The Pakistan Credit Rating Agency Limited
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Muhammad Atif Chaudhry

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PACRA assigns preliminary rating to China Power Hub Generation Company (Pvt.) Limited | PPSTS-3 | PKR 7bln | TBI

Rating Type Debt Instrument
(22-Mar-23 )
Action Preliminary
Long Term AA+
Short Term A1+
Outlook Stable
Rating Watch -

The ratings take comfort from the fact that this project is a priority project under CPEC and has significant economic and strategic importance. Presence of a dedicated jetty at the plant site and the Coal Supply Agreement (CSA) with reputable international coal suppliers which ensure the stable performance of the project provides more cushion to the ratings. Going forward, due to the increase in the international prices of coal the Company is currently in discussion with the GOP for alternate solutions. O&M agreement is with Hub Power Services Ltd. (HPSL) - a joint venture between Hub Power Holdings Limited and China Power International Maintenance Engineering Company Limited. The Company has announced the Project Completion Date (PCD) on 23rd Feb 2023. CPHGC has also finalized the tariff with NEPRA recently. The Company reported a turnover of PKR 190.6bln during the CY22 (CY21: 100bln) and has attained a bottom line of PKR 46.5bln in CY22 (CY21: 19bln). DSRA is maintained by the company and is funded by internal cash generation. The company has paid off six installments of the long-term project-related debt. In reference to short-term borrowings, CPHGC has procured working capital lines of PKR 66.7bln out of which short-term borrowing utilization stood at PKR 44.4bln during CY22. In order to cater the short term working capital needs the Company is also in the process of issuance of PPSTS-3 amounting PKR 7bln. Nevertheless, the leverage is still significant and will progressively decrease over the course of the project.
Circular debt buildup could make managing cash flow difficult. The management, however, is steadfast in its commitment to maintaining on-time debt repayments and is supported by pertinent business fundamentals.

About the Entity
State Power Investment Company (52.5%) in collaboration with the Hub Power Company (47.5%) has setup a 1320MW coal-fired power plant in 2015 at Hub, Baluchistan. It's construction was completed in 2018 and the plant commenced its operations in 2019. Power Purchase Agreement (PPA) is signed for thirty years. Established and registered in Hong Kong in 1994, State Power International Holding Ltd. is primarily focused on the development, construction, operation, overseas investment, and financing of power supply programmes. Whereas, HUBCO is one of the first and largest Independent Power Producers (IPP) in Pakistan to be financed by the private sector in Southern Asia. The BoD comprises of seven members, 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, appointed as CEO. He is accompanied by a team of qualified and experienced Chinese and Pakistani individuals.

About the Instrument
China Power Hub Generation Company (Pvt.) Limited (CPHGC) is going to issued a rated, unsecured, privately placed, short-term Sukuk (PPSTS-3) in Mar 2023. The amount of the instrument is PKR 7,000mln. The purpose of the PPSTS-3 is to finance the company's working capital requirements. The tenor of PPSTS is up to 6 months and will carry a profit rate of 6MK+(upto 80bps). The profit and principal will be paid at maturity. The PPSTS is unsecured.

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