The Pakistan Credit Rating Agency Limited
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Madiha Sohail

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PACRA Maintains Rating of The Hub Power Company Limited | PP Sukuk

Rating Type Debt Instrument
(26-Aug-22 )
(27-Aug-21 )
Action Maintain Maintain
Long Term AA+ AA+
Short Term - -
Outlook Stable Stable
Rating Watch - -

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 investment in Narowal Energy Limited, Laraib Energy Limited and China Power Hub Generation Company, the total combined installed power generation capacity of Hubco is 2,921MW. Furthermore, 660MW will be added to the total installed capacity of Hubco once ThalNova Power and Thar Energy Limited achieve their respective COD by second half of CY22 as per their PPA. The Company aims at expanding its operations in oil & gas exploration, water desalination and renewable energy through this strategic investment. During the nine-month period ended on March 2022, the Company reported topline of PKR~ 41,835mln on account of increased generation (863GWh) of Hub Plant. The profitability of the Company was further enhanced with addition of dividend income and share of profit from associates. Although Hubco has sizeable amount of borrowings to support its working capital needs and growth opportunities but its cash flows are adequate to sustain the debt burden. The settlement of outstanding receivables due from CPPAG under the signed MoU has further eased the burden on the Company’s financial risk profile. Repayment of principle and mark up on long term Sukuks issued previously are due this year. Timely repayment along with successful completion of expansion projects remain crucial for Hubco to sustain its assigned ratings.
Hubco’s strong operational performance over the years coupled with its diversified investment portfolio in the power sector contributes towards to the assigned ratings.

About the Entity
Hubco, a listed company, was incorporated in 1991. Mega Conglomerate being the largest shareholder holds 19.5% of the total ownership. Other institutions include Fauji Foundation (8.5%), Allied bank (4.4%) and National Bank (3.6%). The company has made sizeable investments in the power sector including power generation, oil & gas exploration, operations & maintenance services and coal mining. 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 and is serving on the current position for almost one year. He is accompanied by a team of qualified individuals heading the respective divisions in the company.

About the Instrument
HUBCO issued a secured, & privately placed Sukuk of the amount PKR 7bln in Aug-19. The instrument carried a profit rate of 3MK + 190bps with a tenor of four (4) years. The purpose of the instrument is to partially finance the equity investments of HUBCO in 1) China Power Hub Generation Company 2) Thal Nova Power Thar Limited. The Sukuk will be redeemed in 2026. The profit and principal repayments are running smoothly.

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.