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PACRA Upgrades Entity Ratings of China Power Hub Generation Company (Pvt.) Limited

Rating Type Entity
(01-Jan-21 )
(07-Jan-20 )
Action Upgrade Initial
Long Term AA+ AA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

China Power Hub Generation Company Private Limited (CPHGC) is a coal based 1320MW power plant (Complex), set up by State Power Investment Corporation (SPIC), one of the top Five State-owned Power Corporations in China along with Hub Power Company of Pakistan. The financial strength and experience in the energy chain of the sponsoring companies – CPIH and HUBCO reflects positively in the ratings. Rating takes comfort from the company's strategic importance to economy through its operations, the strong business profile and from the involvement of Pakistan and Chinese governments, as this project is a priority project under CPEC. Dedicated jetty at plant site and Coal Supply Agreement (CSA) with reputable international coal suppliers ensure the stable performance of the project. Initially the O&M contract was outsourced to the EPC contractor- China Energy Engineering Group for two years, which will be expired in August 21. Meanwhile the Company is in the process of finalization of long term O&M contractor. management has put forth the requisition for true up tariff to NEPRA, which would be concluded in due course. The company has successfully achieved all the performance benchmarks and provided 5,214GWh of electricity to the grid during 9MCY20. Profitability of the company is sanguine. DSRA is being funded through operating revenues. Till date the company has repaid two installments of its project related long term debt. However the leverage is yet sizeable and will gradually decline along with the life of the project.
Sustained good financial discipline and upholding strong operational performance in line with agreed performance levels, maintaining healthy debt service coverages remain important. Accumulation of circular debt may pose challenge to the cash flow management. However, the management supported by relevant business fundamentals remain committed to sustain timely debt repayments. External factors, if any, leading to weakening of financial profile may impact negatively.

About the Entity
China Power Hub Generation Company (Pvt.) Limited (CPHGC), incorporated in 2015. CPHGC has been established as a Joint Venture Agreement (JVA) between China Power International Holding Limited (CPIHL) and the Hub Power Company (HUBCO). As per JVA, CPIHL through its wholly owned subsidiary China Power International (Pakistan) Investment Limited (CPIPIL) and HUBCO through its wholly owned subsidiary Hub Power Holdings Limited (HPHL) owns 52.5% and 47.5% respectively. The BoD comprises seven members, including the CEO. Four members represent China Power International (Pakistan) Investment Limited, while three represents Hub Power Holdings Limited. The management team is led by Mr. Zhao Yonggang, CEO. He is supported by a team of experienced professionals from Pakistan and China.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.