Hubco is looking to investment worth $5bn
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KARACHI: Hub Power Company Limited (HUBC) is looking to investment worth $5 billion, where total equity portion of the company is around $402 million in four projects, said a Topline report.
The report said, projects under consideration of HUBC are China Power Hub Generation Company Pvt. Limited (CPHGC), a 46 per cent owned 1320MW coal based power plant, Thar Energy Limited (TEL), a 60 per cent owned 330 MW local coal, Thal Nova, a 38.3 per cent owned 330 MW coal based, and 8 per cent owned Sindh Engro Coal Mining Company (SECMC).
Equity portion of $402 million is expected to be raised through HBL equity loan of $208 million, commercial papers of $60 million, Non Bank TFCs of $50 million, Internal cash flows of $34 million and Right issue of $50 million. Out of this, Non Bank TFCs transaction will be completed in next 3-4 months.
Company’s issuance of 12.1 per cent right share to raise Rs 7 billion was part of its second round funding to finance incremental stake of 21.5 per cent in CPHGC, which require $119 million, the report said.
The CPHGC project has US$ IRR of 17 per cent, while other three projects have US$ IRR 20 per cent, few ppts higher IRR on other 3 projects is like an additional incentive to operate on local coal.
Management believes, downward tariff negotiation of old plants or RFO plants will not generate substantial savings for government as CPP portion is smaller part of overall RFO tariff.
Government is also considering issuance of second Sukuk of around Rs 200 billion to partly resolve circular debt. To note, in first issuance, HUBC got Rs 17 billion. Out of this, Rs 12.5 billion were paid to PSO.
New transmission line for coal projects is expected to start in 2021.
To counter circular debt problems, Government has started action against power thieves and investments in T&D sector. Cumulatively these actions have reduced T&D losses by 1.5 per cent or savings of Rs 40 billion are realized in last six months. As per management government can potentially reduce T&D losses by around 7-8 per cent. Further, tariff is also likely to increase, that will improve cash flows of Disocs.
These are managements forecast with assumption of 100 per cent payout from upcoming projects.
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