KARACHI - Hub Power Co (Hubco) has registered a strong earnings growth of 45pc on year-on-year basis in FY09. Despite the incidence of the circular debt crisis imposing a burden on the companys liquidity, the company declared a final dividend of Rs2/share to bring the total dividend to Rs.3.15/share in FY09. The top line of HUBC increased by a massive 33pc to Rs82.78b in FY09. The increase was on the back of an escalation of 15pc in the number of units generated by the IPP and thus the variable cost of such generation passed on to WAPDA under the Energy Purchase Price (EPP). Secondly, the increase in the fuel expense by 35pc YoY. The increased Pakistani Rupee depreciation against the USD up to 27pc, coupled with US CPI, both of which the Capacity purchase price (CPP) component of the revenue. Moreover, the interest charged on amounts overdue from WAPDA at SBP discount rate plus 2pc per anum, the overdue amount standing at over Rs. 40bn on June 30 2009. Both the increased fuel cost and augmented generation level along with interest charged on overdue payables to PSO on account of delayed payments (charged at SBP discount rate + 2pc) pulled up the cost of sales simultaneously, the head increasing by 33pc YoY in FY09. Gross margins for Hubco declined by 7.4pc in FY09, however, this does not suggest a decline in profitability as this was merely on the back of augmented revenues, having increased on the back of increased fuel cost passed on to WAPDA. Whereas, according to the report, exchange gains pulled up the other income head by 31pc, the impact of this was more than offset by a 25pc increase in administration expenses. Finance cost for HUBC increased by a minimal 7pc, as the IPP, increased its reliance on delaying payments to PSO, rather than short term borrowings. With the finance ministry having announced the issue of Rs100b worth TFCs, it is expected that Hubcos profitability will improve and go forward. The expected earnings to increase by 70pc in FY10 as the increase in the ROE component take effect. This will be further complemented by the earnings from the Narrowal expansion which is expected to come online in Mar-10.