Hubco seeks gas for new plants

ISLAMABAD: Hub Power Co, the country’s biggest independent power producer, wants a long-term gas supply guarantee from the government before it builds power plants near Karachi, said its chief executive.

Hubco is “very keen” on building the gas-fired power plants near the port city, and is in talks with the Pakistan Private Power & Infrastructure Board to ensure gas supplies, said Vince Harris. “This is going to be a major investment for us. But we’ll only go ahead with this project when we’ve secured long-term gas supplies,” he said.

Pakistan is trying to attract fresh investment in the power sector to meet a supply shortfall and is encouraging companies to build cost-efficient gas-fired power plants. The country’s state-run gas distribution companies, the only source of gas, are likely to face a shortfall from 2006 and may not be able to meet extra demand.

Pakistan’s power demand is rising six percent to seven percent a year, and it will need an additional 5,000 megawatts of power between 2007 and 2012, according to government estimates. Mr Harris said UK-based International Power (IPR), which owns 20.7 percent of Hubco, has expressed an interest in the proposed plants.

Hubco has submitted letters of intent to the government for the two power plants which will have a capacity of 300 megawatts and 600 megawatts, respectively. The smaller plant is expected to cost $180 million, and the bigger $360 million, said Harris. Hubco now operates a 1,200-megawatt thermal power plant near Karachi, which supplies power to just one customer, the state-run utility Water and Power Development Authority, better known as Wapda.

Mr Harris said the impression that International Power wants to liquidate its investment in the project is incorrect. “As far as I understand, they’ve intended to be a long-term investor in Pakistan,” he said.

International Power last year sold five percent of its shareholding in Hubco in line with its policy of selectively monetising investments, generating 21 million pounds in cash. Mr Harris said Hubco’s dividend is likely to remain stable at current levels, with a possible increase in two years’ time when a senior loan is due to mature.

“Investors can expect a reliable dividend stream from Hubco,” he said. Hubco pays dividends twice a year. Hubco Thursday paid an interim dividend of Rs 1.6 a share for the first half of the fiscal year ended Dec. 31, down 42 percent from Rs 3.60 a year earlier. Mr Harris said additional capital spending of $12 million over the next three years may reduce the dividend payout by an estimated Rs 0.20 a share each year. “This is an additional capex spending to further enhance the reliability of our plant,” he said. —Dow Jones Newswires

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