PACRA Maintains Rating of Hub Power Holdings Limited | Sukuk

The rating reflects Hub Power Holdings Limited's ('Hub Power Holdings' or 'the Company') holdco structure with focus on expanding energy generation capacity through indigenous resources. The Company is a wholly owned subsidiary of The Hub Power Company Limited (HUBCO), a very strong player in Pakistan's energy sector with a generation capacity of 1,292MWs. Hub Power Holdings has invested in China Power Hub Generation Co. (Pvt.) Ltd. (47.5%) and ThalNova Power Thar (Pvt.) Ltd (38.3%). The Company has also entered in a JV agreement to form Prime International Oil & Gas Company Ltd (a 50:50 joint venture company of Hub Power Holdings and ENI’s local employees), has executed definitive agreements to acquire all the upstream operations and renewable energy assets owned by ENI in Pakistan. The investments are funded through a combination of equity and debt, as per sector's norm. However, the debt was raised at the group level and the Company's capital structure remains predominantly equity financed. Business risk profile of the Company consists solely of profit share from associate, China Power, only; which is constantly receiving generation payments. However, the projected dividend declaration from China Power relies on tariff true-up, which is not yet achieved. Secondly, ThalNova Power has achieved financial close and is expected to become commercially operational in Sep-22. While, Prime International is at the initial gestation phase. The Company has a strong financial profile with the majority of its commitments, as a holding company, have already been met for its existing portfolio. The Company issued a Sukuk of PKR 6bln on Nov-20 mainly to settle debt at group level and is fully guaranteed by HUBCO. Profit and principle repayments are aligned with dividend inflows with sufficient cushion in initial years.
Consolidation of investments at holding company level and formalizing a strong and effective mechanism for making investment and monitoring performance will be critical, going forward.

About the Entity
Hub Power Holdings Limited is a wholly owned subsidiary of The Hub Power Company Limited. The Company was incorporated in 2015 as a public unlisted company under the Companies Ordinance, 1984 (now the Companies Act, 2017). The principal activities of the Company are to invest in new opportunities in energy sector. Mr. Kamran Kamal is the Chairman and CEO of the Company.

About the Instrument
Hub Power Holdings has issued an unsecured, privately placed, Islamic Certificates ("Sukuk") of PKR 6bln to settle debt at group level. The instrument has a tenor of 5 years (grace period 3 years) and is issued at discount, covering profit payments for the first two years. Any decrease/increase in base rate (7.35%) during discounting period shall be subject to a floor equivalent to base rate as set on issue date and to a cap of 30% thereof. The differential profit will be settled through the issuer, subject to the maximum and minimum limits, at the end of the discounting period within 15 working days. Thereafter, profit will be payable semi-annually in arrears at the rate of 6M K250bps. Principle will be paid in 4 equal semi-annual installments. The sukuk is fully secured under PR-6 Regulation by following securities 1) ranking and subordinated floating charge over all present and future movable fixed and current assets of HPHL PKR 6,667mln 2) ranking and subordinated floating charge over all present and future movable fixed assets of HUBCO.