KARACHI: The government is expected to clear overdue payments of independent power producer Hubco in cash and bonds, according to a filing with the stock exchange.
Hub Power Company Limited (Hubco) and the Central Power Purchasing Agency (CPPA) initialed the agreement under which the CPPA is expected to pay Hubco’s receivables in two installments of 40 percent and 60 percent, respectively, within 30 business days, said a notice to the bourse. The initial 40 percent settlement is expected to take place in the form of one-third in upfront cash and the remaining two-third in the form of financial instruments – Pakistan investment bonds and sukuk.
Similarly, the second installment of 60 percent is expected to be cleared after 6 months in the same proportion as the first installment.
The draft agreements will soon be presented before the federal cabinet. The terms of the agreement are subject to approval by the cabinet and the board of directors of Hubco.
Moreover, Hubco agreed to reduce fixed operating costs by 11 percent whilst keeping the existing arrangement of indexations. For project company equity, the PKR/USD exchange rate has been fixed at Rs168.6/USD and August consumer price inflation. However, the existing arrangement under the current power purchase agreement will apply for future billing until PKR/USD exchange rate goes above Rs168.6/USD.
In addition, Hubco and the government will use their best efforts to achieve pre-mature termination of the power purchase agreement (PPA) of Hubco’s base plant. The government will save on capacity payments, which have to be paid to Hubco for the remaining period of the PPA, while Hubco will get monetary benefit and get rid of the plant, which is no longer required in the grid.
Last week Narowal Energy Limited – a wholly-owned subsidiary of Hubco, also initialed an agreement with the CPPA agreeing that the return on equity rate will be changed from the current rate of 15 percent in USD to 17 percent in PKR, with no future USD indexation and the USD equity will be converted to PKR using exchange rate PKR/USD of 148. The plant will move to the ‘take and pay’ basis after implementation of competitive trading arrangement.
A trader works on the floor of the New York Stock Exchange , New York City. — AFP/FileNow that US interest rates...
A general view of al-Atba district of the Egyptian capital Cairo. — AFP/FileCAIRO: Egypt appears on track to break...
A man selling vegetables waits for customers at his makeshift stall at Empress Market in Karachi. — ...
A woman shops in a wet market in Kuala Lumpur, Malaysia. — Reuters/FileKUALA LUMPUR: Malaysia's economy grew faster...
The Pakistan Business Forum logo. — Facebook/pbf.limitedISLAMABAD: The Pakistan Business Forum on Saturday called...
US dollar banknotes are seen in this illustration taken March 10, 2023. — ReutersKARACHI: The government plans to...