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October 19, 2016

Hubco mulls power project’s capacity cut

Business

October 19, 2016

China-Pakistan 660x2MW coal-fired plant

KARACHI: Hub Power Company is mulling to slice the planned 600x2MW coal-fired project in Hub to half as the majority stake-holder Chinese partner showed willingness to start the production ahead of its planned date on the government’s persuasion.

Hubco has 26 percent stake in the joint venture company China Power Hub Generation Company (CPHGC), which has a generation licence for a 660x2 megawatts coal-fired plants in Hub in Balochistan. CPHGC is a venture of the Hubco and China Power International Holding Limited (CPIHL).

“… CPHGC, which is undertaking 2x660MW imported coal based power project at Hub site, has been in discussion with the government on some potential improvement in the required commercial operation date of the 2x660MW project,” Hubco said in a statement issued to the Pakistan Stock Exchange on Tuesday. 

“The potential implication of which could be project getting reduced to 1X660MW, which would impact the project.”

The statement said CPHGC is awaiting finalisation of the decision from the government. It said the power purchase agreement (PPA) and the implementation agreement (IA) of the project have not been yet been executed, “which were required to be signed by October 11, 2016 under the terms of letter of support issued by the Private Power Infrastructure Board to CPHGC.”

“However, the partners led by China Power International Holding, which has 74 percent stake in CPHGC, are making all-out efforts to resolve aforementioned timing issue with the government,” it added.

The announcement is the latest sign of a trouble in Pakistan’s wrecked energy sector, where logistical bottlenecks, red-tapism in decision making and weak infrastructure have eroded investor interest.

Pakistan's long-term energy plans have, however, been boosted by the China-Pakistan Economic Corridor (CPEC) project, which has spurred interest from foreign investors. Chinese companies, under the CPEC, planned two-thirds of the $46 billion in energy projects. Government officials said the country had secured 12,000 MW of future generation from foreign sources in 2015.

Analyst Hashim Sohail at the Topline Securities said the Chinese investors are in the process of negotiations with the government “in order to expedite the completion and improve the required commercial operation date.”

“Due to the (ongoing) discussions… the implementation agreement and power purchase agreement have not yet been signed and executed, which was earlier expected to be signed in October,” Sohail said.

“As per our initial discussions, the management is in advance stages of the negotiations with the government and is of the view that the ongoing discussions will bode well and the project size will not be affected.”

Sohail said the management is confident that the 2x660MW project will achieve financial close by January 2017, “and the IA and PPA will be signed and finalised within the month.

Hubco has earlier said it can increase its stake to a minimum of 43 percent and maximum of 49 percent from the current stake of 26 percent, some 200 days before the commercial operation date.

“In the annual general meeting held today (Tuesday), the management has indicated that it may opt for the mentioned option to increase its stake,” Sohail said.

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