EARLIER this year, the Hub Power Company signed a joint venture agreement with China Power International Holding Ltd, a wholly-owned core enterprise of the China Power Investment Corporation, to construct a 1,320MW imported coal-fired power plant at Hub, Balochistan.

Hubco CEO Khalid Mansoor told Dawn last Friday that the cost of the project would amount to nearly $2.4bn and it would be “one of the biggest private-sector investments in the country”.

“The coal project will pave the way for a much-needed shift of Pakistan’s current energy mix towards the more sustainable and affordable alternative energy resource,” Mansoor added. By virtue of this agreement, Hubco and the China Power International Holding Ltd (CPIH) would also jointly establish an ancillary coal jetty at the site.

“We would surely be looking forward to assistance from both the federal and provincial governments in the execution of the project,” the CEO said.

The company recently filed an application with the National Electric Power Regulatory Authority (Nepra) for a generation license for the two new 660MW power plants.

Hubco is targeting financial close of the new plant before June 2016, with the project likely to come online by 2020

The project will be developed via a special purpose vehicle, with Hubco providing 49pc of the equity and CPIH 51pc. As per the document, the company has suggested a 75:25 debt-to-equity ratio.

According to KASB Securities, Hubco is targeting financial close of the project before June 2016. “It is likely to come online by 2020,” an analyst reckoned.

Set up in 1994, Hubco is the country’s first and largest independent power producer (IPP). It was also the first IPP to go into expansion and set up the country’s maiden hydropower IPP. “Our previous biggest investment was $1.5bn and it was made in 1996,” Mansoor recalled.

As for the current operation conditions, he said the plant was operating at full capacity and it had posted one of its best results for the year ending June 30.

After the company’s sponsors National Power International Holdings B.V. and Xenel stepped out, the project passed into the hands of the Dawood group.

Hubco owns an oil-fired power station with an installed net capacity of 1,200MW at Hub and another of 214MW capacity at Narowal in Punjab. It also has a 75pc controlling interest in Laraib Energy Limited, a subsidiary that developed an 84MW Hydropower plant near the New Bong Escape, 8km downstream from the Mangla Dam in Azad Kashmir.

“Hubco is looking to offload a portion of its holdings in its Narowal project, which is likely to improve its cash position and help it meet its capital expenditure requirements in FY17,” noted BMA Capital Management Ltd analyst Jehanzaib Zafar in a research report.

For fiscal year 2015, the Hub Power Company posted an unconsolidated after-tax profit of Rs9.85bn, up 50.4pc from FY14. Its earnings-per-share worked out at Rs8.51.

However, the company’s revenues had dropped 18.7pc to Rs131.5bn. But gross profit increased kkpc to Rs14.4bn from Rs11.7bn in FY14, and gross margins rose to around 11pc from 7.25pc due to a substantial reduction in its operation and maintenance costs, aided by the big drop in furnace oil prices in the year.

Hubco is listed on the Karachi, Lahore and Islamabad stock exchanges, and its global depository receipts are listed on the Luxembourg Stock Exchange. The company’s Rs10-par value share closed last Friday at Rs102.94.

Published in Dawn, Business & Finance weekly, October 12th, 2015

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