Pakistan's HUBCO seeks extension of $51 million guarantees to safeguard coal plants
The guarantees, previously short-term, would now stay in place until 2034 to cover future loan repayments and potential penalties, the company said in a notice to the country's stock exchange.
New government-imposed transmission charges, which HUBCO is contesting and says were not included in its original contracts, have pushed investors to seek extended guarantees. The cost of borrowing to provide these guarantees would remain below the expected returns from the projects, it said.
'The extended guarantee will cover any fines or funding gaps that may arise,' HUBCO said in a notice to the country's stock exchange, adding that the company has invested about $131 million in the projects so far.
The South Asian nation has faced chronic electricity shortages and challenges to grid stability because of rising solar power use, fuel import constraints due to a foreign exchange crisis and a debt-burdened electricity sector.
Stable coal-fired power supply is crucial amid rising use of solar power, whose variability could potentially cause blackouts if mismanaged.
HUBCO will hold an extraordinary general meeting in August to seek shareholder approval for the plan for its two 330 megawatt (MW) plants operating on locally mined coal 'to ensure the plants' continued operation,' it said.
The plants' problems stem from broader challenges faced by Pakistan's power sector. Pakistan last year authorized an early termination of a power supply deal running to March 2027 as a part of an IMF mandate to cut energy debt.
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