Karachi, In a recent analyst briefing, Hub Power Company Limited (HUBC) shared insights into its financial performance, growth strategies, and the challenges it faces, particularly in relation to circular debt and power transmission limitations. The management's discussion highlighted several key points including the disbursement of dividends from its joint venture, debt management plans, and the focus on renewable energy projects.
According to AKD Securities Limited, HUBC received its first dividend of US$32 million from its joint venture with China Power Hub Generation Company (CPHGC) in November 2023, marking a significant financial milestone. The company plans to use future dividends from CPHGC to pay down debt incurred from the Thar Energy and Thal Nova projects, aiming to adhere to the financing documents' milestones.
In terms of growth, HUBC remains committed to expanding its generation capacity through renewable sources, with several wind and solar projects prequalified, including Karachi Electric's 200MW wind/solar hybrid project and two projects totaling 270MW for the Sindh Solar Energy Project. Furthermore, a Memorandum of Understanding has been signed with Karachi Electric (KEL) for the potential conversion of HUBCO's base into a Thar Coal project post-March 2027, with regulatory and technical discussions ongoing.
The briefing also addressed the persistent issue of circular debt, with management expressing the expectation for the Government of Pakistan to maintain the debt at levels agreed with the International Monetary Fund (IMF). However, they emphasized the need for better planning and measures to curb theft, suggesting that merely managing the outstanding debt through price increases is not a sustainable solution.
On the matter of the tariff true-up for CPHGC, while currently under tribunal review, the management is hopeful for a favorable decision. HUBC's policy remains to distribute available surplus cash to shareholders regularly.
The company also highlighted the constraint in power transmission from the Southern to the Northern region, affecting the load factors of south-based power plants. Additionally, the under-funded status of the Energy Revolving Fund Account, created in 2022, was noted as a concern, particularly among Chinese partners.
Finally, the commencement of exploration activity from the newly awarded S.W Miano is still in the planning stages, with approval pending from the Director-General of Petroleum Concessions (DGPC).