Narowal Energy Limited (also known as "NEL" or "the Company"), a wholly owned subsidiary of HUBCO, has established a 225 MW RFO-fired power plant at Mouza Poong, Narowal, Punjab, located approximately 150 km northeast of Lahore. Spanning 62 acres, the Narowal Power Plant was constructed in 2010 and commenced commercial operations on April 21, 2011. The facility is an RFO-fired, engine-based combined cycle power plant, consisting of 11 generating sets powered by MAN 18V48/60 engines, each with a capacity of 18.428 MWe. The plant also includes 11 Alborg Heat Recovery Steam Generators and a single air-cooled condensing steam turbine manufactured by Dresser-Rand, with a designed output of 16.45 MWe. These four-stroke, medium-speed, turbocharged, and charge air-cooled engines are capable of operating as base-load units on RFO. Under ISO conditions, the plant delivers a net generation capacity of 225 MWe with an average combined cycle efficiency of 45%.

As per the latest notification issued by NEPRA, NEL has been granted a capacity tariff of PKR 2.4560/kWh for the quarter spanning January to March 2025. This tariff encompasses various components, including Fixed O&M – Foreign and Local, Cost of Working Capital, Return on Equity (ROE), and Return on Equity During Construction (ROEDC). In addition, the Variable O&M tariff has been revised to PKR 2.7155/kWh for the same period. These tariff components are subject to quarterly adjustments and are indexed to local and US Consumer Price Indices (CPI), the PKR/USD exchange rate, and KIBOR. Furthermore, the Energy Tariff, which is revised monthly in line with fluctuations in fuel prices, stood at PKR 31.1235/kWh for March 2025.

The Return on Equity is 17% based on the agreements with NEPRA at the time of initiation of the project.

The Company is a wholly owned subsidiary of The Hub Power Company Limited (HUBCO).

The ownership structure of NEL has historically shown stability emerging from sponsors' commitment to operate and expand their footprint in the power sector. NEL is amongst the various Independent Power Producer projects undertaken by the sponsors to add to their strategic portfolio.

HUBCO Group is one of the largest conglomerates in the country, primarily focused on the power sector. Under the leadership of Mr. Habibullah Khan, the group has expanded into various sectors and has a proven track record of successfully delivering projects from initial concept through to operational success.

HUBCO’s financial strength is highlighted by a diverse investment portfolio and stable dividend streams from its various portfolio companies across the energy chain. This financial strength enables the sponsors to provide essential support to the Company whenever needed, ensuring resilience and growth.

NEL is governed by a Board of Directors comprising six members, including five Non-Executive Directors and one Executive Director (the CEO). The Non-Executive Directors represent the HUBCO Group, the parent entity. Given the nature and scale of the Company’s operations, the board composition is considered adequate, ensuring appropriate oversight and strategic direction.

Mr. Kamran Kamal, the CEO and Chairman of  NEL, is an energy technology and policy specialist with extensive experience across business strategy, wholesale electricity market reforms, electricity derivatives, energy technology evaluation, and large-scale infrastructure project structuring. He also serves as the CEO of HUBCO and has held various strategic and executive roles within the group and its associated ventures. Over the years, Mr. Kamal has led major capital projects, developed organizational capabilities, and delivered business outcomes in leadership, executive, and board capacities. Mr. Aly Khan is the Chairman of Pioneer Cement Ltd. and Haleeb Foods Limited, as well as a Director at Qasim International Container Terminal. He is a SECP-certified director in corporate governance. With a decade of international experience across London, Singapore, and New York, Mr. Khan has worked with institutions such as Citigroup and Yang Ming Marine Transport Corporation in various management and training roles. In Pakistan, he has played a vital role in several ventures, including leading the development of the country’s first commercial LEED-certified building. Mr. Amjad Ali Raja has been part of the HUBCO Group since 2013, serving in multiple leadership positions before becoming the CEO of Thar Energy Limited and ThalNova Power Thar Limited in July 2024. With an engineering background and over 22 years of experience in the energy sector, Mr. Raja brings deep technical expertise and project leadership capabilities to the group.

For effective oversight, the board conducts regular meetings as and when required to discuss matters relating to the Company and plant operations. Furthermore, the attendance of board members during the meetings is satisfactory to ensure proper supervision of the Company's affairs and to advise the management on key issues.

The board and management ensure the timely preparation of financial statements that contain all the material disclosures. Furthermore, all the financial information contained in the statements is complete and fair. A. F. Ferguson & Co. is the external auditor of the Company for the period FY24.

Although not very detailed and comprehensive, the Company deploys a streamlined organizational structure with proper reporting lines and a hierarchical structure. As of June 30, 2024, the total number of employees was recorded at 81, including seconded/permanent as well as contractual employees. Each division is headed by a senior resource reporting directly to the CEO.

The senior management comprises individuals having the relevant experience and expertise required for their respective roles. Mr. Kamran Kamal has been the CEO of the Company since 2021 and brings vast experience working in the local energy sector. He has been associated with the HUBCO group in various capacities and is also serving as the CEO of HUBCO and a member of the board of its portfolio companies.

The management monitors overall performance to maintain optimal effectiveness and ensure continuous improvement. Furthermore, the management is supported by the board in key decisions, which ensures operational stability and strategic success.

The Company maintains an internal audit function to maintain compliance with policies and ensure that data and information about the Company are retained. The function ensures that data relating to billing and invoicing, receivables, payables, inventory, generation, etc., is accurate and free from any material error. Furthermore, the management also retrieves regular reports relating to the plant from the O&M contractors to monitor the ongoing smooth operations of the plant.

The electricity generated by Narowal Energy is transmitted to the National Transmission and Despatch Company (NTDC) under a Power Purchase Agreement (PPA) dated November 20, 2008. The PPA is valid for a term of 25 years, commencing from the Commercial Operations Date (COD) of April 21, 2011.

On February 11, 2021, the Company entered into a Master Agreement with NTDC and the Central Power Purchasing Agency (Guarantee) Limited [CPPA(G)], through which NTDC transferred its rights and obligations under the PPA to CPPA(G). The PPA was subsequently renegotiated in 2021 as part of power sector reform efforts initiated by a government task force to address the escalating circular debt.

In February 2025, Narowal Energy entered a new operational phase and executed an Amendment Agreement with the Government of Pakistan and CPPA(G). This amendment introduced tariff adjustments and transitioned the return on equity component to a hybrid take-and-pay model. The full implications of this change remain to be seen and will become clearer over time.

The operations and maintenance (O&M) of the plant are outsourced to a wholly owned subsidiary of HUBCO, Hub Power Services Limited (HPSL), to ensure availability and applicability. HPSL is also providing O&M services to the other power plants of the group.

The Company has entered into a long-term Fuel Supply Agreement (FSA) with Bakri Trading Company for the uninterrupted supply of furnace oil for the plant's operations. As per the PPA, the Company has to maintain a minimum amount of inventory in reserve to remain available. Although the Company assumes all the resource risk but the nature of the long-term contract ensures continuous supply.

Narowal Energy Limited has adequate insurance coverage for property damage and business interruption. The insured values for damages include property damage, partially disturbed amount of US$ 1.783 million (up to PKR 509.6mln) & business interruption cover.

In FY24, Pakistan's power generation declined by 1.9% to 127,160 GWh, marking the second consecutive year of contraction. The decline was primarily attributed to elevated electricity tariffs, persistent inflation, and a slowdown in overall economic activity. The country's total installed power generation capacity marginally increased by ~0.3% year-on-year to 45,888 MW (FY23: ~45,738 MW), while actual generation declined by ~0.6% YoY to an average of 15,662 MW. The generation capacity is diversified across multiple sources, with thermal power contributing 56%, hydel 23%, nuclear 8%, and renewables 6%. Approximately 93% of the total power was generated through CPPA-G, while 7% was contributed by K-Electric (KE). In a bid to diversify the energy mix and reduce reliance on imported fuels, the government has placed increasing emphasis on the adoption of renewable energy and indigenous resources. Within the thermal segment, a notable shift in reliance has occurred: from Natural Gas (~25%) and RFO (~10%) in FY20, to RLNG (~46%) and Coal (~31%) in FY24. This transition has been driven largely by the depletion of domestic natural gas reserves and the high cost of RFO-based generation.

During the nine months ended FY25, Narowal Energy Limited generated 22 GWh of net electrical output, representing a significant decline from 280 GWh in the same period of FY24 (9MFY24) and 201 GWh for the full year FY24. This decrease in generation was primarily driven by the lower energy costs of other thermal IPPs, particularly those utilizing coal and RLNG, which led to reduced dispatch demand for RFO-based plants such as NEL.

The plant remained fully operational during the period, maintaining an availability factor of 99%, which exceeds the 95% benchmark stipulated in the Power Purchase Agreement.

The Company had successfully repaid the long-term project debt by July 2021. Currently, NEL does not have any outstanding long-term borrowings on its balance sheet.

Amid ongoing liquidity challenges in the power sector due to circular debt, the Company received a payment of approximately PKR 8.8 billion from CPPA(G). However, as of March 2025, NEL has outstanding receivables of PKR 1,621 million from CPPA(G), primarily related to capacity invoices and interest accrued on delayed payments.

Due to delayed payments from the power purchaser, the Company has relied on short-term borrowings to procure fuel and manage working capital requirements. As of March 2025, total outstanding short-term borrowings declined to PKR 2,549 million, down from PKR 4,543 million at the end of September 2024.

The Company's cash flow position remains strong, with Free Cash Flow from Operations (FCFO) recorded at PKR 2,746 million in 3QFY25, up from PKR 2,060 million in 1QFY25 (FY24: PKR 6,428 million). While delayed payments from the power purchaser pose some liquidity challenges, the Company continues to generate robust operating cash flows sufficient to cover its financing obligations. Reflecting this strength, the interest coverage ratio (EBITDA/Finance Cost) stood at a healthy 57.1x during 3QFY25.

Following the full repayment of long-term project debt and a reduction in electricity generation from the plant, the Company’s leverage remains low, reflecting minimal reliance on short-term borrowings to support operational needs. The leverage ratio stands at 14.1%, indicating a strong equity base and a conservative capital structure. Additionally, accumulated profits over the years have further strengthened the Company’s equity position, enabling consistent dividend payments in prior years.