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HUBCO’S significant projects, role to overcome energy crisis

Published on 25th May, Edition 21, 2015

 

The Hub Power Company is the largest Independent Power Producer (IPP) in the country with a combined power generation capacity of over 1,600MW. The company generates approximately 10 percent of the country’s electricity and is playing an important role in addressing the energy crisis.

It is situated at Mouza Kund, Hub in Balochistan and is one of the most efficient steam turbine-based thermal power plants in Pakistan. It supplies reliable and uninterrupted electricity to the national grid. The company also holds 75 percent controlling interest in Laraib Energy Limited, which owns and operates an 84MW run off the river hydel power plant near the New Bong Escape, 8 km downstream of Mangla Dam in Azad Kashmir.

The company has also recently established wholly-owned subsidiaries for its future initiatives. Hub Power Holding Limited has been incorporated to invest in the coal-based 2x660MW power project while Hub Power Services Limited has been incorporated to take over the O&M of the Hub Plant and upcoming coal plant.

Financial Highlights

Financial highlights of the holding company and its subsidiaries during the period under review are as follows:

Quarter Ended March 31, 2015

Quarter Ended March 31, 2014

Nine Months Ended March 31, 2015

Nine Months Ended March 31, 2014

.

Rs. in Million

Turnover

27,965

44,261

108,546

123,996

Operating costs

(22,730)

(40,294)

(94,139)

(113,632)

Net Profit*

2,953

2,198

8,356

5,528

Earnings per share (Rs.)

2.55

1.90

7.22

4.78

*Attributable to the Owners of the holding company.

Unconsolidated net profit earned by the company during the nine months period under the review was Rs6,561 million (2013-14: Rs4,994 million) and earnings per share was Rs5.67 (2013-14: Rs4.32) as compared to the same period last year. The increase in profit is mainly due to net effect of lower repair and maintenance expenditures, currency devaluation, higher generation bonus, lower efficiency loss and write-off of damaged assets at Narowal.

Consolidated earnings per share for the nine months period under review was Rs7.22 compared to Rs4.78 in the same period last year. The increase in consolidated earnings, in addition to the factors mentioned in the preceding paragraph, is mainly due to recognition of O&M indexation and interim tariff relief after NEPRA’s approval as part of Laraib’s tariff true-up process.

Operational Highlights Operational highlights of all three plants during the period under review are as follows:

Unit

Quarter Ended March 31, 2015

Quarter Ended March 31, 2014

Nine Months Ended March 31, 2015

Nine Months Ended March 31, 2014

HUB PLANT

Generation

GWh

1,652

1,883

5,099

5,104

Load factor

%

63.8

72.3

64.5

65.7

NAROWAL PLANT

Generation

GWh

350

377

1,095

1,166

Load factor

%

76

82

78

83

LARAIB ENERGY

Generation

GWh

122

101.5

361

308

Load factor

%

67

56

65

56

Hub Plant

During the quarter under review, plant operated at an average load factor of 64%. Available capacity was 82% and electricity sold to WAPDA was 1,652 GWh. During the first nine months of current FY, plant operated at an average load factor of 65 percent and the available capacity was 79 percent. Electricity sold to WAPDA during the nine-month period was 5,099 GWh compared to dispatch of 5,104 GWh during the corresponding period last year. Lower Net Electrical Output (NEO) was due to lesser dispatch during the month of November 2014 and February 2015 by NPCC. The Residual Fuel Oil (RFO) stock was 63,000 MT at the start of January 2015 and 57,000 MT at the end of this review period.

Narowal Plant

During the quarter under review, the plant operated at an average load factor of 76% and at billable availability capacity of 100 percent. During this period, electricity sold to WAPDA was 350 GWh compared to 376 GWh (82 percent load factor) during the comparative period in last year. For the nine-month period, the average load factor was 78 percent compared to 83 percent in the corresponding period last year.

Laraib Plant

During the quarter, the plant load factor was 67 percent and the electricity sold to NTDC was 122 GWh. For the nine month period, the load factor was 65% compared to 56% for the corresponding period last year. Complex has completed its 2nd Agreement Year. During the Agreement Year (March 23, 2014-March 22, 2015), the plant load factor was 71 percent and the electricity sold to NTDC was 526 GWh compared to PPA requirement to dispatch 470 GWh in an Agreement Year. The positive impact in additional energy is attributable to the improved hydrology and better plant availability.

Narowal Demerger

The company is now working to demerge its Narowal Plant into a separate entity. Work on scheme of arrangement, valuation of assets and approvals from the relevant stakeholders are in progress.

Change of corporate logo

The Company has launched a new logo which uses the power-structure inherent in a triangle to convey a trusted image of strength. By placing the triangles together, it is revealed the letter ‘H’ both as a surprise and as a tribute. This initiative was undertaken to better represent where the company is headed in the future.

The Hub Power Company has signed a joint venture agreement (JVA) with China Power International Holding Limited (CPIH), a wholly-owned core enterprise of China Power Investment Corporation. The JVA was signed amid the presence of the Honorable Prime Minister of Pakistan Mian Nawaz Sharif and the Honorable President of People’s Republic of China, Mr. Xi Jinping, by the senior management of HUBCO and CPIH.

By virtue of this agreement, HUBCO and CPIH will jointly develop 2x660MW imported coal-based power plant and a coal jetty at HUBCO’s existing site at Hub, Balochistan. Feasibility study, along with the Field Investigation and Geo-Technical Investigation for plant and the jetty has been carried out. Environmental and Social Impact Assessment (ESIA) for the plant and the jetty is also being conducted.

Currently 1x660MW has been included in the China-Pakistan Economic Corridor. The additional unit is also expected to be added at the next Joint Coordination Committee meeting.

Sindh Engro Coal Mining Company Limited (SECMC): The Company has committed to invest US$20 million equivalent in the coal mining project at Thar and has invested Rs240 million to-dates.

Sustainable Development: The company remained committed to its social responsibilities and focused on the development of the Community Physical Infrastructure; provision of Basic and Technical Education; Health and various Livelihood Interventions. Solar street lights have been installed in three villages around Hub Plant Site and Hepatitis C vaccination was also carried out in these villages. Construction of sewerage improvement project i.e. underground sewerage pipeline with water disposal station progressed well in one of the villages around Narowal Plant Site.

Health Safety and Environment (HSE): The Company continued with its practice of upholding the highest environmental standards and stringently monitored the Safety and Security procedures at the Head Office and at the plants. The Company has launched DuPont Safety Management System Alignment Program by carrying out Safety Perception Survey and Gap Analysis of systems at all sites.

 

A challenging year

The year 2013-14 was a challenging year for the Company. However, it also opened various avenues of growth and transformation. The scope of our vision is based on our commitment to making substantial contributions in addressing the energy crisis being faced by the country and providing a framework for better planning and decision-making for the energy sector

Financial performance profitability

Turnover for the year under review was Rs161,807 million (2013: Rs165,862 million) and operating costs were Rs150,070 million (2013: Rs149,544 million). The company earned a net profit of Rs6,549 million during the year, resulting in earnings per share of Rs5.66 compared to a net profit of Rs9,388 million and earnings per share of Rs8.11 last year.

Decrease in profit is mainly due to lower load factor caused by plant shutdowns because of boilers tubes leakages, lower generation bonus, lower efficiency, liquidated damages and higher repair and maintenance expenditure including the expenditures for rehabilitation works carried out on two of the four boilers and overhauling of engines at Narowal plant.

PACRA’s Rating

PACRA’s rating is an assessment of the credit standing of entities in Pakistan. Since 2008 when the Company initiated its rating process it has maintained PACRA’s long term entity rating of “AA+” and short term rating of “A1+”. These ratings denote a very low expectation of credit risk for timely payment of financial commitment.

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