AGM of Hubco to elect new board of directors

A high-profile annual general meeting (AGM) of Hub Power Company is due on 27th September 2012 which will also elect new board of directors (BoD). After the exit of the two founding sponsors from Hubco during FY12 (Xenel Group and International Power), the election of BoD has assumed added importance, analysts said.
From the profile of nominated candidates (16 nomination for 12 seats), Dawood Group is in a position to secure at least 50 percent of the seats and with the possible support from like-minded investors may obtain majority on the BoD, in our view, an analyst at KASB said. "We reckon reconstitution of BoD bodes well for existing shareholders as the new board may lay more focus on value creation", he added.
"While the possibility of change in senior management ranks remains, we highlight the changes in management or sponsors are unlikely to alter the terms of the PPA", he said. "We have compiled the list of candidates and their respective background to ascertain which group may obtain majority on the BoD", he said.
A total of 16 candidates have filed for nomination for 12 seats as per a company's notice to Karachi Stock Exchange. As per simple mathematics, for one seat on BoD, total 97 million or 8.3 percent stake is required. From the profile of nominated candidates, Dawood Group is in a position to secure at least 50 percent of the seats and with the possible support from like-minded investors may obtain majority on BoD, he said. Dawood Group has filed for a total of 10 seats out of 12 available seats and 16 candidates. The group is poised to obtain majority on the board either on its own or with the support of like-minded investors.
Some of the institutions with large shareholding have not filed for nomination. Dawood Group may count on the support from such institutions. Both Fauji Foundation and MCB Bank have filed nomination for one seat each on the BoD. "We see easy sailing for both", he said.
NBP, a public sector bank with a large shareholding in Hubco, has not fielded a candidate. Interestingly, State Life Insurance Corporation, another public sector entity has nominated candidate. "While the possibility of change in senior management ranks following a reconstitution of BoD remains, we highlight that changes in management or sponsors is unlikely to alter the terms of the Power Purchase Agreement", he said. "Similarly, we see little impact on the day-to-day operations of the company."
Under the long-term contract, IP will continue to act as O&M contractor for the 1200MW Hub plant (current contract expires in 2017) while TNB of Malaysia will operate and maintain Narowal plant (213 MW) impact and also a shift in strategy.
"We reckon reconstitution of BoD bodes well for existing shareholders as the new board may lay more focus on value creation via up-gradation, higher efficiency benchmarks in the plant operations and expansion", he said. However group's ability to exercise its discretion while pursuing growth may face limits. Many of the shareholders on the list tend to have need for stable cash returns.