In the sprawling industrial landscape of Pakistan’s energy sector, few names carry the weight and influence of Hub Power Company (HUBCO). Founded in 1991, HUBCO is Pakistan’s largest independent power producer, with a diverse portfolio spanning thermal, hydropower, and renewable energy projects. Over the decades, it has emerged as a critical player in keeping the country’s lights on, often during moments of economic turbulence and fuel supply crunches. Today, the company finds itself at another turning point, seeking to secure the future of its coal-fired power plants against a backdrop of shifting energy policies, rising solar adoption, and the far-reaching influence of the China-Pakistan Economic Corridor (CPEC).
On Wednesday, HUBCO announced plans to seek an extension of $51 million in bank guarantees, a financial shield for its two 330-megawatt plants running on locally mined coal. These plants, strategically located in Tharparkar, Sindh, are not just industrial installations but key pillars of Pakistan’s fragile power stability. The bank guarantees, previously issued on a short-term basis, are now proposed to remain in place until 2034. The objective: cover future loan repayments, safeguard against potential penalties, and ensure that operational continuity is not jeopardized by the country’s fluctuating economic conditions.
The decision comes at a time when Pakistan’s energy sector is undergoing rapid transformation. Solar power adoption is surging, driven by falling technology costs and policy incentives. But the very strength of solar, its abundance, is also its weakness. Unlike coal or gas, solar power is intermittent, producing electricity only when the sun shines. Without a reliable baseload backup, the variability of solar could cause voltage instability and blackouts. HUBCO’s coal plants, despite environmental concerns, provide that steady, dependable stream of electricity to the national grid, especially during peak demand or when weather conditions curtail solar generation.
Adding to the complexity, the company is currently contesting newly imposed government transmission charges. HUBCO argues these charges were not part of its original contracts and have placed additional financial strain on operations. Investors, wary of the changing regulatory landscape, are pushing for the guarantees’ extension to ensure that any future liabilities or revenue shortfalls can be managed without jeopardizing plant operations. In its filing to the Pakistan Stock Exchange, HUBCO stated that the cost of borrowing to sustain these guarantees will remain lower than the anticipated returns from the projects, reinforcing their economic viability.
So far, HUBCO has invested approximately $131 million in the Thar coal projects, which form part of Pakistan’s broader strategy to utilize domestic coal reserves and reduce dependence on imported fuels. These plants are also embedded within the framework of CPEC, the flagship economic partnership between Pakistan and China. As part of CPEC’s energy portfolio, valued at over $25 billion, coal-fired projects like HUBCO’s were envisioned to alleviate Pakistan’s chronic power shortages, fuel industrial expansion, and create jobs in underdeveloped regions. The Thar coal initiative, in particular, was championed as a way to turn one of the world’s largest untapped lignite reserves into a driver of national energy security.
Yet, the promise of energy stability is colliding with the harsh realities of Pakistan’s economic constraints. Last year, under pressure from the International Monetary Fund (IMF) to rein in energy sector debt estimated at over Rs 2.6 trillion, the government authorized early termination of certain power purchase agreements, some years before their scheduled expiry. This policy shift, aimed at reducing capacity payments and other fixed costs, has introduced uncertainty into the independent power producer landscape, leaving companies like HUBCO recalibrating their long-term strategies.
For HUBCO, the stakes could not be higher. Its two Thar coal plants together generate 660 MW of electricity, enough to power millions of homes. They are integral to stabilizing Pakistan’s grid, particularly during periods when hydropower output is reduced due to seasonal variations or when imported LNG prices spike, making gas-fired power generation economically unfeasible. The company has now called an extraordinary general meeting for August, seeking shareholder approval to finalize the extension of the guarantees.
The story of HUBCO’s latest move is not just about one company’s financial safeguards, it is a microcosm of Pakistan’s energy crossroads. On one hand lies the global push for cleaner, greener power, which has inspired rapid solar uptake in Pakistan. On the other lies the immediate necessity for stable, large-scale, round-the-clock electricity generation, without which economic growth would grind to a halt. As CPEC enters its second phase, focusing on industrialization and energy diversification, the balance between renewable integration and coal-based stability will remain one of the most critical and politically sensitive questions in Pakistan’s development path.
Whether HUBCO’s extended guarantees will be enough to weather the sector’s storms remains to be seen. But what is clear is that the company’s coal plants, rooted in the dusty expanse of Thar and intertwined with the ambitions of CPEC, will continue to play a defining role in how Pakistan navigates its complex, and often contradictory, energy future.
