HUBCO Plans to Convert Two Power Plant Units to Coal

Hub Power Company (HUBCO) is planning to convert two units of its base plant to coal from furnace oil and sell electricity to K-electric.

“Management explained that the cost of electricity will be cheaper for K-electric instead of setting up a new plant as HUBC base plant has repaid its debt,” noted a HUBCO’s analyst briefing report prepared by Insight Securities.

It is to be noted that the 1,208MW Hub Plant consists of four units.

Hub Power Company held an analyst briefing on Wednesday to discuss the financial performance for 9M FY20.

HUBCO’s consolidated profits clocked in at Rs. 18.90 billion, up by 110% as compared with Rs. 9 billion in the same period last year.

The earnings per share (EPS) for the nine-month period in FY20 stood at Rs. 14.07 as compared to Rs. 7.16 last year. This was mainly attributable to rupee’s depreciation due to the exchange rate indexation mechanism in determining profitability, lower overhaul and maintenance charges, project management income from Thar Energy Limited (TEL) post-financial close, and commencement of share of profits from China Power Hub Generation Company (CPHGC).

Plant availability for CPHGC, Hub base plant, Narowal plant, and Laraib plant remained 99%, 90%, 96%, 99% respectively for 9MFY20 as against 0%, 84%, 95%, 100% in the same period last year. While the load factor stood at 58%, 0.4%, 21%, 44% for CPHGC, Base plant, Narowal plant, and Laraib plant respectively.

The report noted that higher taxation for the quarter was a function of higher-income recorded by HUBC on account of services provided to Thar Energy Limited post-financial close.

Due to the COVID-19 pandemic, force majeure event was issued by engineering, procurement, construction (EPC) contractors of both TEL and ThalNova Power Thar Pvt Ltd (TNPTL), said the company.

Construction is in progress albeit at a slow pace.

Management expects that TEL would be commissioned in Q2 2021 as 55% of the total construction has been completed. Similarly, TLNPL is expected to be operational in Q12022, as 23% of construction is completed until now.

Regarding the IPP report by Commission formed by Government, the management termed it a unilateral report as the IPPs view has not been taken by the commission. Moreover, management refuted exorbitant profiteering allegations by citing that the Return on Equity (ROE) component constitutes a little part of CPP while inflated profits are a function of debt repayments included in revenues.

HUBCO’s management has expressed conditional consent to become part of the government’s efforts to bring down electricity prices contingent upon many other steps beyond the scope of IPPs i.e, limiting transmission and distribution losses.

Hub Plant is the first and largest Independent Power Producer (IPP) in Pakistan to be financed by the private sector in Southern Asia and one of the largest private power projects.