PACRA Maintains Entity Ratings of Hub Power Holdings Limited

The rating reflects the Hub Power Holdings Ltd.'s ('the Company') holdco structure, a wholly owned subsidiary of The Hub Power Company Limited (HUBCO), very strong player in Pakistan's energy sector with installed capacity of 3,581MWs, contributing ~17% among total IPPs in terms of capacity generation. HUBCO has other significant power projects under its umbrella, such as Narowal Energy Limited, Laraib Energy Limited, China Power Hub Generation Company, Thar Energy Limited, and ThalNova Power Thar Limited. Hub Power Holdings holds the strategic investment in China Power Hub Generation Co. (Pvt.) Ltd. ('China Power') (~47.5%) and ThalNova Power Thar (Pvt.) Ltd ('ThalNova') (~38.3%). Apart from this, the Company has also entered into a JV agreement (50:50) with Prime International Oil & Gas Co. Ltd. ('Prime International') and acquired all the upstream operations renewable energy assets owned by ENI in Pakistan. The Company also has acquired China Power Hub Operating Co. (Pvt.) Ltd. ('China Power Hub') through a JV agreement with a ~49% stake to operate and maintain China Power's plant. The strategic investments in the associates and joint ventures enable the Company to receive profits. The business risk of the Company derives solely from profit sharing from its associates & joint ventures. During 6MFY24, the Company received major share of profit from its associate i.e. China Power Hub Generation Company (Private) Limited and ThalNova Power Thar (Private) Limited amounting to ~PKR 18.79bln (6MFY23: ~PKR 13.11bln) and ~PKR 2.3bln (6MFY23: ~PKR 32mln). The Company also received a profit of ~PKR 1.56bln from its JV Prime International Oil and Gas Company Limited but received a loss of ~PKR 104mln (6MFY23: Loss of ~PKR 73mln) from China Power Hub operating Company during 6MFY24. As a result during 6MFY24, Hub Power Holdings Ltd’s share of profit from associates and joint ventures has increased by ~73% and clocked in at ~PKR 22.57bln (6MFY23: ~PKR 13.07bln). The Company also received dividends from China Power Hub Generation Co. (Pvt.) Ltd. amounting to ~PKR 9.2bln. The Company’s other associate ThalNova also achieved its COD in Feb-23 and generated 1,009GWh with a load factor of 76% during 6MFY24. The Company achieved a bottom line of ~PKR 15.27bln during 6MFY24, compared to ~PKR 8.62bln in 6MFY23 due to an increase in share of profits from its associates & JV's. The Company has also issued a PPSTS amounting to PKR 6bln for its working capital requirements. While having low leverage, the Company has room to borrow. Moreover, the demonstrated support of sponsors and their strong acumen of power sector dynamics benefit the ratings.
The ratings depend on timely materialization of projected timelines and generating cashflows. Consolidation of investments at holding company level and formalizing a strong and effective mechanism for monitoring performance will be critical, going forward. Maintaining strong financial profile and creating liquidity cushion remains important. Change in the government policy for payment mechanism of power projects, along with any significant delay in envisaged cashflows due to the current power sector dynamics/constraints would impact ratings.

About the Entity
Hub Power Holdings Ltd. operates as a fully-owned subsidiary of The Hub Power Co. Ltd. It was established in 2015 as a publicly unlisted entity in accordance with the Companies Ordinance, 1984 (currently governed by the Companies Act, 2017). The primary focus of the company revolves around capitalizing on emerging prospects within the energy sector. The Board of Directors is chaired by Mr. Aly Khan, serving as Chairman. On the other hand, Mr. Kamran Kamal leads the company as CEO.