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PACRA Maintains Entity Ratings of PakGen Power Limited

Lahore, October 01, 2020 (PPI-OT): The ratings reflect the regulated structure of Pakgen Power Limited (Pakgen Power) business; whereby revenues and cash flows are guaranteed by the sovereign government given adherence to agreed operational parameters. A risk of any decrease in efficiency factor against required benchmark would be borne by the Company itself given the fact, Pakgen Power is managing its operations and maintenance (O and M) in-house.

Topline of the company coupled with capacity utilization has decreased, on the back of lower power generation during the period demanded by power purchaser amid to better energy mix. Receivable days has increased during 1HYCY20 owing to the delay in timely receipt of receivables; however, minor recovery in overdue receivables from the Energy Sukuk of PKR200bln is observed and settlement of pending receivables is considered crucial. Pakgen Power has been paying dividend which in times of need is an internal source of liquidity available.

The long term project debt was completely paid off in 2010; thus, company’s debt position mainly reflects current borrowings secured to bridge the working capital requirements and maintenance of projects. Pakgen has been paying dividend which in times of need is an internal source of liquidity available. Because of the mounting receivables and consequent funding thereof from banking lines, remaining cushion in the available working capital facilities is limited, company’s utilization of working capital lines by 67% leaving a cushion of 33% as at end-June20 requires management’s immediate attention.

Upholding operational performance in line with agreed performance levels would remain a key rating driver. Meanwhile, despite seeking comfort in take or pay tariff regime, any significant increase in overdue receivables, as a result of rising circular debt, coupled with insufficient available working capital financing, in turn weakening in financial risk profile may negatively impact 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: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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