Lahore, September 03, 2021 (PPI-OT):Hub Power Holdings Ltd. (Hub Power Holding) along with Thal Power (Pvt.) Limited and Nova Powergen Limited are setting up a 330MW coal power plant, under the umbrella of ThalNova Power Thar (Pvt.) Limited (ThalNova). Hub Power Holding reflect very strong credentials, as also reflected by their Entity Ratings (AA+). The financial strength and experience in the energy chain of the sponsoring companies is positive to the ratings, while the controlling interest lies with Hub Power Holding.
ThalNova has been awarded an upfront tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. China East Resource Import and Export Corporation and China Machinery Engineering Corporation are the EPC contractors; comfort is drawn that they have ~30 years of worldwide experience. Currently, project is exposed to completion risk because as of June-2021, 46.93% construction work is completed.
The EPC contractors have provided bank guarantees in the form of performance bond and warranty bond. These bank guarantees provide additional cushion for the sustainable financial risk profile. Further, the company will maintain the Debt Service Reserve Account, which will be filled by 6 months SBLCs, providing coverage of six months on its financial obligations till maturity. Moreover, the operations of the plant are exposed to resource risk, because the Thar Block II is under construction but SECMC (coal supplier) has notified to ThalNova that they are confident of completing construction by Mar-2022 and will supply them the required coal.
The Company has signed Power Purchase Agreement (PPA) with CPPA-G and as per the PPA, in case of no demand from the power purchaser, CPPA-G shall be liable to pay the capacity payments at applicable tariff rates. The Government of Pakistan has given payment guarantee against dues from CPPA-G. The Company has adequate insurance coverage to cover the risk of business interruptions, marine and erection, startup-delay etc. Furthermore, external factors such as any adverse changes in the regulatory framework or prolonged delay in achieving COD may impact the ratings.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com