PACRA Assigns Initial Rating to The Hub Power Company Limited | PPSTS | 4.5bln | Apr-22
|Rating Type||Debt Instrument|
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 and China Power Hub Generation Company, the total combined installed power generation capacity of Hubco is 2,921MW. Furthermore, 660MW will be added to the total installed capacity of Hubco once ThalNova Power and Thar Energy Limited achieve their respective COD by second half of CY22 as per their PPA. The Company aims at expanding its operations in oil & gas exploration, water desalination and renewable energy through this strategic investment. During the nine-month period ended on March 2022, the Company reported topline of PKR~ 41,835mln on account of increased generation (863GWh) of Hub Plant. The profitability of the Company was further enhanced with addition of dividend income and share of profit from associates. Although Hubco has sizeable amount of borrowings to support its working capital needs and growth opportunities but its cash flows are adequate to sustain the debt burden. The settlement of outstanding receivables due from CPPAG under the signed MoU has further eased the burden on the Company’s financial risk profile. Repayment of principle and mark up on long term Sukuks issued previously are due this year. Timely repayment along with successful completion of expansion projects remain crucial for Hubco to sustain its assigned ratings.
Hubco’s strong operational performance over the years coupled with its diversified investment portfolio in the power sector contributes towards to the assigned ratings.
Hubco, a listed company, was incorporated in 1991. Mega Conglomerate being the largest shareholder holds 19.5% of the total ownership. Other institutions include Fauji Foundation (8.5%), Allied bank (4.4%) and National Bank (3.6%). The company has made sizeable investments in the power sector including power generation, oil & gas exploration, operations & maintenance services and coal mining. 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 and is serving on the current position for almost one year. He is accompanied by a team of qualified individuals heading the respective divisions in the company.
HUBCO issued unsecured, privately placed short-term sukuk ("PPSTS") of PKR 4,500mln to finance the Company’s working capital requirements of the Company, situated strategically at the Hub River. The Company issued the instrument in April-22. The tenor of the PPSTS is (06) months and carries a profit rate of 6MK + 100bps. PPSTS will mature at the end of October 2022. Interest and principal will be paid in bullet at the time of maturity.