PACRA Assigns Initial Entity Ratings to Narowal Energy Limited

Lahore, July 12, 2018 (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 cashflows, 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.

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 dip in 9MFY18 on the back of lower demand due to closure of RFO based power plants. Narowal Energy has been repaying its debt repayments (Principal and Markup) 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. Any significant increase in overdue receivables, in turn weakening in financial risk profile would be a concern.

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