HUB POWER COMPANY LIMITED (HUBCO)

CASE STUDY:
Encashment of $150 million guarantee by Chinese

BY: RIDA HASSAN KHAN

SUBMITTED TO: MISS NIDA

STRATEGIC MANAGEMENT

BS BBA IV (SECB)
Table of Content:

Introduction............................................................................................................................ 3
COMPANY OVERVIEW:.......................................................................................................... 4
VISION STATEMENT......................................................................................................... 4
MISSION STATEMENT...................................................................................................... 4
CORE VALUES.................................................................................................................. 4
COMPANY’S BACKGROUND:.......................................................................................... 4
Business Strategy:.................................................................................................................5
AREA OF INTEREST:........................................................................................................ 5
Circular DEBT:.............................................................................................................. 5
Revolving Funds:..........................................................................................................5
SPECIFIC PROBLEM:............................................................................................................ 6
Corporate Governance.......................................................................................................... 9
Alternative:......................................................................................................................... 9
Financial Analysis................................................................................................................10
CREDIT RISK:..................................................................................................................11
CASH FLOW SUMMARY...................................................................................................... 12
RATIOS.................................................................................................................................. 13
SWOT ANALYSIS:................................................................................................................ 14
PESTEL Analysis for HUBCO............................................................................................. 15
BCG MATRIX:........................................................................................................................16
SPACE MATRIX:................................................................................................................... 17
CONCLUSION:...................................................................................................................... 18
REFERENCES:..................................................................................................................... 19
APPENDIX:............................................................................................................................19

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 Introduction

HUBCO is a growth-oriented company that is committed to developing new power projects to meet
the growing energy needs of Pakistan. The company's current growth pipeline includes a number of
projects in power, water, and renewables.

HUBCO is also a responsible corporate citizen that is committed to giving back to the communities in
which it operates. The company has a strong CSR program that focuses on education, livelihood,
philanthropy, health, and infrastructure.

Hub Power Company (Hubco), a 47.5% shareholder and sponsor of the China Power Hub Generation
Company (CPHGC), a joint venture established under the China-Pakistan Economic Corridor (CPEC)
that owns and operates imported coal-fired power plants in Balochistan, served a notice on
Wednesday to encash a $150 million guarantee. Not long after, on Thursday, Hubco notified the stock
exchange that it had filed a lawsuit against this encashment notification and that the parties concerned
had also received summonses from the court.

However, as per the terms of the Completion Guarantee Agreement that Hubco, China Power
International, and other Chinese lenders of CPHGC signed, Hubco had somehow agreed to guarantee
not only the start-up of the power plants but also the fulfilment of the Government of Pakistan's
obligation with respect to all CPEC power producers and the establishment of a special fund to settle
future invoices of CPHGC on time. In theory, the project wouldn't be deemed finished until this last
requirement—which is mostly outside of Hubco's control—was satisfied. Moreover, Hubco would be
unable to release itself from the assurance it had given till then.

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 COMPANY OVERVIEW:
VISION STATEMENT

Fueling lives through energy.

MISSION STATEMENT

To be a growth-oriented company recognized for international standards in safety and environment in

providing reliable and affordable energy; serving the country, its stakeholders and local community as
a responsible corporate citizen.

CORE VALUES

– Passion – Ownership – Winning – Enjoyment – Renewal

COMPANY’S BACKGROUND:

The Hub Power Company Limited (HUBCO) is Pakistan's first and largest Independent Power
Producer (IPP). It was established in 1991 and has a combined installed power generation capacity of
3,581 MW. HUBCO operates a diverse portfolio of power plants, including:

❖ Hub Power Plant (1,292 MW) - RFO-fired thermal power plant

❖ Narowal Power Plant (225 MW) - RFO-fired engine based combined cycle power station
❖ Laraib Power Plant (84 MW) - Run-of-the-river hydel IPP
❖ CPHGC Power Plant (1,320 MW) - Imported coal-based power plant
❖ TEL & ThalNova Power Plants (660 MW) - Indigenous fuel-based lignite-fired power plants
❖ ENI Pakistan (Prime) (13.8 MM boe) - Oil & gas company
❖ Thar Energy Limited (TEL) (11.4 MTPA) - Coal mining company
❖ Thar O&M Services Company (SECMC) - Operations & maintenance company

The Hub Power Company Limited (HUBCO), with a total installed power generation capacity of
3,581 MW, is the nation's first and biggest Independent Power Producer (IPP). Our Hub Plant, which
is one of Pakistan's most effective RFO fuelled thermal power plants and provides consistent and
dependable electricity to the national grid, is located at Mouza Kund, Hub in Balochistan. Our
Narowal Plant, situated in Mouza Poong, Narowal, Punjab, is a combined cycle power station that
runs on an RFO fire and is powered by engines. A run-of-the-river hydroelectric power facility called
Laraib Energy Limited, located 8 km downstream of the Mangla Dam in Azad Jammu and Kashmir, is
also owned by HUBCO to the tune of 75%. Our joint venture, China Power Hub Generation Company
Limited (CPHGC), with its integrated coal jetty, is a 1320 MW imported coal-based power plant that
has commenced its commercial operations. It offers reliable and reasonably priced electricity to more
than 4 million households.

For its upcoming expansion plans, HUBCO has formed two fully owned subsidiaries: Hub Power
Holdings Limited (HPHL) and Hub Power Services Limited (HPSL). The purpose of HPHL's

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incorporation is to finance upcoming expansion initiatives. HPSL oversees the operation and
maintenance of HUBCO's current power assets, which include the domestic coal-based expansion
projects. Furthermore, HPSL is investigating other onshore and offshore business opportunities.

Business Strategy:

Business strategy is based on unwavering ambition for growth and development, and unwavering
commitment to growing value for our shareholders. Demonstrated commitment to develop and
revolutionise the energy landscape of Pakistan by diversifying and expanding existing portfolio to
enhance sustainability and growth. Business strategy for the coming years will include: Maintaining
our Health, safety and environmental performance (HSE) systems in line with the best international
practices Increasing the dependability and sustainability of core business Utilising technical expertise
to deliver cost-effective operational and maintenance services Diversifying business portfolio and
client base by investing in exploration and sustainable infrastructure projects Investing in sustainable
and domestic sources of energy for Pakistan Strengthen team by recruiting, hiring and retaining
world-class talent By building success, enable to share with local communities, partners and
stakeholders. By investing a portion of our profits in developmental initiatives, Hoping to
revolutionise the socio-economic

AREA OF INTEREST:

The area of interest on which I am working is Corporate governance and strategic decisions which is
further subdivided into shareholders rights, Special Funds, Transparency and Disclosure, Risk
Management, Compliance and Legal Framework.

Circular DEBT:
To put things in perspective, Pakistan's power industry is set up so that all private power providers are
required to sell their electricity to the government, namely to the Central Power Purchasing Agency
(CPPA-G). The government cannot really afford the price at which the energy is produced and, due to
political pressures, does not want to make customers pay for it either because of some poor decisions
made many years ago on the production side and weak infrastructure on the transmission side. This
results in cyclical debt, which is resolved by the government making successive one-time payments to
electricity producers to pay off their outstanding debts after they remain unpaid for extended periods
of time.

Revolving Funds:
All payments made by the Pakistani government must pass through the Controller General of
Accounts (CGA), the country's top public accounting body that reports to the Federal Ministry of
Finance, with the exception of those government agencies that have their own accounting systems.

Occasionally, though, particularly in the case of development initiatives supported by donors, the
payments are handled through Revolving Fund Accounts, which fall outside the purview of CGA.
These are essentially set up to circumvent the intricacies and protracted procedures found in the
accounting systems used by the public sector. Rent-seeking and delays are avoided by not putting

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every transaction through the government system, i.e., by doing pre-audits as a control exercise. This
guarantees an uninterrupted and constant flow

SPECIFIC PROBLEM:
China Power Hub Generation Company (CPHGC) served a notice to encash a $150 million guarantee
given by its own Pakistani sponsor and 47.5% shareholder Hub Power Company (Hubco) on
November 24, 2022. The CPHGC is a joint venture company formed under the China-Pakistan
Economic Corridor (CPEC) that owns and operates imported coal-fired power plants in Balochistan.

Hubco has since initiated legal proceedings against the encashment notice and the court has issued
summons to the parties involved. Hubco has also stated that it has a strong legal case and is confident
that the court will rule in its favour.

It is also worth noting that the CPHGC has been facing a number of operational challenges in recent
years. These include protests from local communities over environmental concerns and delays in
receiving payments from the government of Pakistan. It appears that the administration was finally
prepared to establish the fund, despite taking its sweet time. To address the liquidity issues of CPEC
power producers, the government of Pakistan has already established a Rs 50 billion revolving fund
account named the "Pakistan Energy Revolving Fund," according to a letter sent by CPPA-G on
behalf of the government last Friday to Ren Lihui, the Chinese CEO of CPHGC. This letter states that
as of this month, a withdrawal of Rs 4 billion per month can be made against the bills of CPEC power
companies. "Essentially, the government of Pakistan is meeting the demand for a Revolving
Account—which is intended to address the 22% shortfall—through special payments and thus
Pakistan Energy Revolving Fund” the letter said.

Ren Lihui replied to CPPA-G the following business day. He did, however, request that the CPPA-G
inform the Chinese government immediately of this development. "Since the Revolving Account
Agreement is a government-to-government agreement under the CPEC framework, we kindly ask
your good office to kindly communicate this information about the establishment of the Pakistan
Revolving Account Fund to the Chinese Government and CPEC Joint Coordination Committee
(JCC)." As it is crucial for us to make sure that the creation of the Pakistan Energy Revolving Fund by
the CPPAG/GOP satisfies the requirements of the Revolving Account Agreement, this would hasten
the approval process from the Chinese government and the lenders. He answered.

Why is the Chinese call guarantee?

The guarantee, which came in the form of a standby letter of credit from a group of Pakistani banks
led by the National Bank of Pakistan, was scheduled to expire on Wednesday, November 23, 2022.
Hubco had the option to extend this standby letter of credit for an additional year, but a person with
direct knowledge of the company says that China Power International, Hubco's Chinese partner, made
it very clear to the management that it would not rely on the guarantee—"not even if the Chinese
lenders asked for it." The Chinese partner's choice to honour their word and genuinely call the
promise, however, surprised Hubco. According to the source, the CPHGC partner's Chinese delegate

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implied that the Chinese had ulterior motives by failing to convene a board meeting to consider this
insinuating mala fide intentions on part of the Chinese

Conversely, CPHGC had implied in their reply to CPPA-G that the matter remains unresolved until
they receive approval from the Chinese government and, by extension, their lenders. The issue is that
Hubco neglected to renew the standby letter of credit, which was due to mature today. According to
Asif Qureshi, chairman of a prestigious brokerage firm, CPHGC called on the standby letter of credit
so that it wouldn't run out of choices after November 23. He was speaking with Dawn. Qureshi's point
is that CPHGC called for the guarantee because they wanted to be on the safe side, not because they
were having severe cash flow problems or had become avaricious.

Conversely, CPHGC had implied in their reply to CPPA-G that the matter remains unresolved until
they receive approval from the Chinese government and, by extension, their lenders. The issue is that
Hubco neglected to renew the standby letter of credit, which was due to mature today. According to
Asif Qureshi, chairman of a prestigious brokerage firm, CPHGC called on the standby letter of credit
so that it wouldn't run out of choices after November 23. He was speaking with Dawn. Qureshi's point
is that CPHGC called for the guarantee because they wanted to be on the safe side, not because they
were having severe cash flow problems or had become avaricious.

Hubco was obviously taken aback by this, though. Feeling deceived by their joint venture partners,
Hubco's management promptly filed a lawsuit. Prior to the banks paying the Chinese against the prior
guarantee, Hubco was reportedly considering providing a fresh standby letter of credit within the next
10 days, according to allegations that surfaced earlier on Thursday. If this had been approved by the
Chinese, it would have ended the matter without requiring Hubco to pay interest in the event that the
guarantee was actually cashed and turned into a bank loan worth Rs 33 billion ($150 million) that was
made available to Hubco. Financing Support for CPHGC Pursuant to the Financing Support
Agreement with the CPPHGC Lenders, the Parent Company committed to arrange working capital
financing through HPHL in the amount of $90. 25 million in the event of CPHGC failed to establish a
working capital base for its operations.

This commitment is valid until all 4,444 loans of the CPHGC project are repaid. Pursuant to the
Completion Security Agreement dated October 24, 2017 between HPHL, China Power Holding
Limited, the Parent Company, CPIPIL, CPHGC and the Lenders of CPHGC, the Parent Company is
required by to furnish SBLC in the aggregate money is 150 million USD.

Ensure investment in the form of equity or subordinated debt (directly or through HPHL) to bridge
the financial gap, if any, of CPHGC: 189 a) to complete the project with the lender's satisfaction; and
b) repay all principal, interest, fees or any other amounts that CPPHC may owe under Financing
Document to the Financing Parties. The parent company has issued this SBLC by entering into an
agreement with the local banks by providing security over all the current and future assets of the
parent company in addition to the current assets. If the SBLC is not renewed 15 days before
expiration, CPHGC has the right to appeal the SBLC. On February 23, 2023, the CPPHC coal-fired
power plant was declared a “Completed Project” by CPHGC lenders.

The Project Completion Date (PCD) Declaration exempts the parent company from the obligation to
maintain the $150 million SBLC. To relieve the parent company of the obligation to maintain a

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standby letter of credit, it was agreed that the parent company, by deed of undertaking, would extend
its existing obligation to pay any corresponding amount for participating in CPHGC. up to a
maximum of $150 million that CPHGC owes to the relevant lenders after CPHGC's primary lender,
China Development Bank (CDB) makes any recourse, according to the CPHGC's financing
documents are set forth in the Assurance of Completion dated October 24, 2017. As amended and
restated from time to time, between CPHGC, its sponsors and shareholders and CDB, until the
funding CPHGC received from its lenders was fully repaid. The 4,444 shares held by HPHL in
CPPHC were pledged on behalf of the securities trustee to secure the parent company's obligations
under the CPPHC financing documents.

Below is a summary of the financial data provided by CPHGC:

FINANCIAL SUMMARY 2023 2023 2022

(Rs. '000s) (Rs. '000s)
Non-current assets 379,135,556 300,666,231
Current assets 221,160,959 163,057,354
Total assets 600,296,515 463,723,585
Non-current liabilities -290,817,974 -229,567,646
Current liabilities -107,235,463 -93,497,882
Total liabilities -398,053,437 -323,065,528
Net assets of the associate available for distribution 202,243,078 140,658,057
Proportion of HPHL's interest in associate 47.50% 47.50%
96,065,462 66,812,577
Goodwill 4,873,649 4,873,649
Carrying amount of HPHL's interest in associate as at June 30 100,939,111 71,686,226
Revenue for the year 167,807,786 145,917,217
Profit for the year 61,585,355 19,852,685
Other comprehensive (loss) / income for the year -334 -2,343
Total comprehensive income for the year 61,585,021 19,850,342

CPHGC has tax provisions where the tax authorities have claimed an amount of Rs7,638.815 million
in notices, demands and orders. However, based on the basis of the case, CPHGC 's management and
CPHGC's tax advisors believe that CPHGC's position is technically correct, so do not make any
provisions. The remaining commitments to be liquidated up to June 30, 2023 amount to Rs.33,486
million (2022: Rs.4,444 million).

HUBCO not issuing new guarantee:

There are more reasons to urge your bank to issue a new standby letter of credit than only the
relatively small bank fees Hubco would have to pay for the issuance of the new guarantee, including

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the moral case for not renewing the guarantee once the Pakistani government has established the
revolving fund. As you can see, in exchange for the banks providing Hubco with this standby letter of
credit, Hubco had to consent to the creation of a charge against all of its fixed assets by the banks as
security against the guarantee. Additionally, as per the guidelines established by the State Bank of
Pakistan (SBP), the entire value of these guarantees is taken into account when calculating the single
party exposure limits, even if at the time they were made they did not actually represent loans.

In light of its recent investments, which included the purchase of Eni Pakistan's assets, Hubco would
require space on its balance sheet to accommodate future bank requests for paid and unfunded
financial facilities. Without a doubt, the creation of this space would have been greatly aided by being
released from this $150 million bank guarantee.

Corporate Governance

REPORTED:
In views of the Significant delays company has identified this as a priority audit item and an area of
higher evaluated risk due to the significance of these trade receivables, the substantial delays in
receiving payments, the possibility of an impairment charge, and the ensuing impact on the
Company's operations and liquidity.

ACTION:
v) contacted the company's management to find out what steps they had taken to ensure that the
receivables could be recovered; vii) reviewed the Implementation Agreement to determine whether
trade debts were secured by a guarantee from the Pakistani government and whether any impairment
needed to be recognized there against the applicable accounting framework; and vii) evaluated the
appropriateness of the related disclosures made in the unconsolidated financial statements in light of
applicable accounting and reporting standards.

Alternative:

Hubco has a number of options to deal with the Chinese demand to encash the $150 million
guarantee. These include:
❖ Negotiating with the Chinese: Hubco could try to negotiate with the Chinese to reach a
settlement. This could involve offering to pay a reduced amount of money, or to provide some
other form of compensation.
❖ Fighting the case in court: Hubco could also fight the case in court. If Hubco is successful, it
would not have to pay the guarantee. However, this could be a lengthy and expensive process.
❖ Issuing a new guarantee: Hubco could also issue a new guarantee to the Chinese. This would
allow Hubco to keep the current guarantee in place, but it would also mean that Hubco would
be liable for the $150 million if the Chinese decide to encash it at a later date.
❖ Raising additional capital: If Hubco is unable to reach a settlement with the Chinese or to
fight the case in court, it may need to raise additional capital to pay the guarantee. This could
be done through a rights issue, a private placement, or a combination of the two.

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The best solution for Hubco will depend on a number of factors, including the company's financial
position, its legal position, and its relationship with the Chinese.
In addition to the above options, Hubco could also try to resolve the issue through political
intervention. This could involve asking the Pakistani government to mediate between Hubco and the
Chinese, or to provide Hubco with financial assistance.
It is also worth noting that the outcome of the case could be affected by the current state of relations
between China and Pakistan. If relations between the two countries continue to deteriorate, it could
make it more difficult for Hubco to reach a settlement with the Chinese.
Overall, the situation is complex and there is no easy solution. Hubco will need to carefully consider
all of its options before deciding on the best course of action.

Financial Analysis

FINANCIAL INSTRUMENTS BY CATEGORY

The accounting policies for financial instruments have been applied to the line items below:
2023 2022
(Rs. '000s) (Rs. '000s)
Financial assets - at FVOCI
Investment in SECMC 3,259,115 3,070,833
Financial assets - at FVTPL
Short term investments - 6.465.204
Financial assets - at amortised cost
Deposits 23,058 21,421
Trade debts 86,751,480 84,749,156
Contract asset 14,817,054
Loans and other receivables 9,807,230 8,504,379
Cash and bank balances 15,553,672 7,527,907

Total 126,952,494 100,802,863

Financial Liabilities - at amortised cost
Long term loans 128,317,616 104,559,111
Liabilities against assets subject to finance lease 1,996,962 2,140,856
Trade and other payables 48,129,004 35,434,455
Unclaimed dividend 211,784 223,090
Unpaid dividend 601,632 405,346

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Interest / mark-up accrued 6,824,158 3.107.238
Short term borrowings 3 2,142,495 24,172,516
Total 218,223,651 170.042,612

CREDIT RISK:

Credit risk is the possibility that one party to a financial instrument may fail to fulfil a commitment,
resulting in a loss of money for the other side. The Group's credit risk exposure is negligible for the
reasons listed below.

The maximum credit exposure is represented by the carrying value of financial assets. At the reporting
date, the maximum exposure to credit risk was as follows:

2023 2022
(Rs. '000s) (Rs. '000s)
Deposits and others 23,058 21,421
Trade debts 86,751,480 84,749,156
Contract asset 14,817,054 -
Loans and other receivables 9,807,230 8,504,379
Bank balances 10,686,061 7,474,511
Total 122,084,883 100,749,467

Under the PPAs and IAs, trade debts are recoverable from CPPA(G)/NTDC and backed by GOP
guarantees. Additionally, the sizable sums of other receivables are secured by IAs and recoverable
from CPPA(G) / NTDC. Since local and foreign credit rating agencies have awarded foreign and local
banks with strong credit ratings, there is less credit risk associated with bank deposits.

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 CASH FLOW SUMMARY
2023 2022 2021 2020 2019 2018
(Rs. (Rs. (Rs. (Rs. (Rs. (Rs.
Millions) Millions) Millions) Millions) Millions) Millions)
Opening -21,281 -26,768 -29,402 -33,799 -21,349 -18,867
Net Cash Flow generated from /
(used in) operating activities 31,638 21,015 7,180 415 117 6,939
Net Cash Flow generated from /
(used in) investing activities 8,097 -1,889 4,223 -7,221 -24,720 -7,305
Net Cash Flow used in financing
activities -37,846 -13,638 -8,769 11,203 12,153 -2,116
Closing -19,392 -21,281 -26,768 -29,402 -33,799 -21,349

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 RATIOS
2023 2022 2021 2020 2019 2018
Liquidity Ratios
Current Ratio Times 1.04 1.19 1.24 1.09 0.92 0.96
Quick / Acid Test Times 1 1.15 1.18 1 0.85 0.89
Ratio
Cash to Current Times 0.014 0.006 0.004 0.006 0.073 0.004
Liabilities
Cash Flow from % 71.07 33.6 22.24 1.51 0.32 9.05
Operations to
Sales

Working capital Rs. in 2,979 13,329 18,029 8,237 -7,906 -3,666

million

Capital Structure:

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 SWOT ANALYSIS:
A SWOT analysis for Hub Power Company (HUBCO) can provide an overview of its internal
strengths and weaknesses, as well as external opportunities and threats. Please note that this analysis
is based on information available up to September 2021, and the company's situation may have
evolved since then. Here's a sample SWOT analysis for HUBCO:

Strengths:
● Large Installed Capacity: HUBCO operates one of the largest thermal power plants in
Pakistan, which contributes significantly to the country's energy needs.
● Experienced Management: The company has a seasoned management team with a track
record of operating and maintaining power generation facilities.
● Diversified Fuel Mix: HUBCO uses a mix of coal and oil for power generation, reducing its
reliance on a single energy source and potentially mitigating fuel price fluctuations.
● Strong Brand Recognition: HUBCO is a well-known and respected brand in the energy sector,
which can be advantageous for attracting investments and partnerships.
● Government Contracts: The company has secured long-term power purchase agreements with
the government of Pakistan, ensuring a stable revenue stream.
Weaknesses:
● Dependence on Fuel Imports: HUBCO relies on imported coal and oil for power generation,
which can expose it to currency exchange rate fluctuations and supply chain vulnerabilities.
● Regulatory Challenges: The energy sector in Pakistan is subject to regulatory changes and
political influences, which can create uncertainties for the company.
● Environmental Concerns: The company may face pressure to transition to cleaner energy
sources due to environmental concerns and changing global energy trends.
● Debt Burden: High levels of debt or financial leverage could impact the company's financial
stability and flexibility.
Opportunities:
● Renewable Energy Investments: HUBCO can diversify its energy portfolio by investing in
renewable energy projects, taking advantage of Pakistan's growing interest in renewable
energy sources.
● Infrastructure Development: Pakistan has significant infrastructure needs, and HUBCO could
explore opportunities to expand its operations in power generation or related sectors.

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 ● Export Markets: Exploring the potential for cross-border energy export arrangements could
open up new revenue streams.
● Technological Advancements: Investing in cleaner and more efficient power generation
technologies can position HUBCO as a leader in sustainable energy.
Threats:
● Regulatory Changes: Changes in government policies or regulations can impact the
company's operations and profitability.
● Competition: The energy sector in Pakistan is competitive, and new entrants or market forces
could affect HUBCO's market share and pricing power.
● Environmental Regulations: Stricter environmental regulations could lead to additional
compliance costs and pressure on the company to reduce emissions.
● Economic Conditions: Economic downturns or currency fluctuations could affect the
company's financial health and its ability to service debt.
● Geopolitical Risks: Political instability or regional tensions can impact energy supply chains
and operations.

PESTEL Analysis for HUBCO

Political:
● The political landscape in Pakistan can be volatile and unpredictable. This can create
uncertainty for businesses operating in the country, including Hubco.
● The government's policies on energy and the environment can also have a significant impact
on Hubco's business. For example, changes in tariffs or subsidies can affect the profitability of
the company.
● Hubco is also subject to a number of regulations, such as those on environmental protection
and employee safety. These regulations can be complex and costly to comply with.
Economic:
● Pakistan's economy is relatively underdeveloped, with a high level of poverty and
unemployment. This can limit the demand for electricity and other products and services that
Hubco provides.
● The Pakistani rupee has been depreciating against major currencies in recent years. This has
increased the cost of imported goods and services for Hubco.
● Inflation has also been rising in Pakistan, which can put pressure on Hubco's margins.
Social:
● Pakistan is a rapidly growing country with a young population. This is expected to drive
demand for electricity in the coming years.
● The Pakistani government is also investing heavily in infrastructure development, which is
expected to further boost demand for electricity.
● However, Pakistan also faces a number of social challenges, such as poverty, illiteracy, and
gender inequality. These challenges can make it difficult for Hubco to reach its target
customers and markets.
Technological:
● The technological landscape in the energy sector is rapidly evolving. New technologies, such
as renewable energy and energy storage, are becoming increasingly competitive.

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 ● Hubco needs to invest in new technologies to remain competitive and meet the changing
needs of its customers.
Environmental:
● Pakistan is a country that is vulnerable to climate change. Extreme weather events, such as
floods and droughts, can damage Hubco's infrastructure and disrupt its operations.
● Hubco is also under pressure to reduce its environmental impact. The company has committed
to reducing its greenhouse gas emissions and investing in renewable energy.
Legal:
● Hubco is subject to a number of laws and regulations, including those on environmental
protection, employee safety, and corporate governance.
● The company needs to ensure that it complies with all applicable laws and regulations.

BCG MATRIX:
The Boston Consulting Group (BCG) Matrix is a strategic planning tool used to analyse a company's
product or business portfolio based on two key dimensions: market growth rate and relative market
share. The matrix categorises products or business units into four quadrants: Stars, Cash Cows,
Question Marks (or Problem Child), and Dogs. Let's create a simplified BCG Matrix for Hubco Power
Company:

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 ​
It's important to note that Hubco's portfolio may consist of a mix of different power generation
projects, including thermal, renewable, and potentially other energy-related ventures. The BCG
Matrix can help Hubco prioritise its investments, allocate resources, and make strategic decisions
based on the relative performance and potential of each project within its portfolio.

SPACE MATRIX:

The SPACE matrix is a strategic planning tool that can be used to assess the competitive position of a
company. It is based on four factors: financial strength, competitive advantage, industry strength, and
environmental stability.

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Overall SPACE matrix assessment HUBCO's SPACE matrix assessment is positive. The company has
a strong financial position, a number of competitive advantages, and operates in a growing industry.
However, the environmental stability of the industry is a challenge.

Space matrix recommendationsBased on the SPACE matrix assessment, HUBCO should focus on the
following strategies:

❖ Continue to invest in its power plants to maintain its competitive advantage.

❖ Diversify its portfolio of power plants by investing in renewable energy sources.
❖ Expand its operations to other countries in the region.
❖ Work with the government to address the environmental challenges facing the power industry.

Financial strength: Competitive advantage:

HUBCO has a strong financial position. The
company has a healthy balance sheet and a
strong cash flow position. HUBCO is also
well-rated by credit rating agencies.
HUBCO has a number of competitive
advantages. These include its large installed
capacity, its diversified portfolio of power
plants, and its strong brand recognition.
HUBCO also has a strong track record of
operating and maintaining its power plants
efficiently.

Industry strength: Environmental stability:

The power industry in Pakistan is growing
rapidly. This is due to the country's growing
population and its economic development. The
government of Pakistan is also supportive of the
power industry and has put in place a number of
policies to encourage investment in the sector.
The environmental stability of the power
industry in Pakistan is challenging. This is due
to a number of factors, including the country's
vulnerability to climate change and its limited
water resources. The government of Pakistan is
taking steps to address these challenges, but it is
likely that the environmental stability of the
industry will remain a challenge in the future.

By implementing these strategies, HUBCO can continue to grow and succeed in the future.

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CONCLUSION:

As our two nations have engaged in practical financial cooperation, China has consistently assisted
Pakistan in growing its economy, enhancing the standard of living for its citizens, and preserving its
financial stability.

China has been the world's greatest investor in renewable energy (RE), according to the International
Energy Agency (IEA), with investments totaling $758 billion between 2010 and mid-2019.
Particularly in wind and solar PV, China's RE sector leads the world and supports over 5 million
employment worldwide.

The power sector in Pakistan has benefited greatly from the China-Pakistan Economic Corridor, with
over 20 projects totaling about 10,000 megawatts and an investment exceeding $20 billion.
Pakistan is looking for ways to remove the current obstacles and provide clear, stable rules, access to
funding, and suitable infrastructure in order to draw Chinese investment in renewable energy.

It appears that there will be some sort of resolution to the issue. All parties involved met in the Prime
Minister's Office to discuss the "issues of CPHGC and Hubco," with Mohammad Jehanzeb Khan, the
prime minister's special assistant for government effectiveness, serving as the meeting's chairman.
During the discussion, the Chinese government gave Hubco's partner in China the assurance that they
will formally notify the Chinese government about the creation of the revolving fund account and
obtain their approval. This indicates that the government is taking proactive measures to find a
solution, as it was their bureaucratic inaction that initially led to this situation.

REFERENCES:
https://hubpower.com/wp-content/uploads/2023/10/HubcoAnnualReport22-09-23.pdf

https://www.globaldata.com/company-profile/the-hub-power-co-ltd/swot-analysis/

https://profit.pakistantoday.com.pk/2022/11/24/chinese-want-to-encash-150m-guarantee-by-hubco-but
-why/#:~:text=LAHORE%3A%20The%20China%20Power%20Hub,Company%20(Hubco)%20on%
20Wednesday.

https://www.dawn.com/news/1727971

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https://issuu.com/pakistantoday-paperazzi/docs/epaper_22-11-25_isb

Kazim Alam, Dawn, Islamabad , 2022-11-24, https://asrc.sdpipk.org/news_article.php?id=271289

https://hubpower.com/wp-content/uploads/2022/10/Investor_Presentation-Sep-2021.pdf

APPENDIX:

20