AsiaNet-Pakistan Premier Editorial Content and Press Release Distribution Service
Karachi: The Board of Directors at Hub Power Company (HUBC) has approved the extension of Sponsor Support Contribution Letters of Credit (SSC LCs) for Thar Energy Limited (TEL) and ThalNova Power Thar (Pvt) Ltd (TNTPL). The extensions are valued at up to USD 31 million for TEL and USD 20 million for TNTPL. This decision comes in response to demands from project lenders to extend the SSC LC tenors until July 2034.
The extension aims to address disputed High Voltage Direct Current (HVDC) liabilities and potential debt servicing shortfalls until the loans reach maturity. Both power plants are nearing their Project Completion Date (PCD), a milestone that would allow them to distribute dividends from excess cash flows.
TEL achieved its Commercial Operations Date (COD) in October 2022, while TNTPL reached this milestone in February 2023. Both were initially slated to achieve COD by March 2021. Due to the delays, the Central Power Purchasing Agency (CPPA-G) has issued invoices. HUBC argues that the delays were caused by the COVID-19 pandemic and coal supply issues from Sindh Engro Coal Mining Company (SECMC), as well as the National Transmission and Dispatch Company (NTDC) failing to complete the HVDC line on time. HUBC claims it is not liable for the liquidated damages of USD 1.9 million per month for the HVDC line and USD 0.75 million per month for delayed commissioning.
Despite these challenges, HUBC anticipates that the renewal of the guarantees will not affect near-term cash flows. The company had already accounted for conservative payouts, suggesting that any unfavorable liquidated damages decisions can be absorbed without significantly impacting their financial valuation, which stands at PKR 151 per share.