PPI Original Text (PPI-OT) – Pakistan Credit Rating Agency Limited Maintains Ratings Of The Hub Power Company Limited

Lahore, May 15, 2012 (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 consistent performance track record, reflected in high availability and adequate efficiency of HUB plant. Recently, International Power PLC (IP) – the largest shareholder and HUB plant’s O and M operator – entered into an agreement with Dawood group to divest its stake.

The transaction is expected to be completed in near future. However, IP would continue to provide O and M services. Dawood group – a leading conglomerate in Pakistan – would become the largest shareholder in HUBCO after completion of this transaction. Dawood group is expected to adequately fill the strategic void.

The ratings incorporate addition of new capacity through Narowal plant, which is governed under 2002 power policy. Similar to HUB plant, the cash flow stream of Narowal is also guaranteed by GoP under the Power Purchase Agreement (PPA), subject to adherence to agreed upon performance benchmarks; this provides comfort to the ratings. However, weak financial discipline of the sole customer, Water and Power Development Authority (WAPDA)/ National Transmission and Distribution Company (NTDC) remains a key consideration. Though the company has been comfortably managing its working capital requirements , optimal allocation of financial resources for its generation fleet remains critical.

For more information, contact:
Hammad Rashid
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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