PACRA Assigns Initial Rating to The Hub Power Company Limited | PPSTS | PKR 6bln | Nov-23

The rating reflects the holding company character of HUBCO with an exclusive focus on the different dimension of the energy sector. HUBCO itself is a 1,292MW RFO based power plant situated at Mouza Kund, Hub in Balochistan. With its investments in Narowal Energy Limited, Laraib Energy Limited, China Power Hub Generation Company, Thar Energy Limited and Thal Nova Power Thar Ltd, the Group has an established footprint in the power generation sector. Hub Power Services Limited is a wholly owned subsidiary of HUBCO that provides Operation and Maintenance (O&M) services to its existing power plants. In addition, the Company also holds 49% stake in China Power Hub Operating Company (Pvt) Limited, a joint venture with China Power International Maintenance Engineering Company Limited, to provide O&M to the Super Critical Coal Power Plant at Hub. The Company also holds a minority stake of 8% in Sindh Engro Coal Mining Company which is establishing a coal mining facility at Thar. Prime international Oil and Gas Company (50% owned by Hub Power Holdings Ltd) has acquired all upstream operations and assets of ENI Pakistan under a J.V with ENI’s local employees. The Company reported topline of PKR 9,847mln during the first quarter of FY24 (FY23: PKR 44,516mln). During 1QFY24, there was no generation from the plant. Similarly, during FY23 the generation of the plant declined to 205GWh (FY22: 1,229GWh) due to the governments priority to obtain electricity from plants with lower generation cost. The profitability of the Company is further supplemented by dividend and Income from Management Services received from subsidiaries.
Although HUBCO has a sizeable amount of borrowings to support its working capital needs and growth opportunities. The settlement of outstanding receivables (Sep 2023: PKR 58,673mln) due from CPPA-G remains crucial.

About the Entity
HUBCO, a listed company, was incorporated in 1991. Mega Conglomerate being the largest shareholder holds 19.48% of the total ownership. The remaining major shareholding is held by various Financial Institutions (12.77%), Insurance Companies (5.61%), Joint Stock Companies (3.00%), Modaraba/Mutual Fund & Leasing Companies (9.09%) and general public (28.22%). Overall control of the company vests in a nine-member board of directors (BoD) including the CEO. Mr. Kamran Kamal is the CEO of the company. He has been associated with the company for about nine years. He is accompanied by a team of qualified individuals.

About the Instrument
HUBCO has issued an unsecured, privately placed short term sukuk (PPSTS) of PKR 6bln in November 2023 to finance the Company's working capital requirements. The Privately Placed Short Term Sukuk, having a tenor of six months, carries a profit rate of 6M KIBOR + 0.25%. The interest and principal will be paid in bullet at the time of maturity.