KARACHI, Oct. 25, 2000Hub Power Co., Pakistan’s largest private power producer, said it set aside 13.4 billion rupees against potential losses in its ongoing tariff dispute with the government.
As a result, the company posted a net loss of $123.6 million (6.984 billion rupees) in its annual report released Tuesday. The report said the loss, the first in company history, follows a profit of 6.704 billion rupees last year.
Hubco has been fighting the tariff dispute with Pakistan Water Development Authority (WAPDA) since 1997. WAPDA accuses Hubco and several other independent private producers of securing exorbitant rates during former Prime Minister Benazir Bhutto’s government. The company, which charges WAPDA 6.86 cents/kw-hr, denies the charges.
Earlier this year, WAPDA reported it had concluded tariff adjustment agreements with 11 other independent power producers (IPPs) at an average of about 5 cents/kWh.
Gen Musharraf’s government has vowed several times to resolve the row, which has badly shaken investor confidence. Foreign investors hold about 59% of Hubco. The UK’s National Power owns 20% of Hub Power shares; Saudi Arabia’s Xenel Industries is also a major stakeholder in the company.
Earlier, National Power slashed the value of its holdings in Hub Power and the Kot Addu Power Complex, to £131 million from a cumulative £262 million, sources said. (OGJ Online, May 25, 2000)
NP’s board of directors made the decision after an unresolved years-long dispute with the Pakistani government and power regulating agencies. The dispute led the NP board to take a pessimistic view of the situation and to take a “prudent way” of reassessing the assets in the two controversial power projects, the sources said.
By provisioning for doubtful debts worth 13.444 billion rupees, analysts say it shows that Hubco has lost hope of getting its money from WAPDA. Arshad Arid, head of research for local stock broker M/S First Capital Securities, said the decision could now pave the way for an agreement with WAPDA to resolve the tariff dispute.