FLASHNEWS:

PACRA assigns Initial rating to China Power Hub Generation Company (Private) Limited – PPSTS-2 – PKR 5bln – Dec-22

Lahore, February 03, 2023 (PPI-OT):The Ratings take comfort from the fact that this project is a priority project under CPEC and has significant economic and strategic importance. Presence of dedicated jetty at plant site and Coal Supply Agreement (CSA) with reputable international coal suppliers which ensure stable performance of the project provides more cushion to the Ratings. Going forward, due to increase in the international prices of coal the Company is currently in discussion with the GoP for alternate solutions. O and M agreement is with Hub Power Services Ltd. (HPSL) – a joint venture between Hub Power Holdings Limited and China Power International Maintenance Engineering Company Limited.

The Company is in process of announcing Project Completion Date (PCD) as all the covenants have been fulfilled except that of revolving fund. In this regard, HUBCO gave a $150mln SBLC to guarantee an investment in the form of equity or subordinated debt to satisfy the funding shortfall if any, in CPHGC. The guarantee encashment notice which was served earlier has been withdrawn and SBLC has been extended on mutually agreed terms.

The Company reported a turnover of PKR 153bln during 9MCY22 (9MCY21: 80bln) and has attained a bottom line of PKR 24bln in 9MCY22 as opposed to PKR 22bln in 9MCY21. The Company aims to issue a series of commercial paper amounting to PKR ~20bln in total, in order to manage the increasing price of imported coal in the international market. Out of which PKR 13bln has already been issued. This will be in addition to the short-term borrowings already utilized by CPHGC. Till date the Company has repaid six 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. 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.

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