Hub Power Company (HUBC) held its corporate briefing today to discuss 1HFY24 financial results and future outlook. Regarding dividend policy, management stated that any surplus cash would be distributed among the shareholders if there was no major capex requirement.
Like other power companies, HUBC is also facing a circular debt issue. However, the company is inconsistent in talks with the government, where the government is working on ways to address the problem.
The acquisition of 9.5% shares of Sindh Engro Coal Mining Company (SECMC), currently held by HBL, will be financed through internal cash generation. This will increase HUBC’s shareholding to 17.5%, making it the second-largest shareholder in SECMC.
As per the management, dividends from Thar Energy Limited (TEL) to flow once certain requirements or project-related milestones are completed.
On the MoU signed with K-Electric (KEL), management said its impact on earnings will be determined once they reach the tariff determination stage, which will take 2-2.5 years. To recall, HUBC signed an MOU with KEL for potentially converting two RFO-fired Hub Power plant units to Thar coal after the existing PPA expires in March 2027.
HUBC is also working on a strategy to add power generation through renewables. HUBC, through its wholly owned subsidiary Hub Power Holding Limited (HPHL), has been prequalified for KE’s 200MW wind/solar hybrid project. Also, HPHL has been pre-qualified for 150MW + 120MW of the Sindh Solar Energy Project (SSEP) for power off-take by KEL.
Regarding entering the electric vehicles segment, management highlighted that the EV project may not be appropriate considering the current scenario, where the demand for automobiles is contracting.
Updating on exploration activities related to SW Miano III, management informed that the last exploration activity was not successful. Moreover, further exploration will be done once all documentation is completed with DGPC, which may take around six months.
Overdue receivables of HUBC’s base plant are currently around Rs55bn. Narowal and Laraib have overdue receivables of Rs8.5bn and Rs7.5bn, respectively. On the other hand, the overdue receivables of CPHGC are around Rs93bn.
To recall, HUBC announced a 2QFY24 result wherein the company reported profit to equity owners of Rs15bn (EPS of Rs11.8), up 15% YoY. Management highlighted that the YoY increase in profit is due to (1) a share of income from Thar Energy and Thal Nova, which achieved COD in Oct-22 and Feb-23, respectively, (2) a higher share of profit from other associates due to PKR depreciation and (3) impact of the acquisition of ENI.
Along with the results, HUBC announced an interim cash dividend of Rs4 per share for 2QFY24, taking the total dividend for 1HFY24 to Rs9 per share.
Courtesy- Topline Research