KARACHI - The Hub Power Company (HUBCO) is working on developing an imported coal based project of up to 660MW at its existing Hub site with an estimated cost of $1 billion.

Khalid Mansoor, Chief Executive HUBCO, at a press briefing, said that country’s existing energy mix is neither sustainable nor affordable as approximately 40% of power generation is dependent on imported Residual Fuel Oil (RFO). This results in higher cost of power generation, alarming levels of circular debt and high import bills, draining country’s foreign reserves, he added. He said the coal-based Brownfield project at Hub is being developed on a fast-track basis. The company expects to receive technical and commercial bids later this year. He said the project is already attracting a lot of interest from overseas investors, mostly from China, owing to scalable advantages of its strategic location.

Khalid Mansoor said that the company has signed an agreement to invest $20 million in Sindh Engro Coal Mining Company Limited (SECMC), subject to it fulfilling certain conditions which include achievement of financial close by the end of 2015. Under this agreement, the company will also have a right to use the coal mined by SECMC and establish a mine mouth power project when the mine production capacity is scaled up.

Khalid added that the company wanted to convert its existing RFO based 1,292MW Hub power plant to coal, however, due to absence of clear cut policy guidelines on coal conversion, the Board decided to keep the conversion on hold and gave go-ahead for setting up a new coal-based power plant. Investment in indigenous resources like coal and hydro can help build our local energy economy. Creating this energy economy is not only a stopgap measure to meet the challenges, but also an opportunity that can be seized and cultivated to deliver long-term socio-economic benefits for the country and its residents, he added.

Globally, the percentage of energy production through coal out of the total energy mix is approximately 41%; however for Pakistan this stands at a massive low of 0.1% – a fact which is both alarming and comforting – alarming due to its low constitution and comforting in the fact that we can still make judicious investments today that will help us overcome this threat.

Talking about the overall situation of the IPPs sector, Khalid Mansoor added the Independent Power Producers (IPPs) are in severe liquidity crisis owing to the alarming level of circular debt and WAPDA’s default on its contractual agreement.

Contrary to the Power Purchase Agreement, WAPDA has released meager or in some cases absolutely no payments to the IPPs over past few months.

WAPDA’s payment default has resulted in severe effects on the financial viability of the power plants and has affected the sustainability of the operations. Condition is such that the IPPs are on the verge of collapse, despite engaging their entire working capital resources. 

He said that WAPDA and NTDC currently owe Rs 220 billion to the IPPs against the overdue invoices for electricity purchased and received on the national grid, which NTDC has acknowledged in writing.

At present, IPPs contribute more than 50% of Pakistan’s energy supply. While, GENCOS are not able to maintain their rated capacities over time. As per NTDC, IPPs are at least 40% more efficient.