The Pakistan Credit Rating Agency Limited
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Hashim Yazdani

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

Rating Type Debt Instrument
(12-Oct-23 )
(14-Apr-23 )
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, China Power Hub Generation Company, Thar Energy Limited and Thal Nova Power Thar Ltd, the Group has an established footprint in the power generation sector. Hub Power Services Limited is a wholly owned subsidiary of HUBCO that provides Operation and Maintenance (O&M) services to its existing power plants. In addition, the Company also holds 49% stake in China Power Hub Operating Company (Pvt) Limited, a joint venture with China Power International Maintenance Engineering Company Limited, to provide O&M to the Super Critical Coal Power Plant at Hub. The Company also holds a minority stake of 8% in Sindh Engro Coal Mining Company which is establishing a coal mining facility at Thar. Prime international Oil and Gas Company (50% owned by Hub Power Holdings Ltd) has acquired all upstream operations and assets of ENI Pakistan under a J.V with ENI’s local employees. During FY23, the Company reported topline of PKR 44,516mln (FY22: PKR 62,544mln) against Energy and Capacity invoices to the power purchaser, CPPA-G. The decline in topline is a result of lower generation of 205GWh (FY22: 1,229GWh) during the period due to the governments priority to obtain electricity from plants with lower generation cost. The profitability of the Company is further supplemented by dividend and Income from Management Services received from subsidiaries.
Although HUBCO has a sizeable amount of borrowings to support its working capital needs and growth opportunities. The settlement of outstanding receivables (June 2023: PKR 55,983mln, FY22: PKR 62,919mln) due from CPPAG remains crucial.

About the Entity
HUBCO, a listed company, was incorporated in 1991. Mega Conglomerate being the largest shareholder holds 19.48% of the total ownership. Other institutions include Fauji Foundation (8.5%), Allied bank (3.38%) and National Bank (2.97%). The remaining shareholding is held by various Financial Institutions, Insurance Companies, Joint Stock Companies, Modaraba/Mutual Fund & Leasing Companies and general public. 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. He is accompanied by a team of qualified individuals.

About the Instrument
HUBCO issued a Rated, Secured, Privately Placed, Islamic Certificate amounting PKR 5bln, on March 19, 2020, for optimization of the balance sheet. The Privately Placed Long Term Sukuk, having a tenor of 4 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 3,750mln and markup of PKR ~2,128mln have been paid till September 2023.

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.