Pakistan Credit Rating Agency Maintains Ratings of Foundation Power Company (Daharki) Limited

Lahore, June 27, 2012 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has assigned long-term entity rating of “AA-” (Double A Minus) and short-term rating of “A1+”(A one plus) to Foundation Power Company (Daharki) Limited (FPCDL). These ratings denote a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.

The ratings of FPCDL reflect GoP guaranteed stream of cash flows till the life of Power Purchase Agreement (PPA) signed between the company and NTDC; the power purchaser. This is dependent on adherence to agreed performance parameters under PPA.

The emanating operational risk is mitigated through outsourcing of O and M to an international operator, KEPCO Plant Services and Engineering Company Limited (KEPCO) that possesses extensive international experience. Despite FPCDL being its first assignment in Pakistan, KEPCO during first year of its operations as an O and M operator, has demonstrated a good performance.

The fuel supply risk is mitigated by long-term gas supply contract with Mari Gas – a related company by virtue of common sponsors. Nevertheless, the weak financial discipline of the sole customer, National Transmission and Despatch Company (NTDC), is the key challenge faced by the company. FPCDL’s association with a financially strong sponsor – Fauji Foundation (FF), also having experience of running another IPP – is a key rating consideration. FF remains committed in honouring financial obligations and has also supported the company in the past.

Keeping in view the ongoing inter-corporate debt issue and implications of the same for IPPs, the company’s ratings are being placed on Rating Watch.

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

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