FLASHNEWS:

PACRA Maintains Entity Ratings of Habibullah Coastal Power Company (Private) Limited

Lahore, November 02, 2021 (PPI-OT):Habibullah Coastal Power Company (Pvt) Limited Gas Supply Agreement (GSA) with Sui Southern Gas Company Limited (SSGCL), expired in Sep 2019. Central Power Purchasing Agency (CPPA-G) has approved the amendments under which the Term of the PPA will be extended for 5 years excluding six-month testing period and 466 days of Other Force Majeure Event (OFME) period. The arrangement will be on Take and Pay basis for 3 months, Take or Pay basis for 8 months and one month schedule outages during which the capacity payments shall be made.

The purchase of power will be on existing tariff of PKR 9.71 per Kilowatt hour (KWh) comprising energy factor of PKR 7.82 per KWh and capacity factor of PKR 1.89 per KWh. SSGCL has agreed to extend the GSA in line with the PPA period with a provision that hybrid gas (65% indigenous gas and 35% RLNG) will be supplied to HCPC. After approval of GSA and amendments in the PPA from respective parties (CPPA-G and SSGCL), the summary is referred to the Economic Coordination Committee (ECC) of the cabinet for final approval. Due to non-availability of gas, the company’s generation during the period was zero. The Company enjoys significant strategic advantage due to its location. There is no other power generation facility in the close vicinity of Quetta which makes HCPC Power Plant a must run facility for stability of national grid and power security of Quetta City. The company’s project debt has been paid and it only borrows to meet its short-term needs.

There is uncertainty as to the timely finalization and approval of PPA and GSA from the ECC. The supply of Gas and the company’s operations are highly dependent on the approval. The ratings have a developing outlook and are placed on rating watch. PACRA would review the ratings once these agreements are finalized. The management is confident based on rational argument as to the finalization of PPA and continued operations of the Company.

Comfort can be drawn from Company’s low leveraged balance sheet. Additionally, CPPA-G has approved the settlement of Liquidated Damages (LDs) amounting to PKR 3,263.452mln against which the company will withdraw LDs claims from SSGCL amounting to about PKR 3,470mln. The same is referred to ECC of the cabinet for approval. Although well-managed, in-house O and M activities expose the company to operational risk; thus, upholding strong operational performance in line with agreed performance levels would remain a key driver of the ratings.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com