The Pakistan Credit Rating Agency Limited
Press Release


Shayan Farooq

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Hub Power Holdings Limited

Rating Type Entity
(20-May-22 )
(21-May-21 )
Action Maintain Maintain
Long Term AA AA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

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. Timely materialization of the same remains crucial. These can be impacted by surging receivables due to circular debt and delay in payments by the government during the peek summer needs. The ratings draw comfort from investment decisions and performance evaluations undertaken at the parent (HUBCO) level, where robust mechanism and governance framework is already in place. The same is still evolving at the Company level. Moreover, demonstrated support of sponsors and their strong acumen of power sector dynamics in Pakistan benefits the ratings.
The ratings depend on timely materialization of projected cashflows and meeting project timelines. 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. Maintaining strong financial profile and creating liquidity cushion remains important. Change in the government policy for payment mechanism of power projects, along with any significant delay in envisaged cashflows due to the current power sector dynamics/constraints would impact ratings.

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.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.