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THE HUB POWER COMPANY LIMITED

CORPORATE GOVERNANCE

April 25, 2012

aired and hopefully resolved in debate with colleagues. THE HUB POWER COMPANY LIMITED Board Room Protocol 1. • a nominated Director from the National Bank of Pakistan . who is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The views of dissenting Directors shall be formally noted in the record. COMPANY ORGANISATION The Board to have a maximum of 15 members as follows: • 12 elected Directors • the Chief Executive. (primary accountability is to Audit Committee) • Senior Manager Human Resource & Public Relations The role of the Chief Executive is set out in Appendix 1. • Head of Internal Audit. The Chief Executive will then be the only company executive on the Board. • Company Secretary. • a nominated Director from the Government of Balochistan. DIRECTORS' DUTIES All Directors share collective responsibility for decisions of the Board and are expected to participate in open and constructive debate. All Directors shall also have access to the advice and services of the Company Secretary. Arrangements for this will be made by the Company Secretary and Legal Manager. The Board shall have at least one and preferably one-third of the total members as independent Directors. In this way differences of opinion and approach will be exposed. Where such debate fails to achieve consensus the Board may choose to defer its decision(s) to enable further clarification or consideration of key issues but as a last resort the majority shall prevail. 2. Whilst it is not included in the Articles in furtherance of his duties as a Director of the Company each Director may if he deems it necessary commission independent professional advice at the Company's expense. 2 . He currently has reporting to him the following company executives: • Chief Financial Officer • Chief Technical Officer.

and 5 respectively. 3 . 3. The Chief Executive has responsibility for approving the secondary delegations from himself to those reporting to him. Company Secretary shall be the Secretary of all the Committees. 4.3. COMMITTEES OF THE BOARD Article 88 of the Articles of Association states that the Directors shall designate from among their number an Audit Committee and a Human Resource Remuneration Committee. MEETINGS The Board shall meet atleast four times during the year to consider the following: i) review of progress and performance. DELEGATIONS OF AUTHORITY The Board has ultimate responsibility for managing the Company and is the source of all executive authority within the business. The Board will from time to time review and approve changes to principal business processes and systems designed to secure appropriate internal control. In addition to the above the Board will hold such other meetings as are considered appropriate. 5. approval of Annual Report and Accounts and associated business. the terms of reference of which are set out in Appendix 6. The Chief Executive has formed a Management Committee to assist him in the discharge of his responsibilities. In addition there shall be an Operations Committee and a Corporate Communications Committee. The name of members of the Committees of the Board shall the disclosed in each Annual Report of the Company. ii) to consider performance and approve first quarter account. Matters which the Board reserves to itself for consideration and approval are set out in Appendix 7. monitor performance and consider policy matters and long term plans. 4. iv) to consider the performance for the current year approve the third quarter accounts and budget for the following year. iii) to approve the half year accounts. The Management Committee is not a committee of the Board. The constitution and terms of reference of these committees are shown in Appendix 2. A schedule setting out the financial and other authorities which the Board have delegated to the Chief Executive is set out in Appendix 8 together with a guidance note on the overall framework within which all delegated authorities operate.

personnel and administrative policies and procedures. discipline and dismiss staff subject to the areas reserved for the Human Resource and Remuneration Committee and the Board. promote. on terms specifically approved by the Board. connected or other documentations of finance and enforce such terms thereof as are to be performed by others. (vi) Act as the focal point for the liaison with Government offices and their agencies. or related to. (iii) Ensure fulfillment by the Company of the terms of the loan agreements. (viii) Recruit. undertakings. the Security Package agreements any related. (ix) Effect disbursements and commitments within approved total capital and revenue budgets. contracts. (ii) Negotiate or renegotiate with the Government of Pakistan or any of its agencies all agreements. on terms specifically approved by the Board. guarantees or other documentation included in. 4 . (iv) Approve on behalf of the Company any recommended variations in the specified design or layout of the power station or in the design. and subject to approved Company procedures. (v) Supervise the work of the Operations and Maintenance Contractors under the terms of the Operations and Maintenance Agreements and recommend any variations thereto for approval of the Board. reward. press and environmental and other interest groups. In performing his task the Chief Executive is required to have a view both to the protection and improvement of shareholders' value and to the longer term health of the Company. Appendix 1 THE HUB POWER COMPANY LIMITED The Role of the Chief Executive The Company is run by its Board of Directors and its affairs are managed on a day to day basis by the Chief Executive under the direction and control of the Directors. subject to reference to the Board for approval of specific reserved items which have implications beyond the current financial year. (vii) Implement management. supply or operating characteristics of the plant components. the Security Package for the project. financial. within financial guidelines approved by the Board. including the negotiation of any associated agreement. following their approval by the Board. The Role of the Chief Executive is to: (i) Undertake all work necessary or appropriate to secure the finance by way of debt and equity needed to achieve the Company's objectives. contract or other documents.

(xii) Sign leases for premises and equipment within the approved budget. and to such adjustments being reported to the Board under the regular variance reports.000. updated annually. contractors and third parties. 5. (xv) Take whatever measures he considers necessary to ensure the safety of employees.000 whichever is higher. (xiv) Make all necessary security arrangements to protect the interests of the Company. (xix) Determine the technical support required under the Support Services Agreement with operations & maintenance conractors and original equipment manufacturers through acting as Employer's Representative under that agreement within the limit of £250. (xiii) Dispose of assets excluding land and fuel up to an original cost of Rs. economical and profitable operation. (xviii) Within the policies and guidelines approved by the Board. (xi) Supervise the work of the Company's Head Office departments.000. within the policies and guidelines approved by the Board. (xvi) Delegate any of his financial or other powers to subordinate staff.(x) Adjust budgetary overruns against underruns and allocate contingency allowances within the budget. 5 . manage the Company in a manner which is calculated to ensure its efficient. (xvii) Formulate and execute a detailed management development and training programme.000 or USD 500. subject to total expenditures being confined within the approved overall budget.

Also once a year the Audit Committee shall meet the Head of Internal Audit and other members of the internal audit function without the Chief Financial Officer and external auditors being present. shall comprise of five directors atleast one and preferably majority of whom shall be independent directors. The Chief Executive may attend meetings of the Audit Committee by invitation. The Chairman of the Audit Committee shall report to the Board after each Audit Committee meeting the proceedings of the meeting. who shall not be the chairman of the Board. A quorum shall be three members or their alternates. Where a Director is unable to attend in person that Director may appoint another Director as an alternate to act on his behalf or allot his vote to another member of the Audit Committee. 2 The Audit Committee shall meet as appropriate. Atleast once a year the Audit Committee shall meet the external auditors without the Chief Financial Officer and Head of Internal Audit being present. 3 The Committee shall have the following functions: 6 . • the external auditors' right of direct access to the Chairman of the Audit Committee. but at least once every quarter before the Board meeting. These arrangements shall be without prejudice to: • the Head of Internal Audit's right of direct access to the Chairman of the Company. Appendix 2 THE HUB POWER COMPANY LIMITED The Audit Committee Constitution and Terms of Reference 1 The Audit Committee. • the Head of Internal Audit's right of direct access to the Chairman of the Audit Committee. Attest one of the members must have relevant financial experience. preferably not more than one week before a Board meeting. Senior managers may also attend the meetings of the Audit Committee by invitation when matters specific to their areas of responsibility are discussed. The Chairman has the right to be 'in attendance' at meetings of the Audit Committee should he so wish. The Chief Financial Officer. Head of Internal Audit and a representative external auditor shall attend meetings of the Audit Committee at which issues relating to accounts and audit are discussed. he shall not have the right to vote unless he is also a member ex officio of the Audit Committee. The Chairman of the Committee shall be an independent director. which is a committee of the Board of The Hub Power Company Limited.

Compliance with listing regulations and other statutory and regulatory requirements. the going-concern assumption. • review of the listed company’s statement on internal control systems prior to endorsement by the Board of Directors.3. half-yearly and annual financial statements prior to their approval by the Board taking into account the views of the external auditors and focusing on: . significant related party transactions. where necessary). any changes in accounting policies and practices. - • review preliminary announcements of results prior to publication.1 The Audit Committee shall recommend to the Board the appointment of external auditors. significant adjustments resulting from the audit. audit fees. assets and liabilities and the reporting structure are adequate and effective. . their removal. • review the quarterly. major judgmental areas. • discussions with the external auditors on the scope of internal audit and matters arising therefrom. 7 . • review of management letter issued by external auditors and management’s response thereto. • consideration of major findings of internal investigations and management's response thereto. • facilitating the external audit and discussion with external auditors of major observations arising from interim and final audits and any matter that the auditors may wish to highlight (in the absence of management. . compliance with applicable standards. • ensuring coordination between the internal and external auditors of the Company. . . • review of the scope and extent of internal audit and ensuring that the internal audit function has adequate resources and is appropriately placed within the Company. accounting systems for timely and appropriate recording of purchases and sales. 3. and .2 The Committee shall also consider the following: • determination of appropriate measures to safeguard the Company’s assets. • ascertaining that the internal control systems including financial and operational controls. receipts and payments. the provision by the external auditors of any service to the Company in addition to audit of its financial statements. .

3 Compliance • to keep under review legislative and regulatory compliance activities. 3. including the development of appropriate procedures. and • consideration of any other issue or matter as may be assigned by the Board of Directors. 8 . • instituting special projects.4 Declaration of interests • to manage the declaration of Directors' interests as required by Article 68 of the Articles of Association. • monitoring compliance with the best practices of corporate governance and identification of significant violations thereof. in consultation with the Chief Executive and to consider remittance of any matter to the external auditors or to any other external body. periodically monitoring the adequacy of compliance arrangements within the Company. 3. • determination of compliance with relevant statutory requirements. value for money studies or other investigations on any matter specified by the Board of Directors.

shall comprise of five members of which atleast one and preferably two shall be independent Directors. 3. targets and rewards of both long and short term executive incentive schemes. normally annually. One of the Directors shall act as Chairman of the Human Resource and Remuneration Committee. The Chairman of the Committee shall report to the Board after each Committee meeting the proceedings of the meeting. Appendix 3 THE HUB POWER COMPANY LIMITED The Human Resource and Remuneration Committee Constitution and Terms of Reference 1. 3. The Human Resource and Remuneration (HR&R) Committee. as appropriate. Where a Director is unable to attend in person that Director may appoint another Director as an alternate to act on his behalf or allot his vote to another member of the Committee. to ensure that in relation to the Chief Executive and senior managers: • salaries are maintained at a level which allows the organisation to compete effectively for good calibre management.1 Responsible for recommending human resource management policies to the Board including executive Human Resource and Remuneration and succession planning. he shall not have the right to vote unless he is also a member ex officio of the Human Resource and Remuneration Committee. competitive and defensible basis. The Chief Executive. • the basis. The Committee shall have the following functions: 3. The Chairman has the right to be 'in attendance' at meetings of the Committee should he so wish. Company Secretary and Senior Manager Human Resources may attend meetings of the Human Resource and Remuneration Committee by invitation. • pay is adjusted at appropriate intervals. • the balance of pay and benefits is maintained on a sensible. The Human Resource and Remuneration Committee shall meet as appropriate. A quorum shall be three members or their alternates. preferably not more than one week before a Board meeting. 2. 9 . both in relation to performance and to an assessment of market movement based on data from one or more reputable sources.2 Taking proper and professional advice. serve the needs of the business. but at least two times each financial year. which is a committee of the Board of The Hub Power Company Limited.

Ensuring that candidates recommended are selected following appropriate search and interview processes both external and internal. Human Resource and Remuneration (including retirement benefits) and succession planning of the Chief Executive Officer . 3.3 Responsible for recommendation to the Board the selection. Manager Human Resource & Public Relations. • Head of Internal Audit. 10 . The Human Resource and Remuneration Committee will also ensure that management succession planning relevant to these posts is regularly reviewed. The Human Resource and Remuneration Committee will have sole responsibility for making recommendation to the Board for these appointments and their removal. • contractual obligations to the Chief Executive and senior managers are honoured and the contracts themselves are reviewed from time to time to ensure they remain up to date and defensible.5 To select and make recommendations to the Board for appointments of the Chief Financial Officer. evaluation. 3. 3.4 To ensure that the Chief Executive discharges his delegated authority in establishing the basis for terms and conditions of employment in respect of senior managers below Board level in order to consider the cost implications for the company and to provide the Chief Executive with appropriate guidance. • Sr. • Chief Technical Officer. • Company Secretary. Chief Technical Officer Director. Company Secretary and Head of Internal Audit. Senior managers currently include: • Chief Financial Officer.

he shall not have the right to vote unless he is also a member ex officio of the Operations Committee. 3. One of the Directors shall act as Chairman of the Committee.1 Timely approvals of expenditure as identified by Hubco Operations Department for undertaking new / exceptional items and plants improvement/betterment projects. Chief Financial Officer and the Company Secretary may attend meetings of the Committee by invitation. 3. The Operations Committee. shall comprise of five members of which atleast one and preferably two shall be independent Directors. The Committee shall have the following functions: 3. The Station Manager of the plants may also attend the meeting by specific invitation. Chief Technical Officer. Where a Director is unable to attend in person that Director may appoint another Director as an alternate to act on his behalf or allot his vote to another member of the Committee. The Chairman has the right to be 'in attendance' at meetings of the Committee should he so wish. 2. 3. A quorum shall be three members or their alternates.2 Review plants operational issues on a regular basis as reported in the Operations monthly reports (prior to Board meeting). 3. The Operations Committee shall meet as appropriate. The Chief Executive. but at least once in a quarter in each financial year.3 Review all the contractual issues. amendments to. which is a committee of the Board of The Hub Power Company Limited. and any interpretation issues related to the O&Ms and other contracts related to the Plant operators and make recommendations to the Board. preferably not more than one week before a Board meeting.4 Review the procedures for procurement used by the O&M contractors for plants and related purchases. Appendix 4 THE HUB POWER COMPANY LIMITED The Operations Committee Constitution and Terms of Reference 1. 11 . The Chairman of the Committee shall report to the Board after each Committee meeting the proceedings of the meeting.

but at least two times each financial year.10 To review the content of the annual and the bi-annual report of the Company. The Chairman has the right to be 'in attendance' at meetings of the Committee should he so wish.2 To review with the Chief Executive additional proposals pre submission for Board approval.8 To review the scope and extent of positive / negative effects of the Company’s corporate and social plans and suggest remedies. The Chairman of the Committee shall report to the Board after each Committee meeting the proceedings of the meeting. 3. 3. 2. 3.5 To co-ordinate corporate responsibility with the O&M contractors. may attend the meeting by specific invitation.9 To keep under review any legislative and regulatory compliance activities. The Committee shall have the following functions regarding the Company’s Corporate Affairs / Relations and the Company’s Social Action Programme: 3. Where a Director is unable to attend in person that Director may appoint another Director as an alternate to act on his behalf or allot his vote to another member of the Committee. 3. The Corporate Communications Committee shall meet as appropriate. One of the Directors shall act as Chairman of the Committee. if appointed.7 To review the work of the Corporate Relations consultants and / or advisors to the Company and to make recommendations regarding renewal / awarding of contracts and terms. 3. Appendix 5 THE HUB POWER COMPANY LIMITED The Corporate Communications Committee Constitution and Terms of Reference 1. preferably not more than one week before a Board meeting. 12 . 3.3 To develop an integrated approach in respect of the Company’s relationships with its customer and regulatory authorities.1 To assist the Chief Executive in formulating recommendations regarding and after Board’s approval assisting in steering the short and long term plans.4 To review and advise on Press Releases / Company Announcements (other than routine before they are issued. A quorum shall be three members or their alternates. 3. The Corporate Relations consultants and / or advisors to the Company. he shall not have the right to vote unless he is also a member ex officio of the Corporate Communications Committee.6 To liaise on related social action issues with the O&M contractors. The Corporate Communications Committee is a Committee of the Board of Directors of The Hub Power Company Limited and shall comprise of five members of which atleast one and preferably two shall be independent Directors. Senior Manager Public Relations and the Company Secretary may attend meetings of the Committee by invitation. 3. 3. The Chief Executive. 3.

The Chief Executive will regularly report the decisions of the Committee to members of the Board. The Head of Internal Audit shall have the right to attend as an observer. dependent on the nature of the business to be considered. The minutes of these meetings will be available to the members of the Board. 13 . • Chief Technical Officer. • Company Secretary. It provides a forum for the regular exchange and review of information and preparation of business for the Board. • Senior Manager Human Resource & Public Relations. The Committee shall meet as appropriate. A quorum at any meeting shall be at the discretion of the Chairman of the Committee. 3. The Committee is the mechanism whereby action necessary to advance the Company's affairs is coordinated and pursued corporately and following the appropriate degree of consultation. Appendix 6 THE HUB POWER COMPANY LIMITED The Management Committee Constitution and Terms of Reference 1. 2. Other staff may attend the meetings of the Management Committee by invitation when matters specific to their areas of responsibility are discussed. but at least fortnightly. The role of the Committee is to assist the Chief Executive to manage and run the Company and assist in the discharge of such of his duties as are not required to be exercised personally. The Management Committee initially shall be composed of: • Chief Executive (Chairman) • Chief Financial Officer. It does not therefore process or collectively determine executive business unless company-wide issues are involved or proposals are outside the agreed framework within which the authority to act is given. The Committee has no formally delegated powers and is not intended to detract from the Chief Executive's individual accountabilities.

However. (xiv) to approve any changes (other than minor) to any contracts. (vi) to borrow moneys and create security. (xii) following receipt of the recommendations and reports of the Human Resource and Remuneration Committee to appoint the Chief Financial Officer. 14 . Appendix 7 THE HUB POWER COMPANY LIMITED Matters Reserved for the Board The Company is run by its Board of Directors and its affairs are managed on a day to day basis by the Chief Executive under the direction and control of the Directors. Company Secretary and Head of Internal Audit. as allowed under Section 120 of the Companies Ordinance. (v) to issue commercial papers. term certificates etc. (xiii) to approve the appointment of advisers. advances and credits by the Company. The duties reserved to the Board are to consider reports on the conduct of the Company's affairs and to take decisions on any of the following matters: (i) all powers of the Company required to be exercised by the Directors at their meeting under Section 196(2) of the Companies Ordinance 1984. sukuks. Any question of their removal should be matter referred to the Board as a whole. contracts. loan agreements. (iv) to issue shares. (x) to recommend the payment of dividends. there are duties reserved for the Board. (iii) to make calls on shareholders. (vii) to invest the funds of the Company. or other legal documents. (ii) those required to be placed before the Board under the Code of Corporate Governance of the Karachi Stock Exchange Listing Rules. (ix) to approve the annual report and accounts and the directors' and auditors' reports thereon following the report of the Audit Committee on the Annual Accounts. Chief Technical Officer. (xi) following receipt of the recommendations and reports of the Human Resource and Remuneration Committee to appoint the Chief Executive and oversee his duties. (viii) to approve loans.

(xix) to approve the annual capital and revenue budgets and long term estimates and plans of the Company. (xvii) to approve changes to the structure of the Company or changes in the business of the Company.000. (xxi) to approve the establishment of bank accounts. 15 . 5.(xv) to establish policies and guidelines for the management of the Company and approve manuals for each functional area. (xvi) to create any committees of the Board and appoint the members thereof. (xxiv) to approve the financial and other delegations to the Chief Executive. (xx) to institute litigation on behalf of the Company and/or the defence or settlement of any lawsuits or claims filed against the Company. (xxiii) to approve the execution of instruments under common seal and other matters requiring Board approval under the Articles. 5. (xxii) following receipt of the recommendations of the Audit Committee to recommend the appointment of auditors.000.000.000. (xxv) authorisation of expenditure is in general delegated to the Chief Executive within the agreed capital and revenue budgets but with the following requiring specific Board approval: • unbudgeted capital expenditure above Rs. (xviii) to approve the disposal of the capital assets of the company subject to the power delegated to the Chief Executive to dispose of assets excluding land up to an original cost of Rs. • unbudgeted revenue items with a contractual commitment of greater than one year.

make further delegations to senior managers that are within his own delegated authority. 16 . at his discretion. Appendix 8 THE HUB POWER COMPANY LIMITED Delegations of Authority to the Chief Executive The attached schedule set out delegations of authority which have been approved by the Board for operation within the Company. The delegations are commensurate with the efficient conduct of the Company's activities and are designed to facilitate devolved decision making and personal accountability. derives from the approved operating plans and capital and revenue budgets. Delegations therefore set limits of authority beyond which commitments cannot be made without consulting the Board. The principles applied to delegations from the Board to the Chief Executive will apply in a similar way to delegations from the Chief Executive to senior managers. it is emphasised that the delegations in themselves give no power to act. The power to act. up to the limits prescribed. The Chief Executive may not allow the Company to exceed agreed budgets or deviate from approved plans without prior consultation with the Board of Directors. However. the delegations of authority are exercisable only in accordance with the Company's arrangements for the proper conduct of its business. The Chief Executive may. Regarding the financial delegations.

000.000.000. THE HUB POWER COMPANY LIMITED Guidance Note Delegations of Authority Nature of authority Delegation to the Chief Executive COMMERCIAL/FINANCIAL MATTERS All expenditure within approved capital and revenue budgets subject to the following which are reserved to the Board 1 Capital and revenue commitment including approval of award of • unbudgeted capital expenditure above Rs. .50 million 5 Land • land sales No delegation • land purchases No delegation • rent agreements Unlimited if for less than three years in accordance with Budget 6 Sale/disposal of scrap or any assets other than fuel or land.500. approval of Assets up to an original cost of Rs. 5.000 gifts of obsolete equipment OTHER DELEGATIONS 1 Appointments Any apart from those reserved for the Human Resource and Remuneration Committee 2 Ex gratia severance payments As per Severance Policy 3 Minor discretionary grants to employees suffering financial hardship Rs.5. contract • unbudgeted revenue items with a contractual Commitment of greater than one year.000 . 2 Fuel purchases Unlimited 3 Electricity sales Unlimited 4 Sale of company services Equivalent US$0.