KARACHI:
Hub Power Company (Hubco) has begun talks to acquire a stake in the country’s top coal-rich mine, which supplies black gold to power power plants, believing the acquisition will prove financially beneficial.
Besides, Kot Addu Power Company (Kapco) is attempting to acquire a 49.5 megawatt wind power project located in Sindh, diversifying its operations by embracing clean energy. Hubco said in a filing to the Pakistan Stock Exchange (PSX) on Tuesday that “the board of directors of Hub Power has authorized the company to enter into negotiations and execute definitive agreements for the proposed acquisition of shares of Sindh Engro Coal Mining Company Limited (SECMC) held by from a potential seller.”
The company, however, did not say how much stake it planned to take in the mining company. Completion of the proposed transaction is subject to the necessary corporate and regulatory approvals and consents, as well as the execution of definitive documents, the notice added.
SECMC is operating Pakistan’s first open cast lignite mine in block-II of Tharparkar in Sindh. Including other blocks, Thar has one of the largest coal reserves in the world, 175 billion tons, equivalent to 50 billion tons of oil and 2,000 trillion cubic feet of natural gas.
“With our current annual mining capacity of 7.6 million tonnes, we continue to supply lignite-grade coal to power producers in Pakistan,” SECMC said on its website. Arif Habib Limited analyst Muhammad Amad said in a commentary that sellers of SECMC’s stake could include Engro with a 12% stake, Thal Limited another 12% stake, HBL 9% and China Machinery Engineering Corporation (CMEC ) 4%.
“If Hubco acquires the stake from Engro, it is expected to positively impact its earnings by Rs 0.73 per share (total impact of Rs 947 million). A similar result is expected if the stake is acquired by Thal Limited,” he said.
“Alternatively, the acquisition of HBL’s stake would have a positive impact of Rs 0.55 per share (or Rs 710 million) on Hubco’s profitability. Additionally, Hubco can enhance its stake in SECMC by 4% through the purchase of all CMEC shares, resulting in a positive impact of Rs 0.24 per share (Rs 316 million).
Reading “Thar coal to liquid fuel conversion project begins”
Another notification to the PSX said that “Kapco has submitted an offer to acquire an equity stake in Tenaga Generasi, which owns a 49.5 MW wind power project located in Sindh.” The offer, if successful, will result in Kapco owning a majority stake in the company.
“Discussions are at a preliminary stage and any potential transaction will be subject to, among other things, the execution of definitive documents, regulatory approvals and internal approvals, including the approval of Kapco shareholders.”
Amad said Tenaga Generasi’s revenue rose 52% year-on-year in the first nine months of calendar year 2023 to Rs4.7 billion. Additionally, profit after tax for 9MCY23 saw a strong growth of 65% to Rs 2.8 billion, against Rs 1.7 billion in the corresponding period last year.
The 12-month profit after tax for Tenaga Generasi was Rs2.7 billion. “We see the company’s valuation at Rs 9.4 billion ($33.4 million), based on the P/E (price-to-earnings ratio) valuation methodology.”
Kapco’s principal activities are the ownership, operation and maintenance of a 1,600 MW multi-fuel (gas, furnace oil and diesel) power plant at Kot Addu, Punjab. The company sells electricity to a single customer, Central Power Purchasing Agency (Guarantee) Limited (CPPA-G).
The company’s plant is Pakistan’s largest combined cycle power plant.
Published in The Express Tribune, January 17u2024.
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