFY23, year-on-year respectively. The company also announced a higher dividend of Rs7.5, which was likely due to dividend received by CPHGC.