Hub Power's Plan: Extending Bank Guarantees to Secure Coal Plants

Hub Power is extending $51 million in bank guarantees for its coal-fired power plants until 2034, due to new transmission charges and challenges in Pakistan's power sector. These guarantees, covering fines and funding gaps, are deemed crucial for stable electricity supply amidst rising solar use.

Hub Power (HUBCO), Pakistan's largest independent power producer, has announced plans to extend $51 million in bank guarantees until 2034. This measure aims to shield its coal-fired power plants, seen as crucial amidst the country's increasing solar energy reliance.

The company recently informed the stock exchange that these long-term guarantees would secure future loan repayments and potential penalties. New government-imposed transmission charges, which HUBCO plans to contest as they were not part of original contracts, have led investors to demand extended guarantees. Despite the potential borrowing costs, the anticipated returns from the projects are expected to remain favorable.

HUBCO highlighted the necessity of stable coal power during an era of rising solar power, which risks causing blackouts if not managed properly. The company has invested approximately $131 million in these projects, citing ongoing challenges within Pakistan's energy sector such as fuel import restrictions and a debt-laden power industry. An extraordinary general meeting is set for August to gain shareholder approval for the needed measures.

(With inputs from agencies.)