Lahore, November 23, 2018 (PPI-OT): The rating is a reflection of PAPCO’s distinctive business model driving its strength from a tariff based return model. PAPCO operates a 786 Km pipeline network dedicated for White Oil Pipeline (WOP). The tariff follows a pre-defined structure denominated in USD$, providing sustainability to the profits of the company. PAPCO has been operating its WOP for HSD only, at a capacity utilization of 57%. The company has envisaged an expansion plan, which will enhance and further leverage the infrastructure capacity, by way of transporting MOGAS.
The expansion is debt driven, wherein interest spread is very much akin to risk free rate. A level of comfort is drawn from the exclusive tariff given for the MOGAS project; all set to be operational by mid of 2019. This will also create strategic advantage for the country. The cash flows of the company are persistently strong, providing sustainable coverages to debt repayments.
The business risk is considered low, given stable – indeed growing demand of MOGAS and HSD, in addition to OMCs reliance on PAPCO for oil supply. The company’s governance derives benefit from its association with PARCO, which also deputes its functionaries (esp. CEO) in PAPCO, with Shell Pakistan Limited nominating the CFO. The ratings are dependent on the sustained business operations and industry wide fundamentals. Strong cash flows enabling relevant coverages to its debt repayments is prerequisite.
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