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HUBC - 1HY23 Analyst Briefing Takeaways, (AKD Off the Analyst's Desk Feb 28, 2023)

The Hub Power Company (HUBC) held an analyst briefing today for the first half of the fiscal year, where the company apprised investors on its performance for the period along with providing key updates on its operations. The company reported consolidated earnings of PkR22.4bn (EPS: PkR17.3) in 1HFY23, up by 83%YoY. Here are some key takeaways from the briefing:

 

• The bumper Share of Profit from Associates of PkR10.0bn received in the second quarter (up 2.2x QoQ) is due to the reimbursement of insurance claims for the CPHGC plant regarding damages on the transformer of one of the plant’s units in 2021. This insurance claim amounts to PkR13.8bn for the plant, with HUBC’s share from it being PkR6.6bn.
• In further updates on the CPEC IPP, the management stated that it is unlikely that the USD indexation will be halted on the plant as foreign investors will not be disfavored by the government in this regard. Furthermore, Thar coal can be blended in as 5-15% of total coal used in the plant, although this is contingent on further studies.
• Finance costs for the company have increased by 110%YoY for 1HFY23 to clock in at PkR7.1bn, the management stated that this is due to loan facilities acquired for the construction of the Thar coal plants (TEL & TNPTL). To note, Finance costs for the quarter clocked in at PkR4.8bn.
• Going further into the Thar plants, the management apprised that work is ongoing to relieve the evacuation constraints from the plants, and should be sorted in the coming months. Moreover, discussions are being held with CPPA-G for the resolution on the amounts of Liquidated Damages with regards to the delays in CODs for both plants.
• Regarding SECMC, the management stated that dividend flow should start from the second half of the fiscal year. The Thar Coal and Energy Board issued the COD for the first phase in Dec’22, while the Phase-II expansion came online in October.
• Availability factors were 92%/86%/99%/84%/92% for the Hub/Narowal/Laraib/CPHGC/TEL plants in 1HFY23. While load factors were 4%, 24%, 43%, 22% and 79% respectively, with load factors decreasing prominently when compared to the SPLY as the RFO and imported coal plants ranked lower in the Merit Order this year owing to the high prices of the commodities in the year.
• The management views the company as an infrastructure company more than just a power generation company. Going forwards, the company will be looking to explore opportunities in the EV infrastructure space along with waste-water treatment.