KARACHI - Due to circular debt problem, the receivables from WAPDA of HUBCO have risen to Rs 43 billion as of June 2009 (overdue amount Rs38 billion). Consequently, this situation forced Hubco to withhold payment of Rs37b to PSO, a major oil supplier to the company, according to the financial results announced by HUBCO. Hubco also announced its full year FY09 EPS of Rs3.27, up 45 per cent year-on-year. The company announced a final cash dividend of Rs2.0/share, which was in addition to Rs1.35 already paid in 1HFY09. During FY09, earnings stood at Rs3.8b (EPS Rs3.27) versus Rs2.6b (EPS Rs2.25) in FY08. This increase was mainly attributed to currency devaluation, generation bonus and higher tariff profile. The company also announced Rs2 per share cash dividend with the results taking cumulative dividend to Rs3.35/share for FY09 (payout ratio stood at 102pc). Going forward, it is expected that a fairly stable dividend stream, as the circular debt issue is likely to settle forever by the end of August 2009 due to IMF pressure on government. It is noteworthy that the financial expenses rose by 7pc to Rs2b; led by higher short-term borrowing. However, mark-up on WAPDAs overdue receivables somehow mitigated the impact of higher financial charges. During 4QFY09, the company availed a long-term loan of Rs5b for Narowal project, which was partly used to pay off short-term borrowings. It is believed that higher dividend payout depicts a management optimism of resolution of circular debt by the end of August 2009. HUBCOs 220MWs Narowal oil-fired power project achieved financial closure in March 2009, while, hydro project i.e. Laraib Energy of 84MW (subsidiary of Hubco) is expected to be completed by September 2009. According to company estimates, the Narowal project is expected to come online by March 31, 2010. The company entered into Power Purchase Agreement for 25 years on November 20, 2008, with WAPDA. The estimated total project cost is $285m with a debt to equity ratio of 70:30. The entire debt has been funded locally. On the other hand, the Power Purchase Agreement (PPA) of Laraib Power plant has been initiated and the amended tariff has been approved by ECC at Rs6.84/kWh. Hubco has 75pc equity interest in this project. The company is financing the project injection through local banks and International financial institutions. Moreover, the company also stated that O&M agreement with International Power Global Development has been renewed for further 12 years.