China Power Hub Generation Company (CPHGC) has withdrawn the encashment notice dated November 23 of a Standby Letter of Credit (Standby LC) facility worth $150 million against Hub Power Company Limited (Hubco).
The development was shared by Hubco, the country’s largest independent power producer, in a notice to the Pakistan Stock Exchange (PSX) on Friday.
“We are please to inform you that the encashment notice dated November 23, 2022 has been withdrawn and the StandBy Letter of Credit has been extended on mutually agreed terms,” said Hubco.
Last month, the CPHGC, which is a joint venture of China Power International Holdings Ltd (CPIH) and Hubco, served a notice to Hubco for the encashment of a Standby LC worth $150 million.
A 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, 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.
Hubco, in a notice to the PSX back then, said that 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”.
Consequently, Hubco initiated legal proceedings against CPHGC with regards to the encashment notice.
“Hubco, to safeguard interests of its shareholders, on advice of its legal counsel has initiated legal proceedings against the encashment notice,” the company said then. “We are pleased to inform that the court has issued summons to the impleaded parties in the matter,” it added.
Earlier this month, it was learnt that Prime Minister Shehbaz Sharif had directed the concerned authorities to resolve a dispute between Hubco and CPHGC.
These directions were issued on an SOS call from Hubco as according to CEO, Hubco, Kamran Kamal, the CPHGC has called on Hubco’s SBLC of $ 150 million despite Islamabad’s untiring efforts.
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