During FY19, power generation from furnace oil declined by 60 percent year-on-year, where its share in total power generation was only 7 percent in FY19 versus19 percent in FY18. As a result, IPPs that run on fuel oil witnessed a significant decline in the load factors. Hub Power Company Limited (PSX: HUBC) witnessed the largest decline in load factors for its base plant by over 40 percent in FY19.

The effects of weak operating performance can be seen in the company's recently announced financial performance for the last fiscal year. HUBC's revenues were seen shrinking by 42 percent year-on-year due to lower electricity dispatches to the power purchaser despite significant currency depreciation that lifts the price component of the revenues. While its base plant at Hub operated at about only 8 percent of its capacity, the load factors for its other plant at Narowal and Laraib (hydel) were also lower by 30 percent and 8 percent year-on-year respectively.

Lower generation resulted in lower operating costs and hence HUBC saw an 18 percent year-on-year improvement in its gross profits, while gross margins doubled due to lower base/denominator. However, the company's bottom-line posted a flattish growth of only 2 percent year-on-year, and apart from slow growth in revenues, the restriction in earnings came from higher finance cost due to higher interest rates and higher capital expenditure largely coming from coal investments. This was also the reason why it has been skipping dividend announcements. Moreover, the cash it received from the first Energy Suck was used to pay off PSO's payables.

HUBC has been banking on coal to reverse the declining trend in revenues.

This can be seen from its investments in coal-based power generation plants, which is likely to ease its liquidity situation in the long run. The latest of the early harvest projects has been by Hub Power Company Limited where its joint venture with China Power International Holding (CPIH) by the name of China Power Hub Generation Company (Pvt) Ltd (CPGHC) for a 1320-megawatt (2×660) imported coal-fired power plant achieved the commercial operations date (COD) in August 2019.

HUBC has also ventured into indigenous coal by acquiring 37 percent stake in ThalNova PowerThar (Pvt) Limited through its subsidiary, Hub Power Holdings Limited for a 330MW coal-fired power plant at Thar coal mine.

It is also constructing a 330-megawatt coal power plant with Thar Energy Limited, and another one with Sindh Engro Coal Mining Company at Thar.