The Pakistan Credit Rating Agency (PACRA) recently reaffirmed the credit rating of The Hub Power Company Limited (HUBCO), a key player in Pakistan’s energy sector. The company retains its “AA+” long-term rating and “A1+” short-term rating, ensuring confidence in its financial stability and operational credibility. This affirmation follows HUBCO’s recent execution of a Negotiated Settlement Agreement with the Government of Pakistan (GoP), which brings notable adjustments to its power agreements and financial outlook.
Key Agreement Changes and Financial Benefits
As part of the settlement with GoP, HUBCO’s power purchase agreements for its 1,292 MW power generation project have been rescheduled to end on October 1, 2024, ahead of the initial expiration date of March 31, 2027. This agreement also includes the settlement of all outstanding receivables up to Rs36.5 billion (excluding interest) from the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G). The settlement also ensures that HUBCO’s claims with Pakistan State Oil (PSO) will be addressed by the government, including any associated liabilities.
Strategic Debt Reduction
PACRA reports that HUBCO plans to use the proceeds from CPPA-G to deleverage its balance sheet by reducing both short- and long-term debts at the parent and subsidiary levels. This strategy is expected to strengthen HUBCO’s financial structure, making it more resilient and capable of sustaining growth in its diverse energy portfolio.
HUBCO’s Expansive Energy Portfolio
HUBCO’s investments across Pakistan’s energy sector underscore its pivotal role. With direct or beneficial control over a variety of energy assets, HUBCO’s portfolio includes:
- Narowal Energy Limited – 100% ownership of a 225 MW project.
- Laraib Energy Limited – A 74.95% stake in an 84 MW hydroelectric plant.
- Thar Energy Limited – 60% shareholding in a 330 MW Thar-based power plant.
- China Power Hub Generation – A 47.5% stake in a 1,320 MW plant in collaboration with China Power International.
- Thal Nova Power Thar Ltd – 38.3% ownership in a 330 MW power facility.
These projects have achieved commercial operation status, solidifying HUBCO’s position as a reliable contributor to Pakistan’s energy grid. The anticipated dividends from these ventures provide a steady stream of income, reinforcing the company’s financial strength and supporting PACRA’s stable outlook.
Diversification into Strategic Sectors
HUBCO’s long-term vision extends beyond conventional energy, positioning itself in key strategic sectors:
- Oil and Gas Exploration: HUBCO holds a 50% stake in Prime International Oil and Gas Company, which has acquired ENI Pakistan’s operations.
- Operations and Maintenance: HUBCO has a 49% stake in China Power Hub Operating Company (Pvt) Limited, providing O&M services to the coal-fired power plant at Hub.
- Coal Mining: HUBCO owns an 8% minority share in Sindh Engro Coal Mining Company (SECMC) and plans to acquire an additional 9.5%. SECMC is involved in extensive coal mining operations in Thar, essential for Pakistan’s energy security.
Expanding into Emerging Sectors
In addition to traditional energy assets, HUBCO is actively diversifying into several emerging industries, such as renewable energy, mining, water desalination, and automobile production. This expansion not only diversifies revenue streams but also aligns with Pakistan’s evolving industrial landscape and growing demand for diversified infrastructure projects.
Future Prospects
HUBCO’s diversified holdings, from power generation to strategic investments in oil and gas, mining, and renewable energy, highlight its forward-thinking approach to energy and infrastructure development. The company’s significant investment in Sindh Engro Coal Mining Company, coupled with the additional 9.5% stake acquisition, will further cement its influence in Pakistan’s coal and energy sectors. Additionally, HUBCO’s ventures into oil and gas exploration and water desalination provide resilience against market fluctuations in any single sector, ensuring long-term stability.
PACRA’s reaffirmation of HUBCO’s ratings reflects the agency’s confidence in the company’s financial health, robust portfolio, and ability to maintain consistent revenue streams. With a strong dividend pipeline and an expanding footprint in critical industries, HUBCO is well-positioned to meet Pakistan’s growing energy and infrastructure needs while reinforcing its standing in the national economy.
Comments