Press Release

VIS Assigns Initial Entity Ratings to Rousch (Pakistan) Power Limited

Karachi, June 28, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘AA-/A-1’ (Double A Minus/A-One) to Rousch (Pakistan) Power Limited (RPPL). The long term rating of ‘AA-’ signifies high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. The short term rating of ‘A-1’ signifies high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’.

RPPL operates a 450 MW combined cycle thermal power plant near Sidhnai Barrage, Abdul Hakim Town, Khanewal District, Punjab. Power Management Company (Private) Limited (PMCL), a subsidiary of Altern Energy Limited (AEL), has majority shareholding in the company with 60% ownership. Further, the ultimate parent company is Descon Processing (Private) Limited. Other major shareholders include Siemens Project Ventures of Germany and Electricity Supply Board of Ireland holding 26% and 7.33% of shares, respectively.

Assessment of business risk profile incorporates low off-take risk due to take or pay tariff awarded whereby RPPL will be eligible for guaranteed capacity payments. Operating performance of the plant has remained satisfactory over the last four years. During the ongoing year, there has been a dip in dispatch factor primarily due to commencement of power projects who are relatively better positioned in the economic merit order vis-à-vis RPPL and partly due to unavailability of RLNG. Resultantly, efficiency has also weakened slightly in the ongoing year. However, given that capacity payments are guaranteed, impact on financial profile is expected to be limited. Operational Risk is also considered manageable in view of satisfactory O&M arrangement in place and adequate insurance cover. While extension of interim Gas Supply Agreement by Ministry of Energy and Petroleum has been working smoothly in terms of availability of RLNG, finalization of a long-term gas supply arrangement is considered important from a ratings perspective.

Financial risk profile draws support from healthy cash flows and satisfactory debt servicing ability. Moreover, the Company’s low leveraged capital structure is a positive rating driver. Cash flows are adequate for servicing outstanding debt obligations. However, persistence of circular debt may translate into some liquidity pressures. Equity base of the company has grown over the years on account of internal capital generation. Three-fifth of the total debt carried on the balance sheet comprises short term borrowings which have been mobilized to meet working capital requirements due to overdue receivables. Long term debt is expected to be fully paid by end-1HFY20. Ratings remain dependent on maintaining satisfactory operating performance and low financial risk profile.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

Applicable Rating Criteria: Industrial Corporates (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (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.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.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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