Lahore, April 18, 2022 (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.
This is indeed a crucial development. 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. The overall debt quantum in the wake of fresh investment is huge.
The cash flows of the company can sustain the burden, which will be complemented by the dividend inflows. 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
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Email: hammad.rashid@pacra.com
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