PACRA Assigns Preliminary Ratings to The Hub Power Company Limited | PPSTS | PKR 6bln | TBI

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 Net Electrical Output from the HUB plant during 1HFY24 stood at 0 GWh due to the electricity demand being met from other cheaper sources. However, the Company reported Net Revenues from Capacity invoices along with Late Payment Surcharge of PKR 19,910mln during 1HFY24. Additionally, the plant has been meeting its benchmarks of availability as per the PPA.
The strong operating history along with the groups strength which is evident from the strategic investment portfolio contributes towards the assigned rating. Furthermore, the outstanding trade debts are guaranteed by the GoP providing further support. Moreover, the profitability of the Company is further supplemented by dividend income received from its subsidiaries.

About the Entity
HUBCO, a listed company, was incorporated in 1991. Mega Conglomerate being the largest shareholder holds 19.48% of the total ownership. Other institutions include Fauji Foundation(8.5%), Allied bank (2.73%) and National Bank (2.22%). The remaining shareholding is held by various Financial Institutions, Insurance Companies, Joint Stock Companies, Modaraba/Mutual Fund & Leasing Companies and general public. Overall control of the company vests in a nine-member board of directors (BoD) including the CEO. The BoD comprises of 3 nominees from Mega Conglomerate, 1 nominee each of NIT, Fauji Foundation and Government of Balochistan along with 2 Independent directors. Mr. Kamran Kamal is the CEO of the company. He has been associated with the company for about seven years. He is accompanied by a team of qualified individuals.

About the Instrument
HUBCO is in the process to issue an unsecured, privately placed short term sukuk (PPSTS) of PKR 6bln in May 2024 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.