KARACHI: Hub Power Company Limited (Hubco) said on Friday China Power Hub Generation Company (CPHGC) has withdrawn the encashment notice of a Standby Letter of Credit (Standby LC) facility worth $150 million against the company.
“We are please to inform that the encashment notice dated November 23, 2022 has been withdrawn and the Standby Letter of Credit has been extended on mutually agreed terms,” Hubco said in a statement to the Pakistan Stock Exchange (PSX).
Hubco and China Power International Holdings Ltd are joint-venture partners in the 1,320-megawatt power plant based on imported coal.
Last month the CPHGC served an encashment notice of $150 million on the bank that issued a SBLC on behalf of Hubco.
Analysts were of the view that the SBLC was to expire on November 23, and required prior renewal. If the SBLC was not renewed 15 days prior to the expiry which was the case, CPHGC’s lender have the right to call upon the SBLC.
A Standby LC is commonly used to cover the risk of a contract party not fulfilling agreed obligations, for instance, failure to pay or deliver. It can be used in open account trade as well as a complement to collections and documentary credits.