KARACHI: The Hub Power Company (Hubco) said on Thursday it intends to provide bank guarantees of up to $476,000 in favour of Eni vendor companies on behalf of Prime International Oil and Gas Company Ltd, a joint venture with 50 per cent shareholding.

Hubco is in the process of acquiring the business of Eni, one of the seven global supermajor energy companies, in Pakistan. It’s carrying out the transaction through Prime International in which Hubco controls 50pc shares through its subsidiary Hub Power Holdings Ltd (HPHL). The rest of shares in Prime International are owned by Eni’s local employees via EBO Group.

Shareholders of Hubco approved a resolution in their annual general meeting on Oct 5 that allows the company to extend the bank guarantees either directly or through HPHL.

As part of the exploration and production sector strategy, the joint venture is looking for growth opportunities in fields that it already owns as well as new fields based on government auctions.

Speaking to Dawn, Standard Capital Securities Strategist Faisal Shaji said Pakistan’s sedimentary basins — a low area in the earth’s crust containing oil reserves — are “high risk”.

“The probability of the existence of reserves is low. The situation isn’t too tempting for supermajors to stay in the local market. Only high-risk zones are left while the low-risk ones are long gone. Eni had little reason to stay,” he said.

In the latest financial accounts, Hubco records its shareholding in Prime International as a long-term investment at Rs467.3 million.

Under the sale and purchase agreements (SPAs) between HPHL and EBO Group, Prime International is required to complete certain conditions precedent — events that must come to pass before a contract becomes effective — within 18 months of SPAs (March 2021). These conditions included the payment of a deposit and obtaining regulatory approvals from the government authorities.

The deposit-related condition has been met while the final approval from the Director General Petroleum Concession is awaited, according to Hubco’s latest financial accounts.

Hubco is the country’s oldest and largest independent power producer with a total power generation capacity of 3,251 megawatts with plants in Balochistan, Punjab, Azad Jammu and Kashmir and Sindh.

Mr Shaji said Hubco is in need of diversification as its furnace oil-fired base plant of 1,292MW has been operating on a low load factor.

Published in Dawn, October 7th, 2022