The China Power Hub Generation Company Limited (CPHGC) served a notice to HUB Power Company Limited (Hubco) for the encashment of a Standby Letter of Credit (Standby LC) worth $150 million on Wednesday.
CPHGC is a joint venture of China Power International Holdings Ltd (CPIH) and Hubco. The development was shared by Hubco in a statement sent to the Pakistan Stock Exchange (PSX) on Wednesday.
Hubco, as a joint venture partner and Pakistani sponsor of CPHGC, had provided security in the form of a Standby LC of $150 million in favour of CPHGC which was set to expire on November 23, 2022 (today).
“An encashment notice has been served today by CPHGC, under the Standby LC, on the issuing bank," the notice read.
The Standby LC is commonly used to cover the risk of a contract party not fulfilling agreed obligations, for instance, failure to pay or deliver. It can be used in open account trade as well as a complement to collections and documentary credits.
Hubco said that being the largest independent power producer in Pakistan, it remains “committed to providing the country affordable and uninterrupted energy and taking any and all necessary actions to protect the best interests of its shareholders”.
Last week, Hubco said a joint venture between its subsidiary Hub Power Holdings Limited and Eni's Employee Buy-out Group, would acquire Eni's business in Pakistan.
The company said that the completion of the transaction could potentially reduce Pakistan’s dependence on imported oil and gas.
Global supply-chain disruptions owing to the Russia-Ukraine war have led prices of energy commodities including LNG to skyrocket, adding to the burden of cash-starving countries like Pakistan.
The South Asian country is also dealing with fuel shortages, as it has failed to secure LNG cargoes owing to high international demand.
At the time of this report, the scrip of Hubco was being traded at Rs67.35, down Rs1.78 or 2.57%.