HUBC has issued a material notice stating that two of its plants have reached their Project Completion Date (PCD), according to a recent update from AHL Research.
Key Points of the material notice
- Thar Energy Limited (TEL) and ThalNova Power Thar (Private) Limited (TNPTL) have announced the achievement of the PCD for their 2×330 MW power plants on October 31, 2025, in accordance with the terms of their project financing documents.
- HUBC directly holds a 60% equity stake in TEL and, indirectly through its wholly owned subsidiary, HPHL, holds 38.3% in TNPTL. FFC has a 30% stake in TEL, while Thal Limited owns 26% in TNPTL. Both projects are classified as priority initiatives under the China–Pakistan Economic Corridor (CPEC).
- Upon achievement of PCD, TEL/TNPTL will be able to declare dividends as and when it has sufficient excess cash flow, which will be beneficial for HUBC, FFC, and Thal.
- According to management, there is no requirement for a true-up prior to the PCD for TEL and TNPTL, as mentioned earlier in our report. Furthermore, TEL and TNPTL are expected to declare dividends semiannually, in December and May. The annual dividend payout may exceed the yearly return on equity (ROE), supported by accumulated cash reserves.
- We expect HUBC to receive dividends of ~PKR 8.0bn (PKR 6.13/share, stake-adjusted) from TEL in FY26, normalizing to PKR 8.5bn(PKR 6.53/share) in FY27. From TNPTL, we project dividends of ~PKR 4.9bn(PKR 3.78/share, stake-adjusted) in FY26, normalizing to PKR 5.6bn (PKR 4.33/share) in FY27. Consequently, HUBC’s total DPS is estimated at PKR 15.0/17.0 for FY26/27.
- HUBC had initially issued a cost overrun SBLC amounting to USD 31.20 million to the lenders of TEL/TNPTL, respectively, which was previously valid until the earlier of PCD or December 25.
- This arrangement was for (a) cost overrun, (b) any obligation under financing documents before PCD, and (c) COD undertakings.
- As indicated in the earlier EOGM notice, TEL and TNPTL were progressing toward declaring their PCD. To waive certain unmet conditions, the lenders required an extension in the tenor of the Standby Letter of Credit (SBLC), with no material cash outflow, until the later of January 2034/July 2034, or until the end of the respective project loan tenors for TEL and TNPTL. The shareholders have approved this extension along with the additional terms proposed by the lenders.
- The extended SBLC tenor aims to cover: (i) disputed HVDC-related LDs under the amended PPA, however, disputed by both TEL/TNPTL, and (ii) any debt servicing shortfalls.
- HUBC is currently trading at forward FY26 multiples of 6.2x P/E and 1.2x P/B, offering a dividend yield of 6.9%.
