Hubco’s Narowal Energy finalises hybrid ‘take and pay’ tariff model

KARACHI: Narowal Energy Limited (NEL), a wholly owned subsidiary of Hub Power Company Limited (Hubco), has formally executed an amendment agreement with the government, finalising revised tariff terms under a ‘hybrid take and pay’ model.

The agreement, effective from November 1, 2024, was disclosed by Hubco, Pakistan’s largest independent power producer (IPP), in a notice to the Pakistan Stock Exchange (PSX) on Wednesday. The amendment follows a request from the PM Office task force to restructure the existing tariff framework.

Under the revised terms, changes have been made to the indexation mechanism for operations and maintenance (O&M), while the tariff for working capital costs and O&M expenses has been adjusted. The return on equity component will now be paid under the hybrid model, and the insurance premium tariff is capped at 0.9 per cent of the EPC cost.

The government has agreed to unconditionally withdraw arbitration under Arbitration Submission Agreements, while the Central Power Purchasing Agency (CPPA) will settle outstanding receivables as of October 31, 2024, within 90 days of cabinet approval. The agreement replaces the LCIA arbitration clause in the power purchase agreement (PPA) with Islamabad-seated arbitration under local laws.

Hubco recently reported a sharp 68 per cent year-on-year decline in net profit to Rs5.48 billion for the quarter ended December 31, 2024. Earnings per share fell to Rs3.25 from Rs11.78 in the same period last year. The company declared a cash dividend of Rs5 per share (50 per cent).