PACRA Maintains Entity Ratings of The Hub Power Company Limited

Lahore, June 29, 2018 (PPI-OT):The Hub Power Company Limited (Hubco) is one of the largest power producers in the country contributing ~7% towards the total generation of the country in FY17. Hubco aims to significantly expand its generation capacity. Hubco aims to boost the country’s energy security by utilising Pakistan’s indigenous natural resources. Hubco is in the process of setting up new coal power plants (i) 2x660MW coal fired power plant at Hub and (ii) 330MW mine-mouth coal fired power plant at Thar. Hubco’s 2x660MW coal fired power project is being developed under a joint venture with China Power International Holdings (CPIH).

A separate JV company has been setup (China Power Hub Generation Company – CPHGC) to undertake this project. Currently Hubco has 26% stake in CPHGC and it is planning to increase its shareholding upto 46%. Hubco has incorporated Thar Energy Limited to undertake its 330 MW open-mine mouth coal power plant in Thar. Company’s new projects will be financed in debt to equity ratio of 75:25. The company plans to finance equity portion of the projects by securing new debt. For this purpose it has availed long term debt facility of PKR ~26.5bln with 4 years of grace period. Although this would increase leveraging, matching repayments with project returns should help manage the financial risk profile.

Comfort is drawn from Hubco’s deleveraged balance sheet and relatively free stable cash flows. Cash flow streams of Hubco’s plants are guaranteed by GoP under the Power Purchase Agreement (PPA), subject to adherence to the agreed upon performance benchmarks; this provides comfort to the ratings. Timely completion of new projects and maintaining healthy debt service coverages post acquisition of new debt will remain challenging.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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