PACRA Assigns Initial Rating to China Power Hub Generation Company (Pvt.) Limited | PPSTS | PKR 8bln | Jul-22
|Rating Type||Debt Instrument|
China Power Hub Generation Company Private Limited (CPHGC) is a coal based 1,320MW power plant and jetty (Complex), set up by State Power Investment Corporation (SPIC), one of the top Five State-owned Power Corporations in China along with Hub Power Company of Pakistan. The financial strength and experience in the energy chain of the sponsoring companies – CPIH and HUBCO reflect positively in the ratings. Rating takes comfort from the company's strategic importance to economy through its operations, the strong business profile and from the involvement of Pakistani and Chinese governments, as this project is a priority project under CPEC. Management has put forth the requisition for true up tariff to NEPRA, the securitization at NEPRA's end has already made, Company is expecting the finalization of tariff in 2022. The Company has successfully achieved all the performance benchmarks and provided 6,647GWh of electricity to the grid during CY21 against 6,939 GWh in CY20. The Company recorded a turnover of PKR 100bln during CY21 (CY20: 104bln) and achieved a bottom-line of PKR 19bln in CY21 against PKR 35bln in CY20. The Company aims to issue a series of commercial paper amounting to PKR ~20bln in total, in order to manage the increasing price of imported coal in international market out of which PKR 13bln has already been issued. This will be in addition to the short-term borrowings already utilized by the Company. Till date the Company has repaid five installments (i.e.~18%) of its project related long term debt.
However, the leverage is yet sizeable and will gradually decline along with the life of the project Maintaining healthy debt service coverages remain important. Accumulation of circular debt may pose challenge to the cash flow management. However, the management supported by relevant business fundamentals remain committed to sustain timely debt repayments.
China Power Hub Generation Company (Pvt.) Limited (CPHGC), incorporated in 2015. CPHGC has been established as a Joint Venture Agreement (JVA) between China Power International Holding Limited (CPIHL) and the Hub Power Company (HUBCO). As per JVA, CPIHL through its wholly owned subsidiary China Power International (Pakistan) Investment Limited (CPIPIL) and HUBCO through its wholly owned subsidiary Hub Power Holdings Limited (HPHL) owns 52.5% and 47.5% respectively. The BoD comprises seven members, including the CEO. Four members represent China Power International (Pakistan) Investment Limited, while three represents Hub Power Holdings Limited. The management team is led by Mr. Ren LiHui, CEO. He is supported by a team of experienced professionals from both Chinese and Pakistani team members
China Power Hub Generation Company (Pvt.) Limited (CPHGC) issued a Rated, Unsecured, Privately Placed, Short-Term Sukuk (PPSTS) of PKR 8,000mln in July, 2022. The purpose of the instrument is to finance the Company's working capital requirements. The tenor of PPSTS is up to 6 months and has carried a profit rate of 6MK+135bps. Profit and Principal will be paid at maturity. The PPSTS is unsecured.