The Hub Power Company Limited (Hubco), Pakistan’s first and largest independent power producer, operates three plants with two additional power plants and a coal mine in the pipeline.
The company currently commands a combined power generation capacity of over 1,601 megawatts: The Hub Power Plant with an installed net capacity of 1,292MW at Hub, Balochistan; Narowal Energy Limited in Punjab with 225MW capacity and Laraib Energy Limited, a subsidiary that developed the first 84MW hydropower plant in the country.
The company is set to add another 1,650MW by FY2021. “The market is yet to appreciate these developments owing to short-term concerns on declining furnace oil-based generation,” says Farheen Irfan, power sector analyst at Elixir Securities.
‘The market is yet to appreciate developments owing to short-term concerns on declining furnace oil-based generation,’ says Farheen Irfan of Elixir Securities
On June 30, 2018, consolidated total assets of Hubco stood at Rs186 billion. The company’s sales net of tax hit the Rs100bn mark. Outstanding shares in Hubco stand at 1,157m.
At the last count on June 30, a total of 12,457 local investors had 15.8 per cent held shares in the company. As many as 81 financial institutions commanded 16.46pc of company stock while eight associated companies had 37.8pc of the company equity.
At present, significant shareholders included Mega Conglomerate (Pvt) Limited with 19.4pc of the company equity and Allied Bank Limited with 9.7pc shares. At the close of trading at the Pakistan Stock Exchange last Monday, the share in Hubco was trading at Rs90.27, which valued the company at Rs104bn.
The Hub Plant generated 5,201GWh of electricity during FY18. Capacity utilisation of the plant declined to 50pc in FY18, from 65pc in FY17. Sector watchers attributed this to developments in the power sector as new capacity additions of two hydel power plants — Neelum Jhelum-969MW, Tarbela 4th Extension-1,410MW — and three LNG plants — Bhikki-1,180MW, Haveli-1,231MW and Balloki-1,223MW — became fully operational.
Part of the decline in Hubco’s capacity utilisation was also attributed to abrupt closure of furnace oil based plants in November 2017 by the outgoing government as a means to control oil imports.
Among upcoming projects, the analyst at Elixir Research mentioned the China Power Hub Generation Company(CPHGC) which is undertaking construction of a 1,214MW coal-based power plant project, in which Hubco is currently increasing its stake to 47.5pc from the earlier 24pc.
However, post financial close the company will hand over a 1.5pc stake to the Government of Balochistan. Hence, Hubco will have a 46pc stake in the project’s earnings.
As per the latest accounts, the company achieved financial close in January 2018 and targeted Commercial Operation Date (COD) by August 2019. In the fall of 2015, when the joint venture agreement with CPHGC was first signed for construction of the imported coal-fired power plant, Mr Khalid Mansoor, the company CEO 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”.
In the FY18 report, Mr Mansoor states that despite the negative impact of circular debt, with Hubco’s current outstanding dues standing at Rs95bn, the company aimed to ensure that the limitation not impact business performance.
Elaborating on the topic, the company chief mentioned to this writer that though of concern, circular debt does not dry up the company’s liquidity 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.
“With the fast-paced development of our growth projects, we are committed to serving the development needs of Pakistan with the addition of 1,650MW in our installed capacity,” Mr Mansoor’s annual report reads.
The FY18 publication further adds that the execution of 2x660MW imported coal-based projects with integrated jetty at the Hub site was progressing according to plan with Commercial Operation Date targeted by August 2019.
By investing 8pc in the Sindh Engro Coal Mining Company (SECMC), which was developing an open cast coal mine in Thar Block II, the company aimed to boost Pakistan’s energy capacity by utilising the country’s indigenous natural resources. The project’s commercial production commencement is expected in June 2019.
To further strengthen the strategic investment, Hubco obtained an option to develop a 330MW mine-mouth Thar lignite fired power plant in Phase II of the SECMC Mining Project. “With this ambitious plan we will own, operate and manage 10,000MW by 2025,” Mr. Mansoor said.
Going forward analysts anticipate further reduction in reliance on furnace oil power plants due to government measures to curtail import bill and new capacity additions (coal/LNG) to the national grid.
Published in Dawn, The Business and Finance Weekly, September 24th, 2018