Pakistan Credit Rating Agency Limited maintains entity ratings of Pakgen Power Limited

Lahore, November 23, 2015 (PPI-OT): The Pakistan Credit Rating Agency Limited (PACRA) has maintained the long term and short term entity ratings of Pakgen Power Limited (Pakgen) at ‘AA’ (Double A) and ‘A1+’ (A One Plus) respectively. The ratings denote a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.

The ratings of Pakgen reflect its low business risk profile supported by a financial structure, whereby the Government of Pakistan has guaranteed cash flows subject to adherence to agreed performance benchmarks. However, the company is experiencing challenge in terms of its operational capacity driven by its inability to generate electricity since February 2015 – a factor of main station transformer failure.

Resultantly Wapda has suspended capacity purchase payments. This has put pressure on the liquidity profile of the company magnified by delayed payments by Wapda of existing dues. Although, insurance arrangements are likely to cover major part of liquidity damages and loss of profits, the settlement would take place after expected restart in 1QCY16.

The ratings have “Negative Outlook”, signifying pressure on liquidity to manage expenditure (CAPEX and OPEX) till restart of operations. Comfort is drawn from sizeable receivables from Wapda and cushion in short-term borrowing limits. The ratings remain dependent on Pakgen’s ability to effectively bring the plant online within expected timeline. Meanwhile, timely receipt of expected insurance claim remains critical.

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