February 25, 2007	Sunday	Safar 7, 1428

KARACHI, Feb 24: The Hub Power Company Limited (Hubco) last week forwarded to the Private Power and Infrastructure Board (PPIB) the pre-feasibility documents for setting up a 210MW new power plant.

The company already operates the country’s biggest independent power plant (IPP) with net capacity of 1,200mw located in tehsil Hub, district Lasbela, Balochistan.

A senior official confirmed that all formalities on the part of the company had been completed and he expected PPIB/Nepra to extend the necessary Letter of Support (LoS) within the next 15 days to a month. He said that for fast-track projects, the upfront tariff was 11.9713 cents, but the company would expect an upward revision in case other competitors were offered higher tariffs. At least five other parties are understood to be looking up for setting up IPPs of their own.

Chief Executive of Hubco, Mr. Javed Mahmood, in answer to a query said that world-wide it was the sellers’ market for power generation machinery since it was the manufacturers who dictated costs and terms. He said that Hubco would have edge in acquisition as well as delivery due to the good reputation that the company and its parent enjoy in skill, efficiency and reliability.

The CEO of Hubco would not disclose the location of the new plant but hinted that it would neither be in Karachi, nor in Balochistan. He also did not say what the cost of the project would be. “It is material information and would be disseminated to all at the right time,” he said. But Mr. Mahmood emphasised: “We are absolutely committed to Pakistan and would like to expand our activities in this country.”

In his annual report for the year ended June 30, 2006, issued on Aug 10, 2006, Chairman of Hubco, Mohammed A. Alireza wrote: “The company is looking forward at active participation in the competitive bidding for the three power projects (in Uch 2, Faisalabad and Lahore) launched by the government last year for which we are already qualified.”

The chairman also said that the company in association with other international companies had submitted documents for pre-qualification in the forthcoming privatisation of Sui Southern Gas Company (SSGC).

The Hubco CEO, Mr Mahmood observed that in case of a new IPP, the pre-development costs were very high. So the question is: Does Hubco has the means to be able to finance all its ambitious projects?

Analysts at Arif Habib Securities in their February 8 report reviewing company’s HY07 accounts, wrote: “Hubco is a cash rich company and profit distribution to its shareholders is based on the free cash flows of the firm (after retiring the financial obligations) instead of following the conventional accounting approach (based on earnings)”

The analysts noted: “As per FY06 accounts, the company has low-leveraged balance sheet with long-term debts accounting for 31 per cent of balance sheet items and the debt to equity ratio at 45:55, hence providing the company ample opportunity for debt financing projects.”

But most analysts thought that the company would not want to rely on just one but opt for a mix of debt and equity.