PACRA Maintains Long Term Rating of Lalpir Power Limited
Lahore, October 02, 2019 (PPI-OT): The ratings reflect the regulated structure of Lalpir Power Limited (Lalpir Power) business; whereby revenues and cash flows are guaranteed by the sovereign government given adherence to agreed operational parameters. A risk of any decrease in efficiency factor against required benchmark would be borne by the Company itself given the fact, Lalpir Power is managing its operations and maintenance (O and M) in-house. Business risk is considered low exhibited by demand risk coverage under Power Purchase Agreement signed between Power purchaser and the company.
Topline of the company has decreased, owing to lower power generation during the period demanded by power purchaser amid to better energy mix. Receivable days has increased during 1HYCY19 owing to the delay in timely receipt of receivables. Settlement of overdue receivables is crucial. Lalpir Power has been paying dividend which in times of need is an internal source of liquidity available. Lalpir Power repaid its long term project debt in 2010.
Current borrowings mainly short-term reflects the need to bridge the working capital requirements and maintenance of projects. Because of the mounting receivables and consequent funding thereof from banking lines, there is minimal cushion in the available working capital facilities as it has been highly utilized as at end-June19, warranting management’s immediate attention. The management is harnessing internal resources for working capital funding and if need be may be resorting to enhance external lines.
Company has cancelled its plan of converting the Lalpir Power plant from oil fired to coal fired boiler, owing to the government policy to restrict use of imported coal on certain projects only. Upholding operational performance in line with agreed performance levels would remain a key rating driver. Meanwhile, any significant increase in overdue receivables, as a result of rising circular debt, coupled with insufficient available working capital financing, in turn weakening in financial risk profile may negatively impact the ratings.
For more information, contact:
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