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Lahore, June 27, 2014 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has maintained the long-term entity rating of ‘AA+’ (Double A plus) and short-term rating of ‘A1+’ (A One plus) of The Hub Power Company Limited. These ratings denote a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.
The ratings reflect Hubco’s robust business profile emanating from the company’s strategic importance in local energy chain. The company has started overhaul and maintenance work on its plants – Hub and Narowal.
This resulted in constrain in overall production levels. Consequential impact was observed in reported lower profitability. Nevertheless, post-completion in FY15, the management expects to benefit in the form of better efficiency levels, particularly at Hub plant.
The company’s expansion plans envisage establishment of a new coal-based plant as against earlier intentions of conversion of existing plant to coal due to related drags. The finalization of related modalities may take time.
Although re-emergence of sizeable circular debt poses challenge to financial profile, the company’s ability to finance its receivables from payables to suppliers, which relates to Hub plant, provides comfort. The ratings continue to draw support from GoP guaranteed cash flow stream under the Power Purchase Agreement (PPA), subject to adherence to agreed upon performance benchmarks.
The ratings are dependent on the company’s ability to manage its financial profile, particularly working capital requirements in case of delayed payments while prudently handling cash flows to repay its debt obligations.
For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com
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