KARACHI, Sept 19: Hub Power Company Limited (Hubco) said that the company had obtained lenders agreement so that dividends might be pre-approved by the lenders before they get to be declared by the board.

Company chairman Mohamed A. Alireza stated in the annual report for the year ended June 30, 2002, released this week, that in order to avoid having to declare future dividends subject to lenders’ approval, the company had negotiated an agreement with lenders which would enable the company to obtain lenders pre- approval for dividends, “providing that events or potential events of default under the company’s agreements with lenders do not arise in future”.

The step was understood to have been taken to curb unnecessary speculation on whether the lenders would approve or disapprove a dividend after the board had declared the same. It also looks to be aimed at precluding the possibility of a repeat of the November 20 last year’s incident, when a false fax message was received and announced by the stock exchange. The message purporting to have originated from Hubco said that the lenders had approved the dividend, though the company later denied having sent such a message.

The other important information conveyed by the chairman’s review was regarding the transformers. It said that in May this year, Unit 4 Generator Transformer (GT) went out of service due to an electro-mechanical fault. Investigation were underway to reach the cause of the failure. Unit 4 returned to service on June 30, 2002. when the spare transformer, which the company had decided to procure in 1999 to meet any eventuality of the kind, was installed in place of the damaged transformer.

“The company successfully brought the Unit back in production in the shortest possible time without incurring any liquidated damages,” the chairman stated, expressing gratitude to Wapda for its assistance with the work, which was jeopardized due to reluctance of some overseas expertise coming to Pakistan on security concerns. The chairman affirmed that the damaged GT was insured. However, due to the incident and another similar GT failure in 1999, insurers declined to extend coverage for the remaining two Ansaldo GTs which were currently in service on Units 1 and 3. The Hubco chairman said that the company had decided to replace those GTs; the first replacement GT would be available in February 2003 and the second in August 2003.

A note to the accounts elaborated that an order had been placed with Toshiba Corporation, Japan, and the first of the two transformers would be ready for shipment in December this year and the second one in June 2003. The capital cost to be incurred on the two transformers has not been noted in the annual report. That possibly would be discussed at the company’s annual general meeting, scheduled to be held on October 8 in Islamabad.