Lahore, June 27, 2019 (PPI-OT): The ratings reflect strong business profile of Narowal Energy Limited emanating from the demand risk coverage under Power Purchase Agreement signed between CPPA-G and the Company. Meanwhile, the Implementation Agreement provides sovereign guarantee for cash flows, given adherence to agreed performance benchmarks (Availability: 88%, Efficiency: 45%). The Company continues to meet its performance benchmarks.
Nevertheless, delayed payments from the power purchaser remained a challenge as the same poses pressure on Company’s working capital requirements. The ratings incorporate low operational risk, a result of in-house O and M undertaken by Hub Power Services Limited (HPSL) – an associated company. The Company’s generation witnessed a decrease during 2HFY19 on the back of lower power demand by CPPA-G. Narowal Energy has been repaying its debt repayments (Principal and Mark-up) on time without availing benefit of forbearance period, facet of strong financial profile and working capital management. Sound financial profile of Hubco; the holding company, provides comfort to the ratings.
Adherence to good financial discipline towards both financial and commercial obligations would remain important. Meanwhile, upholding strong operational performance in line with agreed performance levels remain important. Because of the mounting receivables and consequent funding thereof from banking lines, remaining cushion in the available working capital facilities is limited, warranting management’s immediate attention. However, management is continuously working for the release of overdue amount which would result in sufficient availability of funds.
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