The battle between the government and private power companies has escalated following the initiation of criminal charges by watchdog agency Ehtesab Bureau against Hub Power Company (Hubco). The agency on 11 October lodged two separate cases with the Federal Investigation Agency (FIA).

Senator Saifur Rehman, chairman of Ehtesab Bureau, said that the government has restored the 1992 power purchase agreement with Hubco and has cancelled the two amendments made during former prime minister Benazir Bhutto's regime.

The main shareholders in Hubco are National Power of the UK, with 26 per cent, and Saudi Arabia's Xenel Industries, with 15 per cent.

The amendments revised the average power tariff to Rs 6.6 ($0.13) a kWh from Rs 1.36 ($0.03) a kWh agreed in the 1992 agreement (MEED 29:5:98, Cover Story). Hubco's top management has been accused of cheating, fraud, misappropriation and criminal conspiracy and causing wrongful losses to the Water & Power Development Authority (WAPDA) and the government.

The accused include Hubco's chief executive Mike Woodroffe, finance director Khurshid Hussain, resident engineer Tom Mackay and director of operations Philip Spencer. The FIA has also sealed the Karachi office of the power company. Hubco denies that it is involved in any wrongdoing and says that it is ready for meaningful talks with the government to cut its tariff.

However, Woodroffe, who is now in the UK, told the London daily Financial Times on 14 October that Hubco had served notice that WAPDA was in breach of contract. He said that if the breach were not remedied in 30 days, it would signify that the government would be in default.

'This could lead to the state being required to buy out the $400 million of equity in the project and compensate shareholders for loss of profits,' he said.

Controversy also surrounds another scheme in which National Power is a shareholder. A Lahore court on 14 October ordered a 40 per cent cut in tariffs charged by Kot Addu Power Company, in which the UK firm holds a 36 per cent stake.