960428

Hubco may pay

interim dividend

in March '98

QUETTA: The Hub Power Company Ltd (HUBCO) in energy-deficient Pakistan is likely to pay its first interim dividend in March 1998 and follow up with a final dividend six months later.

"The company is likely to pay the maiden interim dividend in March 1998 and the final in September," the company's chief executive Daniel Michael Woodroffe told Reuters after a seminar on private sector power generation.

Hubco was set up to undertake the design, construction, finance, ownership and operation of a 1,292-megawatt oil-fired power station near the Hub River estuary in Baluchistan province, about 40 km northwest of the industrial port city of Karachi, the capital of Sindh province.

Construction was started under a turnkey contract with a construction consortium headed by Mitsui & Co Ltd and also including Ishikawajima-Harima Heavy Industries Co Ltd of Japan, Ansaldo GIE SrL, Ansaldo Energia SpA of Italy and Campenon Bernard SGE of France.

Woodroffe said the company's first 323-mw generator was likely to start trial power generation early next month and full commercial production in June.

Hubco plans to install three other 323-mw generators at three month intervals so that "full power generation capacity will be reached in March 1997", he added.

Pakistan's present total installed capacity is around 12,600 mw against an estimated total demand of 15,000 mw, one government official said.

The power generation capacity is insufficient to meet the demand, particularly during period of low river flows in winter which sees frequent power cuts, the official said. "It is estimated that one billion dollars worth of production is lost every year due to load shedding."

Analysts say HUBCO, which is listed on the Karachi Stock Exchange with a paid-up capital of 11.571 billion rupees as the largest of its 776 listed firms, has an extremely low risk profile.

"We believe that Hubco's project risk is very low as compared to the returns it offers, especially when compared with other projects in similar risk category," one analyst at Baring Securities Pakistan (Private) Ltd said.

Hubco's 10-rupee stock closed at 33.90 last Thursday on a turnover of 11.84 million shares. The Barings analyst said the share was trading well below its fair value of 43 to 46 rupees per share.

The project's finance director Khurshid Husain says it is being funded by the equivalent of $1,802 million -- $371 million equity, $435 million subordinated debt, $724 million senior debt, $81 million incoming during construction and $191 million standby debt.

Hubco will sell electricity in bulk to the state-run Water and Power Development Authority, which will eliminate a chronic power theft problem during distribution in the industrial port city of Karachi and some other big cities.

Analysts say there will be no marketing problem in Pakistan, which is facing power shortages of more than 2,000 mw.

The power purchase agreement guarantees revenue equivalent to 60 percent of gross capacity utilisation irrespective of the actual off-take from the plant, the analyst said.

"There are a lot of guarantees behind it," Woodroffe said.

The project, which has enjoyed the continuing support of successive governments in Pakistan, is also one of the first private power projects to be supported by the World Bank and is being promoted by a number of international companies, including National Power PLC of Britain and Xenel of Saudi Arabia.-Reuter