PACRA Updates on the Entity Ratings of The Hub Power Company Limited

In a notable development within Pakistan's power sector, the Hub Power Company Limited (HUBCO) has executed a Negotiated Settlement Agreement with the Government of Pakistan and its associated entities. This agreement advances the expiration of HUBCO’s power purchase and related contracts for its 1,292 MW power generation project from the original end date of March 31, 2027, to October 1, 2024. As part of the settlement, HUBCO has received payment for all outstanding receivables billed up to PKR 36.5bln (excluding any delayed payment interest) from the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G). Additionally, any outstanding claims between HUBCO and Pakistan State Oil (PSO) will be settled, with PSO's liabilities being addressed by GoP-related entities. Based on our discussions with management, the Company plans to use the funds received from CPPA-G to deleverage its balance sheet by retiring both short-term and long-term debt at both the holding company and subsidiary levels.
PACRA maintains a stable outlook on HUBCO’s financial standing, which is underpinned by the Company’s strong corporate structure and pivotal role in Pakistan’s energy sector. HUBCO directly or beneficially holds 100% ownership of 225 MW Narowal Energy Limited, a 74.95% share in 84 MW Laraib Energy Limited, a 60% stake in 330 MW Thar Energy Limited, a 47.5% shareholding in 1,320 MW China Power Hub Generation and a 38.3% ownership in 330 MW Thal Nova Power Thar Ltd. All of the projects above have commenced commercial operations and are expected to make a substantial contribution to HUBCO’s earnings through dividends over an extended period, which forms the basis of our opinion on the financial strength of the Company going forward.
Additionally, HUBCO holds a 50% stake in Prime International Oil and Gas Company, which has acquired ENI Pakistan’s upstream operations and assets in partnership with ENI's local employees. HUBCO also has a 49% stake in China Power Hub Operating Company (Pvt) Limited, a joint venture with China Power International Maintenance Engineering Company Limited, providing operations and maintenance (O&M) services for the Super Critical Coal Power Plant at Hub. Furthermore, HUBCO owns an 8% minority stake in Sindh Engro Coal Mining Company, which is developing and expanding coal mining operations in Thar.
HUBCO continues to expand its strategic footprint in key sectors such as automobiles, mining, oil and gas exploration, water desalination, and renewable energy. To further enhance its portfolio, the company also plans to acquire an additional 9.5% stake in Sindh Engro Coal Mining Company. HUBCO’s strong dividend stream from its current and future strategic investments strengthens its financial stability, leading us to maintain confidence in its ratings.

About the Entity
HUBCO, a listed company, was incorporated in 1991. Mega Conglomerate holds the majority stake in HUBCO of 19.48% of the total ownership while Fauji Foundation holds, an 8.5% ownership stake. The remaining shareholding is held by various Financial Institutions, Insurance Companies, Joint Stock Companies, Modaraba/Mutual Fund & Leasing Companies and the Public. Overall control of the Company vests in a nine-member board of directors (BoD). The BoD comprises 3 nominees from Mega Conglomerate, 1 nominee each from NIT and Fauji Foundation. 1 member represents the Government of Balochistan along with 2 independent directors. Mr. Kamran Kamal is the CEO of the Company and has been associated with the Group for about eight years.