Karachi, April 19, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned preliminary entity ratings of “AA/A-1+” (Double A / A-One plus) to Quaid-e-Azam Thermal Power (Pvt.) Ltd (QATPL). Outlook on the assigned ratings is ‘Stable’. Ratings will be finalized upon review of signed legal documents and issuance of Government of Pakistan (GoP) guarantee.
The assigned ratings take into account sub-sovereign ownership of QATPL with Government of Punjab (GoPb) holding 100% stake in the company. QATPL is setting up a 1,180MW Re-Liquefied Natural Gas (RLNG) based Combined Cycle Gas Turbine (CCGT) power plant under the Power Generation Policy, 2015 based on the interim tariff which offers a guaranteed equity Internal Rate of Return (IRR), cost indexation and pass-through structure in line with other IPPs projects. Power generated shall be sold to Central Power Purchase Agency (Guarantee) Limited (CPPA) under a Power Purchase Agreement (PPA) and the obligations of CPPA will be guaranteed by the GoP under the Implementation Agreement (IA). The ratings draw comfort from the presence of a “Non SupplyEvent” which insulates the project from the risk of gas non supply; the company shall continue to receive capacity payments during the non-supply period. In addition, the “Suspension” clause in the PPA entitles QATPL to suspend its plant operations in case the receivable amount from CPPA, at any point of time, remains outstanding for 60 days or more. This provision further insulates QATPL from circular debt risk.The ratings are contingent upon timely completion of the project without significant cost overruns, signing of all material arrangements and issuance of GoP guarantee.
QATPL has signed Engineering, Procurement & Construction (EPC) agreement with a joint venture of Harbin Electric International Company Limited (HEI) and HabibRafiq (Pvt) Ltd (HRL), companies carrying satisfactory track record in their respective fields. HEI is majority owned by Harbin Electric Corporation (HEC), a state owned enterprise established in China.
The project cost is estimated at USD 833.3m with a debt to equity ratio of 75:25; the equity portion amounting to Rs. 22.5b has already been received from GoPb. The project management team comprises seasoned professionals having extensive experience. Board of Directors comprises senior GoPb officials and experienced professionals from the private sector.
For further information on this rating announcement, please contact the undersigned (Ext: 501) or Mr. Mohammed Khalid Ali (Ext: 508) at (021) 35311861-70 or fax to (021) 35311872-3.
Applicable Rating Criteria: Industrial Corporates (October 2003)
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