Lahore, December 13, 2021 (PPI-OT): The rating reflects the holding company character of Hubco with an exclusive focus on the different dimension of the energy sector. In addition to the investment book, Hubco itself is a large RFO based power plant. Hubco aims to expand generation capacity to boost the country’s power generation by utilizing Pakistan’s indigenous natural resources. China Power Hub Generation Company (CPHGC) – A joint venture with China Power International Holdings Limited (CPIHL): 2x660MW coal-fired power plant at Hub achieved COD as of 17 August 2019.
Hubco is 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. Hubco also has an investment in Sindh Engro Coal Mining Company (SECMC). These investments are being funded through a mix of short term and long-term debt and Hubco has already deployed a sizeable fund in its ongoing projects of Thalnova and Thar Energy Ltd. Hubco has working capital related borrowing as well. Previously Hubco had issued two long term and one short term sukuk to meet its working capital needs.
The short term sukuk has been redeemed and Hubco has recently issued a privately placed sukuk of PKR 4,500mln in replacement of the previously issued sukuk of the same amount. The cash flows of the company can sustain the burden, which are complemented by the dividend income received from the company’s associates. Furthermore, the company has recently received payments from government against outstanding capacity payments under the signed MoU. This has further improved the company’s cashflows providing comfort to the ratings. Hubco has used short term debt instruments and privately placed short term Sukuk to meet its working capital requirement.
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. Hubco has recently signed an agreement with Govt. actual impact of the executed agreement is yet to be seen. Timely completion of new projects, settlement of receivable and payable and maintaining healthy debt service coverages is important.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com