PACRA Assigns Preliminary Rating to Hub Power Company Limited – Privately Placed Short Term Sukuk upto PKR 4.5bln

Lahore, October 26, 2020 (PPI-OT):HUBCO is a large RFO based power plant with an installed capacity of 1295MW.The rating reflects the holding company character of HUBCO with an exclusive focus on the different dimension of the energy sector. HUBCO has already expanded generation capacity and aims to further expand generation capacity to boost the country’s power generation by utilizing Pakistan’s indigenous natural resources. HUBCO through its 100% owned company Hub Power Holding Ltd (HPHL) invested in China Power Hub Generation Company (CPHGC) – A joint venture with China Power International Holdings Ltd (CPIHL): CPHGC (2x660MW coal fired power plant at Hub), achieved COD on 17 August 2019.

Hubco is also setting up two more coal power plants (i) Thar Energy Limited (TEL): 330MW mine-mouth coal fired power plant at Thar and (ii) Thalnova Power: 330MW mine-mouth coal fired power plant at Thar. These investments are being funded through Hubco’s own cashflows and a mix of long term debt and short term debt.

HUBCO has already deployed a sizeable fund in its ongoing projects of Thalnova and Thar Energy Ltd. The overall debt quantum in the wake of fresh investment is huge. HUBCO is redesigning its loan book by converting short term sukuks into Long Term Sukuks, currently HUBCO has two long term and one short term sukuk. HUBCO intends to issue another sukuk in the form of a Musharaka. HPHL has recognized the share of profit of PKR ~13,700mln from CPHGC in its books. Furthermore, the dividend from CPHGC is expected to be materialized in FY21. Receivables keep surging due to circular debt issue.

Cash flow streams of Hubco’s plants are guaranteed by GoP under the Power Purchase Agreement (PPA), subject to adherence to the agreed upon performance benchmarks; this provides comfort to the ratings. Timely completion of new projects, settlement of receivable and payable and maintaining healthy debt service coverages are important for the company.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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