Hubco agrees to end power project early

KARACHI: Hub Power Company Limited (Hubco) announced on Thursday that it has signed an initial settlement agreement with the government to accelerate the termination of its power generation project.

“In response to a request from the task force constituted under the Prime Minister’s Office, and in the greater national interest, [Hubco] has initialled a negotiated settlement agreement for the early termination of its agreements, originally set to expire in March 2027. These agreements, related to the company’s 1,292 MW power generation project at Mouza Kund, Gaddani, District Lasbela, Balochistan, will now expire on October 1, 2024,” the company stated in a notice to the Pakistan Stock Exchange (PSX).

Under the terms of the agreement, the government of Pakistan (GoP) and the Central Power Purchasing Agency (CPPAG) have agreed to settle Hubco’s outstanding receivables by October 1, 2024. The company’s board of directors has approved the settlement and authorized the execution of a final agreement. Following Hubco’s announcement, Prime Minister Shehbaz Sharif confirmed the termination of existing agreements with five independent power producers (IPPs), including Hubco.

Zayan Babar, analyst at Optimus Capital Management, commented on the development, noting that Hubco’s base plant operations will cease as of October 1, 2024. This is expected to result in an estimated net cash realization of Rs8.6 per share, with an overall impact of Rs43 per share on the company’s valuation.

As a result of this settlement, consumers are expected to benefit from a reduction of Rs0.28 per kilowatt-hour (KWh) in FY25. Hubco will collect all outstanding receivables up to the termination date and settle its payables, resulting in a net working capital gain of Rs8.6 per share. While additional settlements, such as the first-fill issue amounting to Rs9.5.