KARACHI, March 28: The sale of International Power plc (IPR) controlling stake in Hub Power Company Limited (Hubco) is only half the story. The other and possibly the sunny side is that the foreign sponsor exit from Hubco does not signify the foreign energy giant`s decision to quit the country.

According to company`s website and analysts, the IPR has only made an internal decision to rebalance its business portfolio. So at the same time as it is divesting its entire 17.4 per cent stake in Hubco, IPR has entered into another sale and purchase agreement to increase its holding in Uch-1 (a 551MW gas based power plant) by 20.1 per cent.

Following the acquisition of additional stake, IPR would own 94.6 per cent of Uch-1 power project.

International Power is selling its total shareholding of 17.4 per cent (approximately 202 million shares) in Hubco at a price of Rs31 per share, representing a total consideration of close to Rs6.3 billion ( 51 million).

The buyers are the Dawood Hercules Corporation Limited, its wholly owned subsidiary DH Fertilisers Ltd, and their affiliates, for 16.4 per cent, and Allied Bank Limited for the remaining one per cent.

Hubco owns the 1,200MW oil-fired Hub plant and the 214MW oil-fired Narowal plant as well as a controlling interest in the 84MW Laraib hydro power plant. The operation and Maintenance (O&M) for the Hub plant will continue to be carried out by an International Power subsidiary.

Separately, International Power is acquiring an additional 20.1 per cent of Uch-1 (a 551MW gas fired project) from CER (majority owned by Swicorp, a private equity company), taking the IPR holding up to 94.6 per cent (521MW net).

The gross assets value of Uch-1 at December 31, 2011 stood at 357 million euro.

There would be no change in International Power`s 100 per cent holding in Uch-2 (375MW), which is currently under construction.

The deal size of additional stock acquisition by IPR in Uch-1 has not been disclosed. That is possibly because unlike Hubco, Uch is a non-stock market listed entity and therefore not required to make `material disclosures` The IPR, however, believes that the sale of Hubco offers an attractive return and the additional interest in Uch-1 would result in an increased ability to maximise synergies between the two adjacent Uch plants.

Analysts said that Uch has a strong position in the merit order due to its reliance on indigenous gas, instead of expensive imported oil.