Pakistan's largest private power firm defaults to government

Apr 21, 2008, 14:12 GMT

Karachi - Pakistan's energy crisis is set to worsen as its largest private power company, HUBCO, faces defaults of billions of rupees amid rising oil prices and a financial crunch.

The Hub Power Company or Hubco is facing a default of between 3.5 and 3.8 billion rupees (55 to 57 million dollars) to state-owned Pakistan State Oil (PSO), the country's largest private oil firm, sources on Karachi Stock Exchange said.

'We are working with the government of Pakistan to help resolve this situation,' a spokeswoman for Hubco, Lesley Ann Middlecoat, told Deutsche Press-Agentur dpa on Monday.

Middlecoat has denied confirming the amount of default. Pakistan has already been gripped by a severe power shortage which led to riots in several cities recently prompting the deployment of police and paramilitary forces.

A sudden increase in high speed furnace oil to 42,000-43,000 rupees (650-660 dollars) per tonne has caused this crisis, analysts said.

Hubco has been facing a financial crunch due to sluggish payments from state-owned Water and Power Development Authority (WAPDA), the main buyer of the company's power production, resulting in defaults to the PSO, which supplies furnace oil.

'Hubco is caught in the bin from sides,' says senior analyst Khurram Shehzad, at Invest Cap brokerage house. 'According to market rumours the defaults runs anywhere between 3.5 to 3.8 billion rupees.'

The 1.6 billion dollar Hubco, with a market capitalization of around 39.5 billion rupees (650 million dollars) is Pakistan's only private power project which is also listed on the Luxembourg Stock Exchange, where its global depository receipts (GDRs) are traded.

Hubco's total power generation capacity is 1,292 megawatt but currently produces only 900 megawatt, according to Middlecoat. Analysts have said the shortage is due to the internal financial crunch and weak cash flow from WAPDA.

The country's total power generation capacity is around 12,000 megawatts with demand fluctuating between 14,500 and 16,000 megawatts, according to Pakistan Power Infrastructure Board.

Hubco's shares closed a little higher on foreign exchanges at 32.95 rupees (0.50 US cents) but PSO shares fell to 513 rupees (around 9 dollars)from 522 rupees on Monday.