HUBC’s base plant expiry: What is next for the power giant?

The expiry of the Hub Power Company Limited (HUBC) Hub plant marks a significant shift in Pakistan’s power landscape, particularly among IPPs. The powerplant is responsible for a substantial portion of the company’s EPS.

With the federal government considering not renewing agreements with IPPs whose Power Purchase Agreements (PPAs) have expired, the early retirement of HUBC’s base plant is under scrutiny.

This decision carries financial and operational implications for HUBC, which could ripple across the industry.

Should HUBC shareholders be concerned?

The early termination of HUBC’s base plant could allow the company to receive advance capacity payments, which could expedite the conversion of the plant from Residual Fuel Oil (RFO) to Thar coal.

This early termination is unlikely, as the government doesn’t have the capacity to pay the next 3 years’ worth of capacity payment upfront. However, from HUBC’s point of view, this would be a positive development.

The important things to consider for the government is whether this plant can be converted to Thar coal.

By tapping into local Thar coal, HUBC could reduce Pakistan’s dependence on imported fuels, which have historically been a financial burden, and align with the national shift towards more sustainable energy sources.

According to the company’s recent financial statements, the strategic pivot towards Thar coal could improve profitability and solidify HUBC’s position as a key player among IPPs in Pakistan.

The shift to Thar coal is seen as a means for HUBC to maintain and even strengthen its market standing in an increasingly competitive environment.

As other IPPs face the challenge of renewing or losing their PPAs, HUBC’s proactive steps to secure alternative revenue streams and improve operational efficiency could set it apart from its competitors.