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Saturday, October 19th, 2019

PACRA Maintains Entity Ratings of Foundation Power Company Daharki Limited

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by October 2, 2019 General

Lahore, October 02, 2019 (PPI-OT): The ratings reflect strong business profile of Foundation Power Company Daharki Limited (Foundation Power) emanating from the demand risk coverage under Power Purchase Agreement signed between NTDC (through Central Power Purchasing Agency) and the company. Meanwhile, the Implementation Agreement provides sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. The ratings incorporate low operational risk, a result of the performance of KEPCO – the O and M operator. Fuel of the plant is ‘low BTU’ gas, which is supplied by an associate – Mari Petroleum Company Limited (40% owned by Fauji Foundation).

Thus, fuel supply risk is considered low. Although there are delays in payments from power purchaser, the company manages the impact by aligning the payments to fuel supplier with its receipts. This keeps working capital needs under check. Short-term borrowing lines are available and available cushion therein is significant at end-June19, which provides comfort. Foundation Power has total long-term debt of PKR 2,930mln as at end-June19 payable till June 2020. Moreover, Foundation Power has been repaying its debt repayments (Principal and Markup) on time without availing benefit of forbearance period. The company’s association with Fauji Foundation (FF) provides comfort to the ratings.

Sustained good financial discipline and upholding strong operational performance in line with agreed performance levels remain important. Accumulation of circular debt would pose threat to the company’s ability to continue with this practice. However, the management ably supported by sponsors remains committed to sustain improvement in management of commercial obligations and timely debt repayments.

For more information, contact:
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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