Pakistan Credit Rating Agency revises Ratings of Halmore Power Generation Company Limited

Lahore, November 30, 2012 (PPI-OT): The Pakistan Credit Rating Agency Limited (PACRA) has revised the long-term and short-term entity ratings of Halmore Power Generation company Private Limited (HPGCL) to “A” (Single A) and “A1″ (A One) respectively [Previous: AA-/A1+]. The ratings denote a low expectation of credit risk.

The ratings of HPGCL incorporate continuing pressure of inter-corporate debt on liquidity profile of the power sector in general, and IPPs in particular. The current regulatory structure, wherein sovereign guarantee is provided for timeliness of cash flows, given adherence to agreed performance benchmarks, ensures low business risk. This remains a critical factor in HPGCL’s ratings. However, at the same time, the company cannot fully isolate itself from sector related risks, that has constrained its financial profile.

On a standalone basis, HPGCL is facing multiple challenges which interalia include i) delay in true-up of tariff post-CoD, ii) low working capital lines, hindering the plant’s availability relative to its peers, iii) recent differences with NTDC on one of critical benchmark – availability – that has led to lower capacity payments, and iv) immediate liquidity pressure in terms of debt repayments. Cognizant of this, the company has been working on a plan to re-profile its debt repayments profile in line with its liquidity profile.

Additionally certain enhancements in the plant are being made to improve its efficiency. If successfully executed, these initiatives would provide some respite to HPGCL’s operational and financial profile. The key sponsor has recently injected some funds in the company. However, sponsors support would remain critical in near to medium term. Considering in process debt restructuring and true-up of tariff, the ratings continue to remain under Rating Watch.

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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