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THE HUB POWER COMPANY LIMITED

UNAUDITED QUARTERLY FINANCIAL STATEMENTS

FOR THE SECOND QUARTER ENDED DECEMBER 31, 2010

CONTENTS THE HUB POWER COMPANY LIMITED Company Information 1 Report of the Directors 3

Auditors’ Review Report to the Members 5 Condensed Interim Unconsolidated Profit & Loss Account 6 Condensed Interim Unconsolidated Statement of 7 Comprehensive Income

Condensed Interim Unconsolidated Balance Sheet 8

Condensed Interim Unconsolidated Cash Flow Statement 9

Condensed Interim Unconsolidated Statement of Changes 10 in Equity.

Notes to the Condensed Interim Unconsolidated Financial 11 Statements

THE HUB POWER COMPANY LIMITED and its Subsidiary Company

Report of the Directors on the Consolidated Financial Statements 16

Condensed Interim Consolidated Profit & Loss Account 17

Condensed Interim Consolidated Statement of 18 Comprehensive Income

Condensed Interim Consolidated Balance Sheet 19

Condensed Interim Consolidated Cash Flow Statement 20

Condensed Interim Consolidated Statement of 21 Changes in Equity

Notes to the Condensed Interim Consolidated 22 Financial Statements

COMPANY INFORMATION

BOARD OF DIRECTORS: Mr. Mohamed A. Alireza H.I. Chairman Mr. Yousuf A. Alireza

Dr. Fereydoon Abtahi Mr. Robin A. Bramley Dr. Asif A. Brohi NBP Nominee Mr. Malcolm P. Clampin

Mr. Taufique Habib Mr. Vince R. Harris, OBE Chief Executive Mr. M. Javaid Iqbal Mr. Qaiser Javed Mr. Ahmad Raza Khan GOB Nominee Mr. Ali Munir Mr. S. Nizam A. Shah

Mr. M. Ashraf Tumbi Mr. Keith Ulyett

MANAGEMENT: Vince R. Harris OBE Chief Executive William Burrough Chief Operations Officer

Abdul Nasir Chief Financial Officer Huma Pasha Chief Internal Auditor

Arshad A. Hashmi Company Secretary Wasif Mustafa Khan Head of Projects

Lesley A. Middlecoat Sr. Manager HR, PR & Admin Shamsul Islam Treasurer PRINCIPAL BANKERS National Bank of Pakistan, Karachi Accounts Banks: Allied Bank of Pakistan

Askari Bank Limited Bank Al-Falah Limited Bank Al-Habib Limited Citibank N.A. Karachi. Habib Bank Limited Habib Metropolitan Bank Limited JS Bank Limited Meezan Bank Limited MCB Bank Limited NIB Bank Limited Pak China Investment Company Limited Pak Kuwait Investment Company (Pvt) Limited Standard Chartered Bank (Pakistan) Ltd., Karachi

Sumitomo Mitsui Banking Corp. Europe Ltd., London United Bank Limited INTER-CREDITOR AGENT: National Bank of Pakistan, Karachi Habib Bank Limited Allied Bank Limited

1

COMPANY INFORMATION

REGISTERED OFFICE: C/o. Famco Associates (Pvt) Ltd., (Formerly Ferguson Associates (Pvt) Limited)

12, Capital Shopping Centre, Second Floor, G-11 Markaz, Islamabad HEAD OFFICE: 3rd Floor, Islamic Chamber of Commerce Bldg; ST-2/A, Block 9, Clifton, P. O. Box No. 13841, Karachi-75600 Email : [email protected] Website: http://www.hubpower.com LEGAL ADVISORS: Rizvi, Isa, Afridi & Angell, Karachi AUDITORS: M. Yousuf Adil Saleem & Co. REGISTRAR: Famco Associates (Pvt) Limited

(Formerly Ferguson Associates (Pvt) Limited) HUBCO NAROWAL Hubco Narowal Project PROJECT Mauza Poong

5 KM from Luban Pulli Point on Mureedkay- Narowal Road Distric Narowal

2


REPORT OF THE DIRECTORS FOR THE SIX MONTHS ENDED 31 DECEMBER 2010

The Directors take pleasure in presenting the un-audited Financial Statements for the Six Months ended December 31, 2010. As required these have been subject to a limited review by our External Auditors and their Review Report is annexed. The Hub Power Company Limited (the "Company") was incorporated in Pakistan on August 1, 1991 as a public limited company under the Companies Ordinance, 1984 (the "Ordinance"). The shares of the Company are listed on the Karachi, Lahore and Islamabad Stock Exchanges and its Global Depository Receipts are listed on the Luxembourg Stock Exchange. The principal activities of the Company are to develop, own, operate and maintain power stations. The Company owns an oil-fired power station with an installed net capacity of 1,200 MW in Balochistan and a 214 MW oil-fired power station which is under construction at Narowal in Punjab. The Company also has a 75% controlling interest in Laraib Energy Limited (LEL), a subsidiary company which is constructing an 84 MW hydel power project near Mangla in Azad Kashmir; this project achieved Financial Close in December 2009 and is required to achieve Commercial Operations Date within 42 months of Financial Close which will be June 2013. Our customer WAPDA remains unable to meet its obligations to HUBCO in accordance with the Power Purchase Agreement (PPA) which are secured under a sovereign guarantee of GOP. On the date of this Report an amount of Rs. 88 billion is outstanding against WAPDA of this Rs. 82 billion is classified overdue (payable immediately). In addition, WAPDA has failed to provide a Letter of Credit for Rs. 12.92 billion as required under the PPA. Despite frequent follow-up with the concerned Ministry of GOP it is regretted there has been no improvement in the situation; as a consequence your Company owes Rs. 76 billion to PSO for fuel supply, part of which is covered by a Standby Letter of Credit of Rs. 8 billion provided by Hubco. This has also resulted in a irregular supply of fuel which has affected Plant Operations. During the review period the Hub Plant operated at an average load factor of 71% and an average complex availability (ACA) of 85%. Electricity sold to WAPDA was 3,746 GWh. Turnover for the period was Rs. 49,202 million (2009: Rs. 46,168 million) and operating costs were Rs. 44,954 million (2009: Rs. 42,389 million) resulting in a gross profit of Rs. 4,248 million compared to Rs. 3,779 million in the corresponding period last year. The Company earned a net profit of Rs. 2,843 million during the period (earning per share of Rs. 2.46) compared to a net profit of Rs. 2,855 million and (earnings per share of Rs. 2.47) in the same period last year. As reported earlier a delay was encountered in the commissioning of our 214 MW Narowal Project due to a major equipment failure on August 26, 2010. It will be recalled that the Construction Contract committed MAN of Germany to deliver commercial operation by March 31, 2010; this date was extended by the contractor to October 31, 2010 and a financial settlement was negotiated by the Company with MAN. As advised earlier the losses arising from the equipment failure will be included in the claim on the insurers. Following this unfortunate incident the Company believes a completion date of March 2011 is achievable. Due to delay in completion the Government of Pakistan (PPIB) encashed the Company’s Guarantee for USD 1.125 million in December 2010 for not meeting our contractual commitment. As agreed with MAN they have paid the

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Company Rs. 1.7 billion as partial settlement of their ultimate liability; these will be utilized to mitigate the Company’s financial loss due to delay. The Company remains proactive in maintaining and expanding its Corporate Social Responsibility program. Our focus is to support health and education programs in the province of Balochistan, District Labella and in Narowal Punjab. The Directors in compliance with the requirements of the ‘Commission De Surveillance Du Secteur Financier, Societe de Bourse de Luxembourg SA’; are pleased to confirm that to the best of their knowledge, the condensed interim financial statements for the six months ended December 31, 2010 give a true and fair view of the assets, liabilities, financial position and financial results of the Company and are in conformity with approved accounting standards as applicable in Pakistan. Further, the aforementioned business overview includes a fair review of the development and performance of the Company together with the potential risks and uncertainties faced, if any. The Directors would like to draw your attention to the last paragraph of the Auditors’ Review Report relating to note 12.1 to the financial statements. The Directors’ Report on Consolidated Financial Statements (un-audited) of The Hub Power Company Limited (the Company) and its Subsidiary Laraib Energy Limited (the Subsidiary) for the half year ended December 31, 2010 has been separately presented in this Report. The Directors have pleasure in declaring an Interim Dividend of Rs. 2.50 per share.

By Order of the Board

Vince Harris Chief Executive

Karachi: February 22, 2011

4

AUDITORS’ REPORT TO THE MEMBERS ON REVIEW OF INTERIM FINANCIAL INFORMATION

Introduction We have reviewed the accompanying condensed interim unconsolidated balance sheet of The Hub Power Company Limited (“the Company”) as at December 31, 2010 and the related condensed interim unconsolidated profit and loss account, condensed interim unconsolidated statement of comprehensive income, condensed interim unconsolidated cash flow statement, condensed interim unconsolidated statement of changes in equity and selected explanatory notes to the accounts for the six months then ended [here-in-after referred to as “interim financial information”]. Management is responsible for the preparation and presentation of this interim financial information in accordance with approved accounting standards as applicable in Pakistan. Our responsibility is to express a conclusion on this interim financial information based on our review. The figures of the condensed interim unconsolidated profit and loss account and condensed interim unconsolidated statement of comprehensive income for the quarters ended December 31, 2010 and 2009 have not been reviewed as we are required to review only the cumulative figures for the six months ended December 31, 2010. Scope of Review We conducted our review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information as of and for the six months ended December 31, 2010 is not prepared, in all material respects, in accordance with approved accounting standards as applicable in Pakistan. Emphasis of Matter We draw attention to the matters described in note 12.1 to the interim financial information. The ultimate outcome of this contingency cannot presently be determined and accordingly, no provision for any liability that may result has been made in the interim financial information. Our conclusion is not qualified in respect of this matter. Chartered Accountants

Engagement Partner Asad Ali Shah

Karachi Dated: February 22, 2011 5

3 months ended 3 months ended 6 months ended 6 months endedDec 2010 Dec 2009 Dec 2010 Dec 2009

Note (Rs. '000s) (Rs. '000s) (Rs. '000s) (Rs. '000s)

Turnover 24,001,984 24,162,242 49,202,119 46,167,529

Operating costs 4 (21,679,643) (21,898,292) (44,953,674) (42,388,820)

GROSS PROFIT 2,322,341 2,263,950 4,248,445 3,778,709

Other income 5,966 11,875 15,790 35,191

General and administration expenses (97,582) (87,822) (205,572) (175,412)

Finance costs 5 (657,103) (440,687) (1,215,836) (783,141)

Workers' profit participation fund 6 - - - -

PROFIT FOR THE PERIOD 1,573,622 1,747,316 2,842,827 2,855,347

Basic and diluted earnings per share (rupees) 1.36 1.51 2.46 2.47

The annexed notes from 1 to 17 form an integral part of these unconsolidated financial statements.

THE HUB POWER COMPANY LIMITEDCONDENSED INTERIM UNCONSOLIDATED

FOR THE SECOND QUARTER ENDED DECEMBER 31, 2010PROFIT AND LOSS ACCOUNT (UNAUDITED)

Vince R. Harris O.B.E. Taufique HabibChief Executive Director

6


(Rs. '000s) (Rs. '000s) (Rs. '000s) (Rs. '000s)

Profit for the period 1,573,622 1,747,316 2,842,827 2,855,347

Other comprehensive income for the period - - - -

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 1,573,622 1,747,316 2,842,827 2,855,347




FOR THE SECOND QUARTER ENDED DECEMBER 31, 2010STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

7

Dec 2010 Jun 2010Note (Rs. '000s) (Rs. '000s)

ASSETSNON-CURRENT ASSETS

Fixed AssetsProperty, plant and equipment 7 50,370,354 49,614,595 Intangibles 7,093 8,369

Stores and spares 637,023 637,023 Investment in subsidiary 3,428,061 2,610,118 Other assets 56,440 4,133

CURRENT ASSETSInventory of fuel oil 1,958,384 1,559,876 Trade debts 8 74,161,091 66,712,461 Advances, prepayments and other receivables 2,897,026 739,628 Cash and bank balances 844,612 809,311

79,861,113 69,821,276

TOTAL ASSETS 134,360,084 122,695,514

EQUITY AND LIABILITIES

(134,360,084) SHARE CAPITAL AND RESERVE

Share CapitalAuthorised 12,000,000 12,000,000

Issued, subscribed and paid-up 11,571,544 11,571,544


BALANCE SHEET (UNAUDITED)AS AT DECEMBER 31, 2010

CONDENSED INTERIM UNCONSOLIDATED

Revenue Reserve

Unappropriated profit 18,259,674 18,309,733

29,831,218 29,881,277

NON-CURRENT LIABILITIESLong term loans 9 25,066,594 23,444,521 Share premium payable - 41,208 Deferred liability - Gratuity 10,335 15,689

CURRENT LIABILITIESTrade and other payables 10 69,674,235 59,595,332 Interest / mark-up accrued 1,419,582 1,317,961 Short term borrowings 11 6,254,400 6,743,596 Current maturity of long term loans 2,103,720 1,655,930

79,451,937 69,312,819

COMMITMENTS AND CONTINGENCIES 12

TOTAL EQUITY AND LIABILITIES 134,360,084 122,695,514

The annexed notes from 1 to 17 form an integral part of these unconsolidated financial statements.Diff -


8


CASH FLOW STATEMENT (UNAUDITED)

6 months ended 6 months endedDec 2010 Dec 2009

Note (Rs. '000s) (Rs. '000s)

CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the period 2,842,827 2,855,347

Adjustments for:Depreciation 858,390 859,461 Amortisation 1,777 757 Gain on disposal of fixed assets (1,731) (183) Staff gratuity 6,950 13,262 Interest income (6,119) (9,361) Interest / mark-up 1,108,129 697,679

Operating profit before working capital changes 4,810,223 4,416,962

Working capital changes 306,133 (2,814,409)

Cash generated from operations 5,116,356 1,602,553

Interest received 5,290 9,386 Interest / mark-up paid (1,053,528) (667,389) Staff gratuity paid (12,402) -

Net cash from operating activities 4,055,716 944,550

CASH FLOWS FROM INVESTING ACTIVITIES


Fixed capital expenditure (1,614,911) (10,527,330) Proceeds from disposal of fixed assets 2,091 183 Investment in subsidiary (1,048,159) (1,169,572) Other assets (52,307) 172

Net cash used in investing activities (2,713,286) (11,696,547)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of long term loans (489,531) (489,531) Proceeds from long term loans - Narowal - 12,835,098 Proceeds from long term loans - Laraib's investment (net) 2,559,394 - Dividends paid (2,887,796) (2,304,874) Repayment of finances under mark-up arrangements - Narowal - (1,148,890) Finances under mark-up arrangements - Laraib's investment - 1,136,180

Net cash (used in) / from financing activities (817,933) 10,027,983

Net increase / (decrease) in cash and cash equivalents 524,497 (724,014)

Cash and cash equivalents at the beginning of the period (5,934,285) (1,399,564)

Cash and cash equivalents at the end of the period 14 (5,409,788) (2,123,578)



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(Rs. '000s) (Rs. '000s)

Issued capitalBalance at the beginning of the period 11,571,544 11,571,544

Balance at the end of the period 11,571,544 11,571,544

Unappropriated profit

Balance at the beginning of the period 18,309,733 17,960,806

Total comprehensive income for the period 2,842,827 2,855,347

Final dividend for the fiscal year 2009-2010 @ Rs. 2.50 (2008-2009 @ Rs. 2.00) per share (2,892,886) (2,314,309)



STATEMENT OF CHANGES IN EQUITY (UNAUDITED)FOR THE SECOND QUARTER ENDED DECEMBER 31, 2010

CONDENSED INTERIM UNCONSOLIDATED

Total equity 29,831,218 30,073,388



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1. THE COMPANY AND ITS OPERATIONS

2. SIGNIFICANT ACCOUNTING POLICIES

3. BASIS OF PREPARATION


Note (Rs. '000s) (Rs. '000s) (Rs. '000s) (Rs. '000s)4. OPERATING COSTS

Residual fuel oil 20,341,149 20,542,159 42,245,461 39,712,147 Operation & Maintenance 4.1 656,975 657,637 1,353,340 1,318,532 Insurance 121,805 120,171 243,904 240,273 Depreciation 424,123 424,017 847,430 848,098 Amortisation - 80 - 302 Miscellaneous 135,591 154,228 263,539 269,468

21,679,643 21,898,292 44,953,674 42,388,820

4.1

These condensed interim unconsolidated financial statements are unaudited but subject to limited scope review by auditors and are being submitted to theshareholders as required under Section 245 of the Ordinance and have been prepared in accordance with the requirements of IAS 34 "Interim FinancialReporting" as applicable in Pakistan.


The accounting policies and methods of computation followed for the preparation of these condensed interim unconsolidated financial statements aresame as those applied in preparing the unconsolidated financial statements for the year ended June 30, 2010.

UNCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

This represents services rendered by an associated company under Operation & Maintenance Agreement.

NOTES TO THE CONDENSED INTERIM


The Hub Power Company Limited (the "Company") was incorporated in Pakistan on August 1, 1991 as a public limited company under the CompaniesOrdinance, 1984 (the "Ordinance"). The shares of the Company are listed on the Karachi, Lahore and Islamabad Stock Exchanges and its GlobalDepository Receipts are listed on the Luxembourg Stock Exchange. The principal activities of the Company are to develop, own, operate and maintainpower stations. The Company owns an oil-fired power station of 1,200 MW (net) in Balochistan and a 214 MW (net) oil-fired power station which isnearing completion in Punjab. The Company also has a 75% controlling interest in Laraib Energy Limited, a subsidiary company which owns an underconstruction hydel power project of 84 MW.

4.1

5. FINANCE COSTS

Interest / mark-up on long term loans 243,700 277,508 489,621 556,970 Mark-up on short term borrowings 271,019 92,467 534,077 135,000 Miscellaneous finance costs 34,247 21,231 59,707 41,690

548,966 391,206 1,083,405 733,660 NarowalInterest / mark-up on long term loans 756,696 569,198 1,473,931 869,188 Mark-up on short term borrowings - - - 15,150 Other finance costs 11,217 63,497 26,374 146,613

767,913 632,695 1,500,305 1,030,951 Laraib's investmentInterest / mark-up on long term loans 84,431 - 84,431 - Mark-up on short term borrowings - 5,709 - 5,709 Unwinding of discount on share premium payable 9,805 - 24,853 - Other finance costs 13,831 43,772 23,074 43,772

108,067 49,481 132,358 49,481

1,424,946 1,073,382 2,716,068 1,814,092

7.2 (767,843) (632,695) (1,500,232) (1,030,951)657,103 440,687 1,215,836 783,141

6. WORKERS' PROFIT PARTICIPATION FUND

Provision for Workers' profit participation fund 78,681 87,365 142,141 142,767 Payment of Workers' profit participation fund recoverable

from WAPDA (78,681) (87,365) (142,141) (142,767) - - - -

This represents services rendered by an associated company under Operation & Maintenance Agreement.

Less: amount capitalised in the cost of qualifying assets - Narowal

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7. PROPERTY, PLANT AND EQUIPMENT

Operating property, plant and equipment 26,758,330 27,598,326 Capital work-in-progress

Plant betterments 51,571 42,685 Narowal 7.2 23,560,453 21,973,584

23,612,024 22,016,269

7.1 50,370,354 49,614,595

7.1


7.2 Capital work-in-progress - Narowal

Opening balance 21,973,584 8,563,800 Additions during the period / year

Payments for land - 15,354 Housing colony 69,559 39,991 EPC & other costs 374,134 10,650,984 Professional services 69,828 68,072 Advances for stores & spares 65,829 - Insurance cost 4,613 27,215 Land development 86,550 81,230 B i & l t d t ti t 5 1 473 931 2 266 371

Additions to property, plant and equipment during the period were Rs. 1,616.009 million (June 2010: Rs. 13,445.400 million) and disposalstherefrom at net book value were Rs. 0.360 million (June 2010: Rs. 6.348 million).

The Company is required to pay 5% of its profit to the Workers' profit participation fund (the "Fund"). However, such payment does not affect theCompany’s overall profitability because after payment to the Fund, the Company bills this to WAPDA as a pass through item under the Power PurchaseAgreement (PPA).

Borrowing & related transaction cost 5 1,473,931 2,266,371 Other finance costs 5 26,301 173,794 Government fees 1,816 2,779 Testing & pre-commissioning revenue- net (2,815) - Testing & pre-commissioning fuel inventory 750,518 74,555 Liquidated damages - net 7.2.1 (1,339,186) - Other directly attributable cost 5,791 9,439

1,586,869 13,409,784 Transfers during the period / year - -

23,560,453 21,973,584

7.2.1


8. TRADE DEBTS - Secured

Considered good 8.1 74,161,091 66,712,461

8.1 This includes an amount of Rs. 62,104 million (June 2010: Rs. 57,764 million) from WAPDA which is overdue but not impaired because thetrade debts are secured by a guarantee from the Government of Pakistan under the Implementation Agreement. The overdue amount carriesinterest / mark-up at SBP discount rate plus 2% per annum compounded semi-annually.

This represents Liquidated Damages (LDs) recoverable by the Company from the EPC contractor, net of damages charged by powerpurchaser and PPIB for delay in achieving commercial operations date.

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9. LONG TERM LOANS - Secured

Hub plant 5,823,506 6,313,037 Narowal plant 18,787,414 18,787,414 Laraib's investment

Syndicated term finance facility 9.1 2,173,474 - Islamic finance facility 9.2 459,000 - Transaction cost (73,080) -

2,559,394 -

9.3 27,170,314 25,100,451 Less : Current portion of long term loans (2,103,720) (1,655,930)

25,066,594 23,444,521

9.1

9.2

The Company has entered into a long term financing arrangement with various banks / financial institution for an amount of Rs. 3,741 million tomeet its investment obligations in the Subsidiary. The loan is repayable in nine equal installments on semi-annual basis following the six monthsafter the end of availability period which is 42 months from the facility effective date at a mark-up rate of six months KIBOR plus 2.20% perannum. The facility became effective on October 01, 2010. The mark-up is payable on semi-annual basis in arrear starting from the availabilityperiod. Any late payment by the Company is subject to an additional payment of 2% per annum above the normal mark-up rate. This loan issecured by way of second ranking / subordinated charge over all present and future undertaking and assets of the Company other than: (i) assetsrelating to the Narowal power plant; (ii) Commercial Facility Disbursement Account; (iii) any shares in Demerged Company (special purposevehicle that the Company may incorporate under the laws of Pakistan for the purpose of construction, ownership, operations & maintenance ofNarowal project); and (iv) present and future shares acquired in the Subsidiary including bonus shares and right shares.

The Company has also entered into a long term islamic financing arrangement with a bank for an amount of Rs. 759 million to meet itsinvestment obligations in the Subsidiary. The loan is repayable in nine equal installments on semi-annual basis following the six months after theend of availability period which is 42 months from the facility effective date at a mark-up rate of six months KIBOR plus 2.20% per annum. Thefacility became effective on November 24, 2010. The mark-up is payable on semi-annual basis in arrear starting from the availability period. Anylate payment by the Company is subject to an additional payment of 2% per annum above the normal mark-up rate. This loan is secured by wayof second ranking / subordinated charge over all present and future undertaking and assets of the Company other than: (i) assets relating to theNarowal power plant; (ii) Commercial Facility Disbursement Account; (iii) any shares in Demerged Company (special purpose vehicle that the

9.3

10. TRADE AND OTHER PAYABLES


11. SHORT TERM BORROWINGS - Secured

Finances under mark-up arrangements 11.1 6,254,400 6,743,596

11.1

This includes an amount of Rs. 64,775 million (June 2010: Rs. 55,532 million) payable to Pakistan State Oil, out of which overdue amount is Rs. 55,105million (June 2010: Rs. 48,769 million). The overdue amount carries interest / mark-up at SBP discount rate plus 2% per annum compounded semi-annually.

Included herein is a sum of Rs. 1,961.571 million (June 2010: Rs. 1,711.571 million) out of the total available facilities of Rs. 3,000 million(June 2010: Rs. 2,000 million) from an associated undertaking.

The facilities for running finance available from various banks amounted to Rs. 10,500 million (June 2010: Rs. 9,300 million) at mark-upranging between 0.75% to 3.00% per annum above one month KIBOR. The mark-up on the facilities is payable on monthly / quarterly basis inarrears. The facilities will expire during the period from March 14, 2011 to December 31, 2011. These facilities are secured by way of chargeover the trade debts and stocks of the Company pari passu with the existing charge. Any late payment by the Company is subject to an additionalpayment of 2% per annum above the normal mark-up rate.

Narowal power plant; (ii) Commercial Facility Disbursement Account; (iii) any shares in Demerged Company (special purpose vehicle that theCompany may incorporate under the laws of Pakistan for the purpose of construction, ownership, operations & maintenance of Narowal project);and (iv) present and future shares acquired in the Subsidiary including bonus shares and right shares.

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12. COMMITMENTS AND CONTINGENCIES

12.1 (i)

(ii)

(iii)

Pending the resolution of the matters stated above, no provision has been made in these unconsolidated financial statements.

The Deputy Commissioner of Income tax (DCIT) made assessments under section 52/86 of the Income Tax Ordinance, 1979 [ITO,79]amounting to Rs. 1,896 million stating that the Company did not withhold tax at the time of issue of shares to sponsors against projectdevelopment costs incurred by them. The Company deposited tax amounting to Rs. 297 million against the above assessments inaccordance with the departmental procedures. Appeals filed by the Company before the Commissioner of Income tax (Appeals) [the"CIT(A)"] and thereafter with the Income Tax Appellate Tribunal (the "ITAT") were decided against the Company. Against the decisionof the ITAT, the Company filed appeals before the High Court (the "HC"). The HC granted a stay of demand for the outstanding taxliability which according to the provisions of section 136 of the ITO,79 expired on August 2, 1999. However, the HC directed the DCITnot to institute recovery measures without its permission.

The management and their tax and legal advisors are of the opinion that the position of the Company is sound on technical basis andeventual outcome will be in favour of the Company.

Without prejudice to the above appeals, the Company filed an application for the resolution of the matter under the Alternate DisputeResolution (ADR) provided under section 134A of the Income Tax Ordinance, 2001 with the Federal Board of Revenue (FBR). TheAlternate Dispute Resolution Committee (ADRC) constituted by the FBR made certain recommendations to the FBR which required theCompany to pay a total of Rs. 380 million (including Rs. 297 million already paid). However, the Company informed the FBR that therecommendation of the ADRC was not maintainable under the law because ADRC had gone beyond their mandate. The FBR, afterreviewing the recommendations of the ADRC and the letter filed by the Company, decided not to agree with the recommendation of theADRC and let the dispute be resolved by way of appeals pending before the HC.

Without prejudicing its rights, the Company has held several meetings with the FBR in order to settle the matter in an amicable manner.Various options have been discussed but no conclusion has yet been reached.

On the unpaid tax demands referred in (i) above, further assessment orders were issued for Rs. 50 million (Rs. 29 million beingadditional tax and Rs. 21 million being penalty). Against these orders, the Company filed appeals before the CIT(A), who has deleted theamount of additional tax levied of Rs. 29 million and reduced the penalty of Rs. 21 million by Rs. 6 million. Against the decision of theCIT(A), the Company and Income Tax Department filed further appeals before the ITAT which had upheld the decision of the CIT(A).Against this, the Company moved reference application to the ITAT to refer the issue to the HC, which stands rejected by the ITAT. Themanagement and their tax advisors are of the opinion that if the HC decides the appeals against assessments made under section 52/86 ofthe ITO,79 in favour of the Company, the penalty would also be deleted.

12.2

12.3

The Company had filed a petition on June 28, 2000 challenging the application of the Companies Profits (Workers' Participation) Act, 1968 (theAct) to the Company on the ground that since its inception the Company has not employed any persons who falls within the definition of the term"Worker" as it has been defined in the Act.

The petition was filed subsequent to the Company's receipt of the Labour, Manpower and Overseas Pakistanis' Division's letter dated March 14,2000 directing the Company to allocate 5% of its net profit (since its establishment) towards the Workers' Profit Participation Fund and depositthe entire amount of the Fund in the Federal Treasury. The petition had been filed against the Federation of Pakistan through the Secretary,Ministry of Labour, Manpower and Overseas Pakistanis, Labour, Manpower and Overseas Pakistanis Division and, in view of the fact that anypayment made by the Company to the Fund is a pass through item under the Power Purchase Agreement (PPA), against the Water and PowerDevelopment Authority (WAPDA) as a pro forma party.

In connection with the Narowal power plant, subsequent to the period end, the Company has provided Stand By Letter of Credit (SBLC) for anamount of Rs. 1,000 million to Bakri Trading Company (Pvt.) Ltd. for the procurement of fuel. This SBLC will expire on March 21, 2011 and issecured by way of charge over the trade debts and stocks of the Company pari passu with the existing charge. Any late payment by the Companyis subject to a mark-up rate of one month KIBOR plus 4.00% per annum.

In December 2003, the Company decided on a fresh legal review of the petition and thereafter was advised by counsel to withdraw the petitionand to immediately file a fresh petition incorporating all the available grounds. Accordingly, on December 17, 2003 the Company withdrew thepetition and immediately refiled a petition, which incorporated all the available grounds.

Both HUBCO and WAPDA agreed that this petition should proceed and a judgment obtained on merits. Subsequent to the period end, thepetition was dismissed by the High Court (HC). Against the decision of the HC, the Company has filed petition for leave to appeal before theSupreme Court. No provision has been made in these unconsolidated financial statements as any payment made by the Company is a passthrough item under the PPA.

Following the amendments made by the Finance Act 2006 to the Companies Profits (Workers' Participation) Act, 1968 (the Act), the Companyestablished the Hubco Workers' Participation Fund on August 03, 2007 to allocate the amount of annual profits stipulated by the Act fordistribution amongst worker(s) eligible to receive such benefits under the Act and any amendments thereto from time to time (see note 6).

14


Note (Rs. '000s) (Rs. '000s)

13. TRANSACTIONS WITH RELATED PARTIES / ASSOCIATEDUNDERTAKINGS

Amounts paid for services rendered 13.1 1,631,476 1,639,024

Reimbursement of expenses and others 988 1,101

Mark-up on long term loans 140,503 77,635

Other finance costs 95,120 49,607

Remuneration to key management personnel: Salaries, benefits and other allowances 34,713 25,325 Retirement benefits 3,396 5,078

13.2 38,109 30,403

Fees 13.3 2,000 450

Contribution to staff retirement benefit plans 17,180 17,115

13.1

13.2

13.3

13.4


(Rs '000s) (Rs '000s)

This represents fee paid to four (December 2009: three) directors.

These include transactions with principal shareholders of the Company under various service agreements.

Transactions with key management personnel are carried out under the terms of their employment. Key management personnel are also providedwith the use of Company maintained automobiles.

The transactions with associated companies are made under normal commercial terms and conditions.

(Rs. '000s) (Rs. '000s)14. CASH AND CASH EQUIVALENTS

Cash and bank balances 844,612 1,444,523 Finances under mark-up arrangements (6,254,400) (3,568,101)

(5,409,788) (2,123,578)

15. DIVIDEND

16. DATE OF AUTHORISATION

17. GENERAL

Figures have been rounded off to the nearest thousand rupees.


These condensed interim unconsolidated financial statements were authorised for issue on February 22, 2011 in accordance with the resolution of theBoard of Directors.

The Board of Directors declared an interim dividend for six months ended December 31, 2010 of Rs. 2.50 per share, amounting to Rs. 2,892.89 million,at their meeting held on February 22, 2011.

15


REPORT OF THE DIRECTORS ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2010

The Board of Directors take pleasure in presenting the Financial Statements (un-audited) of The Hub Power Company Limited (the Company) and its Subsidiary Laraib Energy Limited (the Subsidiary) for the 2nd Quarter ended 31 December 2010. The Company holds 75% shares in the Subsidiary. The Subsidiary is developing the 84MW hydropower generating complex near the New Bong Escape 8km downstream of the Mangla Dam in Azad Jammu and Kashmir. The Financial Close of the project was achieved in December 2009. The construction activities have commenced and the Project is scheduled to achieve Commercial Operation by June 2013. In addition, the Directors in compliance with the requirements of the Commission De Surveillance Du Secteur Financier, Societe de Bourse de Luxembourg SA; are pleased to confirm that to the best of their knowledge, the condensed interim financial statements for the six months ended December 31, 2010 give a true and fair view of the assets, liabilities, financial position and financial results of the Company and are in conformity with approved accounting standards as applicable in Pakistan. Further, the aforementioned business overview includes a fair review of the development and performance of the Company together with the potential risks and uncertainties faced, if any. The Directors’ Report on the Financial Statements (un-audited) of The Hub Power Company Limited for the six months ended December 31, 2010 has been separately presented in this Report.

By Order of the Board

Vince Harris Chief Executive

Karachi: February 22, 2011

16


Note (Rs. '000s) (Rs. '000s) (Rs. '000s) (Rs. '000s)

Turnover 24,001,984 24,162,242 49,202,119 46,167,529

Operating costs 4 (21,679,643) (21,898,292) (44,953,674) (42,388,820)

GROSS PROFIT 2,322,341 2,263,950 4,248,445 3,778,709

Other income 11,670 18,552 22,959 39,053

General and administration expenses (117,899) (107,108) (244,271) (210,055)

Finance costs 5 (658,062) (445,881) (1,216,983) (789,838)

Workers' profit participation fund 6 - - - -

Profit before taxation 1,558,050 1,729,513 2,810,150 2,817,869

Taxation - current- for the period (4,359) - (7,039) - - prior years 6,561 - (3,670) -

PROFIT FOR THE PERIOD 1,560,252 1,729,513 2,799,441 2,817,869

Attributable to:

- Owners of the holding company 1,563,570 1,733,875 2,810,208 2,827,051

THE HUB POWER COMPANY LIMITEDCONDENSED INTERIM CONSOLIDATED

FOR THE SECOND QUARTER ENDED DECEMBER 31, 2010PROFIT AND LOSS ACCOUNT (UNAUDITED)

- Non-controlling interest (3,318) (4,362) (10,767) (9,182)

1,560,252 1,729,513 2,799,441 2,817,869

Basic and diluted earnings per share attributableto owners of the holding company (rupees) 1.35 1.50 2.43 2.44

The annexed notes from 1 to 18 form an integral part of these consolidated financial statements.


17


(Rs. '000s) (Rs. '000s) (Rs. '000s) (Rs. '000s)

Profit for the period 1,560,252 1,729,513 2,799,441 2,817,869

Other comprehensive income for the period - - - -

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 1,560,252 1,729,513 2,799,441 2,817,869

Attributable to:

- Owners of the holding company 1,563,570 1,733,875 2,810,208 2,827,051

- Non-controlling interest (3,318) (4,362) (10,767) (9,182)

1,560,252 1,729,513 2,799,441 2,817,869


THE HUB POWER COMPANY LIMITEDCONDENSED INTERIM CONSOLIDATED

FOR THE SECOND QUARTER ENDED DECEMBER 31, 2010STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)


18


ASSETSNON-CURRENT ASSETS

Fixed AssetsProperty, plant and equipment 7 57,628,033 53,981,348 Intangibles 1,422,801 1,424,160

Stores and spares 637,023 637,023 Other assets 74,718 25,023

CURRENT ASSETSInventory of fuel oil 1,958,384 1,559,876 Trade debts 8 74,161,091 66,712,461 Advances, deposits, prepayments and other receivables 2,917,118 764,397 Cash and bank balances 2,227,164 927,940

81,263,757 69,964,674

TOTAL ASSETS 141,026,332 126,032,228

EQUITY AND LIABILITIES

(141,026,332) SHARE CAPITAL AND RESERVE

Share CapitalAuthorised 12,000,000 12,000,000

Issued, subscribed and paid-up 11,571,544 11,571,544

Revenue Reserve

Unappropriated profit 18,116,074 18,196,909

Att ib t bl t f th h ldi 29 687 618 29 768 453


BALANCE SHEET (UNAUDITED)AS AT DECEMBER 31, 2010

CONDENSED INTERIM CONSOLIDATED

Attributable to owners of the holding company 29,687,618 29,768,453

Advance against issue of shares to minority shareholders 244,794 -

NON-CONTROLLING INTEREST 372,690 357,415

30,305,102 30,125,868 NON-CURRENT LIABILITIES

Long term loans 9 30,898,954 25,453,790 Liabilities against assets subject to finance lease - 943 Share premium payable - 41,208 Deferred liabilities 10,865 15,781

CURRENT LIABILITIESTrade and other payables 10 69,872,784 60,582,340 Interest / mark-up accrued 1,576,912 1,412,109 Short term borrowings 11 6,254,400 6,743,596 Current maturity of long term loans 2,103,720 1,655,930 Current maturity of liabilities against assets subject to

finance lease - 663 Taxation - provisions less payments 3,595 -

79,811,411 70,394,638

COMMITMENTS AND CONTINGENCIES 12

TOTAL EQUITY AND LIABILITIES 141,026,332 126,032,228

The annexed notes from 1 to 18 form an integral part of these consolidated financial statements.Diff -


19

THE HUB POWER COMPANY LIMITEDCONDENSED INTERIM CONSOLIDATEDCASH FLOW STATEMENT (UNAUDITED)


Note (Rs. '000s) (Rs. '000s)

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 2,810,150 2,817,869

Adjustments for:Depreciation 862,438 860,963 Amortisation 2,183 931 Gain on disposal of fixed assets (2,748) (183) Deferred income realised (249) (79) Staff gratuity 7,215 13,641 Interest income (18,349) (10,272) Interest / mark-up 1,108,179 701,087

Operating profit before working capital changes 4,768,819 4,383,957

Working capital changes (417,513) (3,022,382)

Cash generated from operations 4,351,306 1,361,575

Interest received 18,375 10,297 Interest / mark-up paid (1,053,578) (669,321) Staff gratuity paid (12,402) - Taxes paid (4,766) -

Net cash from operating activities 3,298,935 702,551

CASH FLOWS FROM INVESTING ACTIVITIES

Fixed capital expenditure (4,498,883) (12,490,114) Proceeds from disposal of fixed assets 4,008 183


Proceeds from disposal of fixed assets 4,008 183 Share premium paid (230,216) (531,371) Other assets (49,695) 297,620

Net cash used in investing activities (4,774,786) (12,723,682)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of shares to minority shareholders 27,885 - Advance against issue of shares to minority shareholders 244,794 212,858 Repayment of long term loans (489,531) (489,531) Proceeds from long term loans - Narowal - 12,835,098 Proceeds from long term loans - Laraib's investment (net) 2,559,394 - Proceeds from long term loans - Subsidiary (net) 3,811,131 2,005,093 Dividends paid to owners of the holding company (2,887,796) (2,304,874) Repayment of finances under mark-up arrangements - Narowal - (1,148,890) Finances under mark-up arrangements - Laraib's investment - 1,136,180 Short term borrowing from an associated undertaking of the

subsidiary - 43,000 Repayment of short term borrowing from an associated

undertaking of the subsidiary - (43,000) Repayment of liabilities against assets subject to finance lease (1,606) (535)

Net cash from financing activities 3,264,271 12,245,399

Net increase in cash and cash equivalents 1,788,420 224,268

Cash and cash equivalents at the beginning of the period (5,815,656) (1,410,210)

Cash and cash equivalents at the end of the period 15 (4,027,236) (1,185,942)


Vince R. Harris O.B.E. Taufique HabibChief Executive Director 20


(Rs. '000s) (Rs. '000s)

Attributable to owners of the holding company

Issued capital



Unappropriated profit


Total comprehensive income for the period 2,810,208 2,827,051

Final dividend for the fiscal year 2009-2010 @ Rs. 2.50 (2008-2009 @ Rs. 2.00) per share (2,892,886) (2,314,309)

Reduction in controlling interest of the holding company 1,843 -


Attributable to owners of the holding company 29,687,618 29,996,854

Advance against issue of shares to minority shareholders


STATEMENT OF CHANGES IN EQUITY (UNAUDITED)FOR THE SECOND QUARTER ENDED DECEMBER 31, 2010

CONDENSED INTERIM CONSOLIDATED

g y

Balance at the beginning of the period - -

Advance received during the period 272,679 212,858

Shares issued during the period (27,885) -

Balance at the end of the period 244,794 212,858

Non-controlling interest

Balance at the beginning of the period 357,415 95,687

Shares issued during the period 27,885 -

Total comprehensive income for the period (10,767) (9,182)

Reduction in controlling interest of the holding company (1,843) -

Balance at the end of the period 372,690 86,505

Total equity 30,305,102 30,296,217



21

1. STATUS AND NATURE OF BUSINESS

The Group consists of:

The Hub Power Company Limited (the holding company); and

Laraib Energy Limited (the subsidiary) – Holding of 75.18%.

2. SIGNIFICANT ACCOUNTING POLICIES

3. BASIS OF PREPARATION


The accounting policies and methods of computation followed for the preparation of these condensed interim consolidated financial statements aresame as those applied in preparing the consolidated financial statements for the year ended June 30, 2010. During the period, the subsidiary hasrecognised a provision for current taxation based on taxable income at the applicable rates of taxation determined in accordance with the prevailinglaw for taxation. The charge for current tax includes adjustments for prior years, if any.

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)NOTES TO THE CONDENSED INTERIM


The Hub Power Company Limited (the "holding company") was incorporated in Pakistan on August 1, 1991 as a public limited company under theCompanies Ordinance, 1984 (the "Ordinance"). The shares of the holding company are listed on the Karachi, Lahore and Islamabad StockExchanges and its Global Depository Receipts are listed on the Luxembourg Stock Exchange. The principal activities of the holding company are todevelop, own, operate and maintain power stations. The holding company owns an oil-fired power station of 1,200 MW (net) in Balochistan and a214 MW (net) oil-fired power station which is nearing completion in Punjab.

The subsidiary was incorporated in Pakistan on August 9, 1995 as a public limited company under the Companies Ordinance, 1984. The subsidiaryis constructing a 84 MW hydropower generating complex near the New Bong Escape, which is 8 km downstream of the Mangla Dam in AzadJammu & Kashmir. The project achieved Financial Close in December 2009 and is required to achieve Commercial Operations Date within 42months of Financial Close which will be June 2013.


Note (Rs. '000s) (Rs. '000s) (Rs. '000s) (Rs. '000s)4. OPERATING COSTS

Residual fuel oil 20,341,149 20,542,159 42,245,461 39,712,147 Operation & Maintenance 4.1 656,975 657,637 1,353,340 1,318,532 Insurance 121,805 120,171 243,904 240,273 Depreciation 424,123 424,017 847,430 848,098 Amortisation - 80 - 302 Miscellaneous 135,591 154,228 263,539 269,468

21,679,643 21,898,292 44,953,674 42,388,820

4.1 This represents services rendered by an associated company under Operation & Maintenance Agreement.

These unaudited condensed interim consolidated financial statements have been prepared in accordance with the requirements of IAS 34 "InterimFinancial Reporting" as applicable in Pakistan and are being submitted to the shareholders of the holding company as required under Section 245 ofthe Ordinance.

22


Note (Rs. '000s) (Rs. '000s) (Rs. '000s) (Rs. '000s)5. FINANCE COSTS

Holding company

Interest / mark-up on long term loans 243,700 277,508 489,621 556,970 Mark-up on short term borrowings 271,019 92,467 534,077 135,000 Miscellaneous finance costs 34,247 21,231 59,707 41,690

548,966 391,206 1,083,405 733,660 NarowalInterest / mark-up on long term loans 756,696 569,198 1,473,931 869,188 Mark-up on short term borrowings - - - 15,150 Other finance costs 11,217 63,497 26,374 146,613

767,913 632,695 1,500,305 1,030,951 Laraib's investmentInterest / mark-up on long term loans 84,431 - 84,431 - Mark-up on short term borrowings - 5,709 - 5,709 Unwinding of discount on share premium

payable 9,805 - 24,853 - Other finance costs 13,831 43,772 23,074 43,772

108,067 49,481 132,358 49,481

1,424,946 1,073,382 2,716,068 1,814,092 Less: amount capitalised in the cost of

qualifying assets - Narowal 7.2 (767,843) (632,695) (1,500,232) (1,030,951)

Finance cost of the holding company 657,103 440,687 1,215,836 783,141

Subsidiary

Interest / mark-up on long term loans 93,275 1,283 150,306 1,283 Mark-up on salary payable to ex-CEO - 392 - 837 Mark-up on short term borrowings from ex-CEO - 57 - 122 Mark-up on short term borrowings - 1,489 - 2,318 Finance charges on leased assets - 56 50 131 Other finance costs 7.3 18,531 153,140 41,959 182,424 Bank charges 959 3,200 1,097 3,289

112,765 159,617 193,412 190,404

Less: amount capitalised in the cost ofqualifying assets - Subsidiary (111,806) (154,423) (192,265) (183,707)

Finance cost of the subsidiary 959 5,194 1,147 6,697

658,062 445,881 1,216,983 789,838

6. WORKERS' PROFIT PARTICIPATION FUND

Provision for Workers' profit participation fund 78,681 87,365 142,141 142,767 Payment of Workers' profit participation

fund recoverable from WAPDA (78,681) (87,365) (142,141) (142,767)

- - - -


7. PROPERTY, PLANT AND EQUIPMENT

Operating property, plant and equipment 26,792,847 27,609,409 Capital work-in-progress

Plant betterments 51,571 42,685 Narowal 7.2 23,560,453 21,973,584 Subsidiary 7.3 7,223,162 4,355,670

30,835,186 26,371,939

7.1 57,628,033 53,981,348

The holding company is required to pay 5% of its profit to the Workers' profit participation fund (the "Fund"). However, such payment does notaffect the holding company’s overall profitability because after payment to the Fund, the holding company bills this to WAPDA as a pass throughitem under the Power Purchase Agreement (PPA).

23

7.1


7.2 Capital work-in-progress - Narowal

Opening balance 21,973,584 8,563,800

Additions during the period / yearPayments for land - 15,354 Housing colony 69,559 39,991 EPC & other costs 374,134 10,650,984 Professional services 69,828 68,072 Advances for stores & spares 65,829 - Insurance cost 4,613 27,215 Land development 86,550 81,230 Borrowing & related transaction cost 5 1,473,931 2,266,371 Other finance costs 5 26,301 173,794 Government fees 1,816 2,779 Testing & pre-commissioning revenue-net (2,815) - Testing & pre-commissioning fuel inventory 750,518 74,555 Liquidated damages - net 7.2.1 (1,339,186) - Other directly attributable cost 5,791 9,439

1,586,869 13,409,784 Transfers during the period / year - -

23,560,453 21,973,584

7.2.1

Dec 2010 Jun 2010

Additions to property, plant and equipment during the period were Rs. 4,511.883 million (June 2010: Rs. 17,489.317 million) and disposalstherefrom at net book value were Rs. 1.260 million (June 2010: Rs. 6.348 million).

This represents Liquidated Damages (LDs) recoverable by the holding company from the EPC contractor, net of damages charged bypower purchaser and PPIB for delay in achieving commercial operations date.


7.3 Capital work-in-progress - Subsidiary

Opening balance 4,355,670 320,210

Additions during the period / yearEPC costs 2,485,475 3,621,148 Professional services 84,742 113,234 Insurance cost 70,742 145,833 Borrowing & related transaction cost 162,266 335,722 Other finance costs 5 41,959 26,377 Other directly attributable cost 22,308 12,021

2,867,492 4,254,335 Transfers during the period / year - - Transaction cost directly attributable to borrowings - (218,875)

- (218,875) 7,223,162 4,355,670


8. TRADE DEBTS - Secured

Considered good 8.1 74,161,091 66,712,461

8.1 This includes an amount of Rs. 62,104 million (June 2010: Rs. 57,764 million) from WAPDA which is overdue but not impaired becausethe trade debts are secured by a guarantee from the Government of Pakistan under the Implementation Agreement. The overdue amountcarries interest / mark-up at SBP discount rate plus 2% per annum compounded semi-annually.

24


9. LONG TERM LOANS - Secured

Holding company

Hub plant 5,823,506 6,313,037 Narowal plant 18,787,414 18,787,414 Laraib's investment

Syndicated term finance facility 9.1 2,173,474 - Islamic finance facility 9.2 459,000 - Transaction cost (73,080) -

2,559,394 -

9.3 27,170,314 25,100,451 Less : Current portion of long term loans (2,103,720) (1,655,930)

Long term loans of the holding company 25,066,594 23,444,521

Subsidiary

Foreign currency loans 4,999,380 1,990,985 Local currency loans 1,385,000 555,000 Transaction cost (552,020) (536,716)

Long term loans of the subsidiary 5,832,360 2,009,269

30,898,954 25,453,790

9.1 The holding company has entered into a long term financing arrangement with various banks / financial institution for an amount of Rs.3,741 million to meet its investment obligations in the subsidiary. The loan is repayable in nine equal installments on semi-annual basisfollowing the six months after the end of availability period which is 42 months from the facility effective date at a mark-up rate of sixmonths KIBOR plus 2.20% per annum. The facility became effective on October 01, 2010. The mark-up is payable on semi-annual basis inarrear starting from the availability period. Any late payment by the holding company is subject to an additional payment of 2% per annumabove the normal mark-up rate. This loan is secured by way of second ranking / subordinated charge over all present and future undertakingand assets of the holding company other than: (i) assets relating to the Narowal power plant; (ii) Commercial Facility Disbursement

9.2

9.3

10. TRADE AND OTHER PAYABLES


11. SHORT TERM BORROWINGS - Secured

Finances under mark-up arrangements 11.1 6,254,400 6,743,596

11.1

and assets of the holding company other than: (i) assets relating to the Narowal power plant; (ii) Commercial Facility DisbursementAccount; (iii) any shares in Demerged Company (special purpose vehicle that the holding company may incorporate under the laws ofPakistan for the purpose of construction, ownership, operations & maintenance of Narowal project); and (iv) present and future sharesacquired in the subsidiary including bonus shares and right shares.

The holding company has also entered into a long term islamic financing arrangement with a bank for an amount of Rs. 759 million to meetits investment obligations in the subsidiary. The loan is repayable in nine equal installments on semi-annual basis following the six monthsafter the end of availability period which is 42 months from the facility effective date at a mark-up rate of six months KIBOR plus 2.20% per annum. The facility became effective on November 24, 2010. The mark-up is payable on semi-annual basis in arrear starting from theavailability period. Any late payment by the holding company is subject to an additional payment of 2% per annum above the normal mark-up rate. This loan is secured by way of second ranking / subordinated charge over all present and future undertaking and assets of theholding company other than: (i) assets relating to the Narowal power plant; (ii) Commercial Facility Disbursement Account; (iii) any sharesin Demerged Company (special purpose vehicle that the holding company may incorporate under the laws of Pakistan for the purpose ofconstruction, ownership, operations & maintenance of Narowal project); and (iv) present and future shares acquired in the subsidiaryincluding bonus shares and right shares.

Included herein is a sum of Rs. 1,961.571 million (June 2010: Rs. 1,711.571 million) out of the total available facilities of Rs. 3,000 million(June 2010: Rs. 2,000 million) from an associated undertaking.

The facilities for running finance available from various banks amounted to Rs. 10,500 million (June 2010: Rs. 9,300 million) at mark-upranging between 0.75% to 3.00% per annum above one month KIBOR. The mark-up on the facilities is payable on monthly / quarterly basisin arrears. The facilities will expire during the period from March 14, 2011 to December 31, 2011. These facilities are secured by way ofcharge over the trade debts and stocks of the holding company pari passu with the existing charge. Any late payment by the holdingcompany is subject to an additional payment of 2% per annum above the normal mark-up rate.

This includes an amount of Rs. 64,775 million (June 2010: Rs. 55,532 million) payable to Pakistan State Oil, out of which overdue amount is Rs.55,105 million (June 2010: Rs. 48,769 million). The overdue amount carries interest / mark-up at SBP discount rate plus 2% per annumcompounded semi-annually.

25

12. COMMITMENTS AND CONTINGENCIES

12.1 (i)

(ii)

(iii)

Pending the resolution of the matters stated above, no provision has been made in these consolidated financial statements.

Without prejudice to the above appeals, the holding company filed an application for the resolution of the matter under the AlternateDispute Resolution (ADR) provided under section 134A of the Income Tax Ordinance, 2001 with the Federal Board of Revenue(FBR). The Alternate Dispute Resolution Committee (ADRC) constituted by the FBR made certain recommendations to the FBRwhich required the holding company to pay a total of Rs. 380 million (including Rs. 297 million already paid). However, the holdingcompany informed the FBR that the recommendation of the ADRC was not maintainable under the law because ADRC had gonebeyond their mandate. The FBR, after reviewing the recommendations of the ADRC and the letter filed by the holding company,decided not to agree with the recommendation of the ADRC and let the dispute be resolved by way of appeals pending before the HC.

Without prejudicing its rights, the holding company has held several meetings with the FBR in order to settle the matter in anamicable manner. Various options have been discussed but no conclusion has yet been reached.

On the unpaid tax demands referred in (i) above, further assessment orders were issued for Rs. 50 million (Rs. 29 million beingadditional tax and Rs. 21 million being penalty). Against these orders, the holding company filed appeals before the CIT(A), who hasdeleted the amount of additional tax levied of Rs. 29 million and reduced the penalty of Rs. 21 million by Rs. 6 million. Against thedecision of the CIT(A), the holding company and Income Tax Department filed further appeals before the ITAT which had upheld thedecision of the CIT(A). Against this, the holding company moved reference application to the ITAT to refer the issue to the HC, whichstands rejected by the ITAT. The management and their tax advisors are of the opinion that if the HC decides the appeals againstassessments made under section 52/86 of the ITO,79 in favour of the holding company, the penalty would also be deleted.

The Deputy Commissioner of Income tax (DCIT) made assessments under section 52/86 of the Income Tax Ordinance, 1979 [ITO,79]amounting to Rs. 1,896 million stating that the holding company did not withhold tax at the time of issue of shares to sponsors againstproject development costs incurred by them. The holding company deposited tax amounting to Rs. 297 million against the aboveassessments in accordance with the departmental procedures. Appeals filed by the holding company before the Commissioner ofIncome tax (Appeals) [the "CIT(A)"] and thereafter with the Income Tax Appellate Tribunal (the "ITAT") were decided against theholding company. Against the decision of the ITAT, the holding company filed appeals before the High Court (the "HC"). The HCgranted a stay of demand for the outstanding tax liability which according to the provisions of section 136 of the ITO,79 expired onAugust 2, 1999. However, the HC directed the DCIT not to institute recovery measures without its permission.

The management and their tax and legal advisors are of the opinion that the position of the holding company is sound on technicalbasis and eventual outcome will be in favour of the holding company.

12.2

12.3

g , p

In December 2003, the holding company decided on a fresh legal review of the petition and thereafter was advised by counsel to withdrawthe petition and to immediately file a fresh petition incorporating all the available grounds. Accordingly, on December 17, 2003 the holdingcompany withdrew the petition and immediately refiled a petition, which incorporated all the available grounds.

Both HUBCO and WAPDA agreed that this petition should proceed and a judgment obtained on merits. Subsequent to the period end, thepetition was dismissed by the High Court (HC). Against the decision of the HC, the holding company has filed petition for leave to appealbefore the Supreme Court. No provision has been made in these consolidated financial statements as any payment made by the holdingcompany is a pass through item under the PPA.

Following the amendments made by the Finance Act 2006 to the Companies Profits (Workers' Participation) Act, 1968 (the Act), theholding company established the Hubco Workers' Participation Fund on August 03, 2007 to allocate the amount of annual profits stipulatedby the Act for distribution amongst worker(s) eligible to receive such benefits under the Act and any amendments thereto from time to time(see note 6).

In connection with the Narowal power plant, subsequent to the period end, the holding company has provided Stand By Letter of Credit(SBLC) for an amount of Rs. 1,000 million to Bakri Trading Company (Pvt.) Ltd. for the procurement of fuel. This SBLC will expire onMarch 21, 2011 and is secured by way of charge over the trade debts and stocks of the holding company pari passu with the existing charge.Any late payment by the holding company is subject to a mark-up rate of one month KIBOR plus 4.00% per annum.

The holding company had filed a petition on June 28, 2000 challenging the application of the Companies Profits (Workers' Participation)Act, 1968 (the Act) to the holding company on the ground that since its inception the holding company has not employed any persons whofalls within the definition of the term "Worker" as it has been defined in the Act.

The petition was filed subsequent to the holding company's receipt of the Labour, Manpower and Overseas Pakistanis' Division's letter datedMarch 14, 2000 directing the holding company to allocate 5% of its net profit (since its establishment) towards the Workers' ProfitParticipation Fund and deposit the entire amount of the Fund in the Federal Treasury. The petition had been filed against the Federation ofPakistan through the Secretary, Ministry of Labour, Manpower and Overseas Pakistanis, Labour, Manpower and Overseas PakistanisDivision and, in view of the fact that any payment made by the holding company to the Fund is a pass through item under the PowerPurchase Agreement (PPA), against the Water and Power Development Authority (WAPDA) as a pro forma party.

26

13. SEGMENT ANALYSIS

13.1 SEGMENT RESULTS

Turnover 24,001,984 - - - 24,001,984

Operating costs (21,679,643) - - - (21,679,643)

GROSS PROFIT 2,322,341 - - - 2,322,341

Other income - net 4,641 (225) 5,704 1,550 11,670

General and administration expenses (79,665) (17,840) (20,317) (77) (117,899)

Finance costs (548,966) (70) (959) (108,067) (658,062)

Workers' profit participation fund -

Profit before taxation 1,698,351 (18,135) (15,572) (106,594) 1,558,050

Taxation - current- for the period - - (4,359) - (4,359) - prior years - - 6,561 - 6,561

PROFIT FOR THE PERIOD 1,698,351 (18,135) (13,370) (106,594) 1,560,252

Turnover 24,162,242 - - - 24,162,242

Operating costs (21,898,292) - - - (21,898,292)

GROSS PROFIT 2,263,950 - - - 2,263,950

Other income - net 11,872 3 6,677 - 18,552

G l d d i i t ti (71 736) (14 752) (19 286) (1 334) (107 108)

……...……………………. 3 months ended Dec 2010 ...……...………………Hub power

plantNarowal power

plantLaraib power

plantUnallocated Total

……...……...…………………….. (Rs. '000s) ……………………………………

……...……………………. 3 months ended Dec 2009 ...……...……………….Hub power

plantNarowal power

plantLaraib power


...…….…………………………… (Rs. '000s) …………………………….……...

General and administration expenses (71,736) (14,752) (19,286) (1,334) (107,108)

Finance costs (391,206) - (5,194) (49,481) (445,881)



Taxation - current- for the period - - - - - - prior years - - - - -


Turnover 49,202,119 - - - 49,202,119

Operating costs (44,953,674) - - - (44,953,674)

GROSS PROFIT 4,248,445 - - - 4,248,445

Other income - net 15,710 (5) 7,169 85 22,959

General and administration expenses (175,646) (29,445) (38,699) (481) (244,271)

Finance costs (1,083,405) (73) (1,147) (132,358) (1,216,983)



Taxation - current- for the period - - (7,039) - (7,039) - prior years - - (3,670) - (3,670)


……...……...…………………….. (Rs. '000s) ……………………………………

……...……………………. 6 months ended Dec 2010 ...……...………………Hub power

plantNarowal power

plantLaraib power


27

Turnover 46,167,529 - - - 46,167,529

Operating costs (42,388,820) - - - (42,388,820)

GROSS PROFIT 3,778,709 - - - 3,778,709

Other income - net 35,185 6 3,862 - 39,053

General and administration expenses (149,437) (24,256) (34,643) (1,719) (210,055)

Finance costs (733,660) - (6,697) (49,481) (789,838)



Taxation - current- for the period - - - - - - prior years - - - - -


13.2 SEGMENT ASSETS

TOTAL ASSETS 105,229,074 25,696,838 10,094,309 6,111 141,026,332

Unallocated Total

The unallocated items relate to costs incurred by the holding company for investment in the subsidiary.

………………...……………………. Dec 2010 ...……...…………………………Hub power

plantNarowal power

plantLaraib power


...…….…………………………… (Rs. '000s) …………………………….……...

……...……………………. 6 months ended Dec 2009 ...……...……………….Hub power

plantNarowal power

plant

.……...……...…………………….. (Rs. '000s) …………………………………….

...……………...……………………. Jun 2010 ...……...…………………………Hub power Narowal power Laraib power

Laraib power plant

Unallocated Total

TOTAL ASSETS 98,086,517 21,992,687 5,946,832 6,192 126,032,228

Unallocated Total

.......…..…………………………… (Rs. '000s) ……………………………….........

pplant

pplant

pplant

28


Note (Rs. '000s) (Rs. '000s)14. TRANSACTIONS WITH RELATED PARTIES / ASSOCIATED

UNDERTAKINGS

Amounts paid for services rendered 14.1 1,631,476 1,639,024

Reimbursement of expenses and others 988 1,101

Short term borrowing from an associated undertaking of thesubsidiary - 43,000

Repayment of short term borrowing from an associatedundertaking of the subsidiary - 43,000

Mark-up on long term loans 140,503 77,635

Other finance costs 95,120 49,607

Mark-up on short term borrowings from subsidiary's ex-CEO - 122

Mark-up on salary payable to subsidiary's ex-CEO - 837

Remuneration to key management personnel: Salaries, benefits and other allowances 42,479 37,845 Retirement benefits 4,244 5,684

14.2 46,723 43,529

Fees 14.3 2,000 450

Contribution to staff retirement benefit plans 17,180 17,494

14.1 These include transactions with principal shareholders of the holding company under various service agreements.

14.2

14.3

14.4


(Rs. '000s) (Rs. '000s)15. CASH AND CASH EQUIVALENTS

Cash and bank balances 2,227,164 2,382,159 Finances under mark-up arrangements (6,254,400) (3,568,101)

(4,027,236) (1,185,942)

16. DIVIDEND

17. DATE OF AUTHORISATION

18. GENERAL

Figures have been rounded off to the nearest thousand rupees.

Taufique HabibDirector

The transactions with associated companies are made under normal commercial terms and conditions.

Chief Executive Vince R. Harris O.B.E.

The Board of Directors of the holding company declared an interim dividend for six months ended December 31, 2010 of Rs. 2.50 per share,amounting to Rs. 2,892.89 million, at their meeting held on February 22, 2011.

These condensed interim consolidated financial statements were authorised for issue on February 22, 2011 in accordance with the resolution of theBoard of Directors of the holding company.

p p g p y g

Transactions with key management personnel are carried out under the terms of their employment. Key management personnel are alsoprovided with the use of Company maintained automobiles.

This represents fee paid to four (December 2009: three) directors of the holding company.

29

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