Press Release

JCR-VIS Reaffirms Entity Ratings to National Power Parks Management Company (Pvt.) Ltd
 

Karachi, December 31, 2018: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of National Power Parks Management Company (Pvt.) Ltd. (NPPMCL) at “AA+/A-1+” (Double A-Plus/A-One Plus). The medium to long-term rating of ‘AA+’ denotes high credit quality coupled with strong protection factors. Moreover, risk factors may vary slightly with possible changes in the economy. The short-term rating of ‘A-1+’ denotes highest certainty of timely payments, liquidity factors are excellent and just below risk-free government of Pakistan’s short-term obligations. Outlook on the assigned ratings is ‘Stable’.

The assigned ratings take into account strong ownership profile of NPPMCL as the company is owned and controlled by the Government of Pakistan (GOP) via Pakistan Development Fund Limited (PDFL). The principal business activity of NPPMCL is power generation, and for that purpose, the company has established two Re-liquefied Natural Gas (RLNG) based Combined Cycle Gas Turbine (CCGT) power plants, Haveli Bahadur Shah (HBS) and Balloki, under the Power Generation Policy, 2015 that offers a guaranteed equity Internal Rate of Return (IRR), cost indexation and pass-through structure. Both power plants attained Commercial Operation Date (COD) during mid-2018, and electricity generated from these plants is being sold to the Central Power Purchase Agency (Guarantee) Limited (CPPA) under a Power Purchase Agreement (PPA), and the obligations of CPPA are guaranteed by the GOP under the Implementation Agreement.

Delays in COD for both power projects have resulted in liquidated damages receivable from the EPC contractors. NPPMCL, with the consent of EPC contractors, has withheld the amount of liquidated damages from the outstanding payments of EPC contractors, however, this will be recognized at the time of projects’ closure. Profitability and cash flows position of the company has improved considerably as a result of commencement of combined cycle operations of Balloki early in the 1QFY19. The debt coverage ratios have improved owing to notable growth in funds from operations (FFO) despite higher short-term borrowings. Short-term borrowings from commercial banks were recorded higher due to elevated working capital requirements. Equity base of NPPMCL augmented with the retention of profits, whereas shareholding of GOP was acquired by PDFL at the beginning of FY18. Strong equity base and conservative capital structure is reflected in low gearing and debt leverage indicators.

PDFL loan is being converted into equity, whereas NPPMCL is in process of mobilizing long-term debt of Rs. 38b from a consortium of commercial banks to discharge its liabilities mainly for the settlement of SBLC, IDC, and outstanding bills of EPC contractors as well as to cover the shortfall in LNG escrow account. Moreover, the Council of Common Interests (CCI) has approved the proposal of privatization of both power plants. Both plants have also been cleared by the cabinet committee on privatization for 100 % sale while Privatization Commission has been tasked with the appointment of financial advisor to structure the transaction.

For further information on this rating announcement, please contact undersigned (Ext: 201) or Mr. Maimoon Rasheed (Ext: 8008) at 021-35311861-70/ 042-35723411 or fax to 021-35311872-3.


Jamal Abbas Zaidi
Advisor

JCR-VIS Entity Rating Criteria Industrial Corporate (May 2016)
http://www.jcrvis.com.pk/docs/Corporate-Methodology-201605.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2018 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

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