Karachi, June 23, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Engro Powergen Qadirpur Limited (EPQL) at ‘AA-/A-1’ (Double A Minus/A-One). The long term rating of ‘AA-’ signifies high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. The short term rating of ‘A-1’ signifies high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on June 5, 2020.
EPQL has been operating a 217.3 MW gas based thermal combined cycle power plant near Qadirpur, District Ghotki, Sindh since 2010. Engro Energy Limited (EEL), a subsidiary of Engro Corporation Limited (Engro), has majority shareholding in the company with 69% ownership while remaining stake is held by general public. EPQL has outsourced its operations and maintenance (O and M) services to Engro Energy Services Limited (EESL).
The assigned ratings incorporate sound profile, significant experience of the sponsor (EEL), and satisfactory operational track record of the O and M contractor, EESL. Assessment of the business risk profile indicates low off-take risk due to take or pay tariff awarded whereby EPQL is eligible for guaranteed capacity payments from the power purchaser in case of non-purchase of electricity despite availability. Fuel supply and price risks are limited due to long-term supply contract and cost recovery mechanism built in the tariff. Performance of the plant has remained compliant with normative parameters as laid down in the power purchase agreement (PPA). As projected in the implementation agreement, EPQL is now facing gas curtailment from Qadirpur gas field as it is depleting and has made its plant available on mixed mode i.e. comingling of gas and high speed diesel.
Financial risk assessment depicts satisfactory debt servicing capacity on account of complete repayment of long term debt and adequate cash flow coverage to finance short term obligations, despite reduced energy payments. Liquidity also remained well managed through effective working capital management. Moreover, recent agreement signed with the GoP is expected to provide liquidity relief once new mechanism is in place. Comfort is also drawn from guaranteed return on equity and capacity payments for the life of the project. Leverage indicators have illustrated improvement on account of matured long term debt.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Email: [email protected]
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