KARACHI, Nov 5: At a meeting in Karachi on Monday, the Board of Directors of Hub Power Company Limited, recommended final dividend, subject to lenders’ approval, at 22 per cent (Rs2.2 per share) for the year ended June 30, 2001. In addition to the interim at 17 per cent (Rs1.70 per share) already announced, the aggregate payout works out to 39 per cent (Rs3.9 per share).

In a statement released later in the evening, a spokesman for Hubco termed it “a positive development” and “good for local and international investment climate in Pakistan”.

The market had been looking forward to the dividend from Pakistan’s largest Independent Power Producer (IPP); but what came out of the Board room on Monday, was quite clearly below the general expectations. “Market was visualizing a final cash dividend in the region of Rs3 to 4”, says Mohammed Sohail, Research Head at securities firm, Invest Cap. The payment of final dividend has also been made conditional on the approval by lenders, which also was not generally expected; though the company argued that the condition was “in accordance with the Company’s Agreement”. And finally, some analysts had been making bold forecasts of an interim dividend for the on-going year to end-June 2002. That also was not to be.

The Hubco stock, which began the day’s trading at KSE on Monday at Rs23.20, met with the expected investor battering; it closed at Rs22.05, prevented from further fall by the 5 per cent circuit breaker rule.

Annual General Meeting of the company has been called on December 29, at Islamabad. The board stated that subject to the lenders’ approval being received by the company prior to December 29, the total dividend to be approved and declared by the shareholders at AGM would be 39 per cent, inclusive of the interim already announced. Interim had been announced in May 2001, for which lenders’ approval was received in October and the company said on Monday that it “expects to make the payment towards the end of November 2001”. The Board stated that total dividend (less interim) would be paid in January 2002 to the shareholders whose names appear in the Register of Members on December 19, 2001. Book closure is from December 20 to December 31, both days included.

Hubco also unveiled on Monday, the profit and loss account; balance sheet; chairman’s review and directors’ report for the year ended June 30, 2001.

Although the dividend fell short of market expectations, the financial numbers came close to analysts’ forecasts. The company posted net profit amounting to Rs10.859bn for the year ended June 30, 2001, which represented a turnaround from net loss of Rs6.985bn the year ago. Directors attributed it to the reversal of provision which was no longer necessary in the light of the Settlement Agreement (SA). On December 17, 2000, a SA was signed between the Company, Wapda and the Government, to resole in a negotiated settlement the tariff dispute, which the company chairman Mohammed A. Alireza terms was “one of the most difficult commercial disputes in the history of Pakistan”.

The accounts show that against the provision of Rs13.445bn last year, the company made a reversal amounting to Rs5.326bn; all of the amount earlier in dispute with Wapda. Turnover for the year under review was up 14 per cent to Rs29.086bn, from Rs 25.601bn last year. Operating costs ran high by 38 per cent to Rs20.622bn, from Rs14.886bn and the gross margin fell to 29 per cent, from 42 per cent. Directors stated that the amounts were higher than earlier year, due to the cumulative effect of the revised tariff charged under the SA, the continuous rise in price of Residual Fuel Oil (RFO), higher electricity despatch by Wapda at 68 per cent, from 61 per cent last year and the retirement of debt. The RFO price, as set by PSO, recorded 15 per cent increase during the fiscal year from Rs9,680 to Rs11,150 per ton.

During the year, Plant’s Actual Capacity Available was 85.3 per cent, which the company claimed was higher than international standards for this class of plant.