The Bell about Electricity – Elixir Securities Limited

Karachi: Hub Power Company Limited – 1QFY12 earnings in line with expectation

Expansion related finance cost limited earnings
According to Elixir Securities, financial charges during 1QFY12 stood at PKR1.78bn, up 2.2x YoY, mainly due to expensing of interest charges on Narowal Long term debt and disbursement of debt associated with Laraib. Financial charges associated with Narowal project stood at PKR1.1bn, with interest cost on LT debt at PKR839mn, whereas finance cost on ST borrowings at PKR218mn. Interest cost on Long term loans of Narowal were being capitalized during 1QFY11. Additional ST financing was obtained for funding Narowal over dues during 1QFY12, as Narowal doesn’t enjoy extended fuel supplier credit due to fuel supply agreement with private fuel supplier. Financial charges on debt associated with Laraib stood at PKR146mn during 1QFY12, up 5x YoY as major disbursements were done during FY11.

Narowal’s loss partly offset by net penal interest income
Revenues for Narowal were booked on the basis of reference tariff, which resulted in a loss of PKR168mn (PKR0.15/share) for Narowal during 1QFY12. Narowal earns a positive spread of 2.5% on overdue receivables, as penal mark-up rate on overdue receivables is 3M KIBOR + 4.5%, whereas running facilities obtained for funding over dues are at a mark up of 3M KIBOR + 2%. Net penal interest income for Narowal during 1QFY12 is estimated at PKR43mn (PKR0.04/share). Elixir’s estimates suggest that no operational savings were realized from Narowal operations during 1QFY12.