Hub Power Company Limited owns an oil-fired power station with an installed net capacity of 1,292MW at Hub in Balochistan and another plant of 225MW capacity at Narowal in Punjab.

It also has a three-quarter controlling interest in Laraib Energy Limited, a subsidiary that developed the first 84MW hydropower plant in the country. “Hub Power is indeed Pakistan’s first and largest independent power producer (IPP)” Hubco CEO Khalid Mansoor tells this writer.

But what lies ahead is even more exciting. “The company would double its capacity as a result of ongoing expansion projects”, he says, alluding to Hubco’s strategic stake in the 1,320MW imported coal fired power plant, which has now entered the execution phase.

In the fall of 2015, when the joint venture agreement with the China Power Hub Generation Company Limited (CPHGCL) was first signed to construct a 1,320MW (2x660MW) imported coal-fired power plant at Hub, Balochistan, Mr Khalid Mansoor informed this writer that the cost of the project would amount to around $2.4bn and would be “one of the biggest private-sector investments in the country”.

An ancillary coal jetty is also being set up at the site, which is currently under construction.

“The company plans to expand power generation capacity up to 6,000MW by 2028 and also convert the existing plant to coal by 2032”

Another Hubco project, 330MW Thar coal power plant, is targeted to achieve financial close in Sept this year. The plant is based on Thar lignite coal. The targeted Commercial Operations Date (COD) of the above projects is Aug and Dec of 2019.

“The company plans to expand power generation capacity up to 6,000MW by 2028 and also convert the existing plant to coal by 2032”, says an energy sector watcher.

Hubco offered 30pc strategic shares from its wholly-owned 330MW local coal based power plant, Thar Energy Limited (TEL), to Fauji Fertiliser Company Limited (FFC) and another 10pc equity interest in the project to the China Machinery Engineering Company (CMEC) — the EPC Contractor for the TEL Project — taking its total divestment to 40pc.

Along the years, the IPP has been at the forefront in developing coal-based power plants in order to benefit from lower generation cost and fast commissioning. The company CEO says: “The coal projects will pave the way for a much needed shift of Pakistan`s current energy mix towards the more sustainable and affordable alternative energy resource”.

Hubco also has an 8pc strategic investment in Sindh Engro Coal Mining — a joint venture between the government of Sindh, Engro Powergen, Thal Limited, House of Habib, China Machinery and Engineering Corporation (CMEC) and Hubco — to develop a coal mine in Thar (which has the seventh largest reserves of coal in the world).

“As the project is in the list of the China Pakistan Economic Corridor (CPEC) priority projects, it has the first right of option to the available coal mine, which we intend to exercise”, says the Hubco CEO. The project is expected to achieve financial close in Sept.

Hubco undertook the demerging of its 225MW Narowal plant into a separate legal entity, ‘Narowal Energy Limited’ (NEL). Sector analysts presumed that Hubco had offloaded a portion of its holdings in its Narowal project to improve its cash position and help meet its capital expenditure requirements. Mr Mansoor says that no decision regarding an Initial Public Offering (IPO) in the project had been made so far.

As for core operations, the Hubco CEO expressed satisfaction saying that the plant was operating at full capacity and all of the power produced was sold to the national grid.

Mr Mansoor remained unruffled on the mention of circular debts. “Hubco, Narowal and Laraib collectively hold outstanding energy dues from the government amounting to Rs70bn”, he says. But mentions that it does not dry up liquidity for the company as financial institutions and banks do not hesitate to open up credit lines for Hubco, given the company’s record of never having defaulted on its debt.

Talking about other projects, the CEO says that Hubco has taken over Operations and Maintenance (O&M) of the Hub Plant, which was previously outsourced, resulting in a steep decline in O&M expenses.

Outstanding shares in Hubco stand at 1,157m. At the close of trading at the Pakistan Stock Exchange (PSX) last Wednesday, the share in Hubco was tagged at Rs128.94, which works out to the company’s market capitalisation at Rs149bn.

The company CEO affirmed that the market capitalisation of the company had grown 135pc in three years since 2013, which he attributed to the rise in stock price on the back of its consistent performance and regular stream of dividend payouts.

Published in Dawn, Economic & Business, April 17th, 2017