The Pakistan Credit Rating Agency Limited
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Madiha Sohail

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PACRA Maintains Ratings of The Hub Power Company Limited | Privately Placed Sukuk of PKR 5bln

Rating Type Debt Instrument
(14-Apr-23 )
(15-Apr-22 )
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 dimensions of the energy sector. The Company had signed a PPA with the government for 30 years that is valid till 2027. 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 was 2,921MW, which is now increased to 3,581MW. As 660MW is added to the total installed capacity of Hubco as ThalNova Power and Thar Energy Limited achieved their respective COD on 17th Feb'23 and 1st Oct'22 respectively. The Company aims at expanding its operations in oil & gas exploration, water desalination and renewable energy through this strategic investment. HUBCO completed the acquisition of Eni’s business in Pakistan, through a 50:50 joint venture company, Prime International Oil & Gas Co. During the six-month period ended on Dec 2022, the Company reported topline of PKR ~25bln (Dec'21: PKR ~31bln). While the profitability of the Company significantly increased by ~40% to PKR ~15bln (Dec'21: 9bln). The increase in profit is mainly due to Dividend income from NEL and partly offset by impact of higher finance costs due to higher interest rate. Although Hubco has a sizeable amount of borrowings to support its working capital needs and growth opportunities. The settlement of outstanding receivables due from CPPAG under the signed MoU has further eased the burden on the Company’s financial risk profile.

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 Rated, Secured, Privately Placed, Islamic Certificate amounting PKR 5bln, on March 19, 2020, to finance Company’s working capital requirements. The Privately Placed Long Term Sukuk, having a tenor of four years, carries a profit rate of 1 Year Kibor + 190bps. Interest is being paid semi-annually and principal will be paid in 4 equal semi-annual installments (with two years of Grace Period) starting from the 30th month of the issuance date in September 2022. Currently, the principal of PKR 2,500mln and markup of PKR 1,839mln have been paid till March 2023 by 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.