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PACRA Maintains Long Term Rating of PakGen Power Limited

by October 2, 2019 General

Lahore, October 02, 2019 (PPI-OT): The ratings reflect the regulated structure of Pakgen Power Limited (Pakgen 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, Pakgen Power is managing its operations and maintenance (O and M) in-house. Topline of the company has decreased, on the back of 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. The company’s financial profile, though adequate, is highly dependent on the behaviour of the power purchaser. Pakgen Power has been paying dividend which in times of need is an internal source of liquidity available. Pakgen Power repaid its long term project debt in 2010.

However, Company has a moderately leveraged capital structure, current borrowings reflects the need to bridge the working capital requirements. Because of the mounting receivables and consequent funding thereof from banking lines, available working capital lines are almost fully 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 external lines.

Company has cancelled its plan of converting the Pakgen Power plant from oil fired to coal fired boiler, owing to the government policy to restrict use of imported coal on certain projects. 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