PACRA Maintains The Entity Ratings of Hub Power Holdings Limited | Sukuk

The rating reflects Hub Power Holdings Limited's ('Hub Power Holdings' or 'the Company') holdco structure with focus on expanding energy generation capacity through indigenous resources. The Company is a wholly owned subsidiary of The Hub Power Company Limited (HUBCO), a very strong player in Pakistan's energy sector with a generation capacity of 1,292MWs, which is now increased to 3,581MWs. Hub Power Holdings has made strategic investments in two key entities i.e. China Power Hub Generation Co. (Pvt.) Ltd. and ThalNova Power Thar (Pvt.) Ltd. with ownership stake of 47.5% and 38.3% respectively. In Dec 22, the Company successfully completed the acquisition of ENI's upstream business operations in Pakistan through a Joint venture known as Prime International Oil & Gas Co. Also, Hub Power entered into a JV to establish China Power Hub for operation and maintenance of China Power's plant holding its 49% share. The primary component of the Company's business risk profile revolves around profit-sharing arrangements with its associated entity, China Power, which consistently receives capacity payments. China Power achieved its project completion date in February 2023. ThalNova, on the other hand, has yet to announce its PCD. During FY23, the Company experienced a substantial surge in its profitability, reaching PKR 25.7 bln (FY22: PKR 4.6 bln) due to increase in the income from related parties (FY23: PKR 34.5 bln , FY22: PKR 9 bln) which has a major incorporation of China Power Hub Generation share of profit (FY23: PKR 28.3bln, FY22: PKR 9.1bln). Furthermore, the Company benefits from the support of its sponsors, along with their business acumen of power sector. These factors contribute positively to the Company's credit ratings.
The construction of an effective mechanism for making consolidated investments and evaluating their performances in a holding company will be a critical and an on going process.

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.

About the Instrument
Hub Power Holdings has recently issued a secured, privately placed Islamic Certificates (commonly referred to as "Sukuk") totaling PKR 6 bln to address debt obligations at the group level. The Sukuk carries a 5-year tenor, with a grace period of 3 years, and was issued at a discount. This discount covered the profit payments for the initial two years of the Sukuk's term. The differential profit, associated with the discounting, was settled on November 14, 2022. Subsequently, profit payments will be made semi-annually in arrears, with a fixed rate of 6M KIBOR plus 250 bps. The principal amount will be repaid in four equal semi-annual installments. The sukuk is fully secured under PR-6 Regulation of SBP.