PACRA Maintains Entity Ratings of PakGen Power Limited

Lahore, December 22, 2017 (PPI-OT):The ratings reflect the regulated structure of Pakgen’s business; Whereby revenues and cash flows are guaranteed by the sovereign government given adherence to agreed operational parameters. Pakgen’s plant, after closure of almost eleven months, had resumed normal operations in January 2016. The company’s loss of profit and cost of replacement of transformer was covered under insurance policy thus protecting the company from loss. Insurance claims have been settled completely by Dec 2016. During 6MCY17, trade receivables of the company largely remained at the same level in comparison to same period last year.

The company’s financial profile, though adequate, is highly dependent on the behaviour of the power purchaser. The Company has been consistent in paying dividends. Pakgen Power repaid its long term project debt in 2010. However, current borrowings reflects the need to bridge the working capital requirements. Moreover, Company’s profitability has increased because of reduction in delta losses.

Conversion of plant from oil fired to coal and participation in planned investment by parent Nishat Group to set up a new 660MW coal power plant are in process. However, the progress has been slowed down due to the government restriction on use of imported coal to certain projects only.

Upholding operational performance in line with agreed performance levels would remain a key rating driver. Accumulation of debt to finance CAPEX – the coal conversion project and/or fresh investment in new power project – may impact financial risk profile of the company. Meanwhile, any significant increase in overdue receivables, as a result of rising circular debt, may negatively impact the ratings.

For more information, contact:
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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