PACRA maintains entity ratings of LalPir Power Limited

October 11, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of LalPir Power Limited (PSX: LPL) at "AA" for the long term and "A1" for short term with a stable outlook forecast, latest press release issued by PACRA showed.

The ratings reflect the regulated structure of LPL 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 the required benchmark would be borne by the company itself given the fact, that Lalpir Power is managing its operations and maintenance (O&M) in-house.

During the period under review, Lalpir Power continues to meet its availability and other performance benchmarks.

During 6MCY 23 Lalpir power generated 106Gwh of electricity as compared to 545Gwh same period last year depicting a decline of 80.5%.

This decrease in generation is mainly attributed to the shift of electricity demand towards a less expensive source of generation i.e., Hydro, Solar, Wind, and Biogas from the power purchase in the wake of a cost-effective energy basket.

The same trend is expected to be followed in upcoming periods. During 6MCY23 the top line of the company reported PKR 8,491mln (CY22: Rs37.611 billion, 6MCY22: Rs21.942bn).

Despite the fall in revenue, margins benefitted from lower load factors, appreciation of USD against PKR, and lesser utilization of short-term working capital lines.

Gross and Net margins for 6MFY23 clocked to 30% & 25.9% respectively. Currently leveraging stood at 5.2% representing short-term borrowing only (CY22:20%).

There is adequate cushion available to the company to meet its working capital requirement in its approved STB limits.

The ratings stemmed from the fact that the long-term debt of the company was fully paid successfully in June 2010.
Sustained good financial discipline and upholding strong operational performance in line with agreed performance levels remain important.

Delay in receiving the amounts from Power purchasers owing to the accumulation of circular debt remains a cause of concern.

The PPA of the company is expected to expire in CY28, the company plans / strategy in upcoming years with reference to the utilization of the plant after expiry remains imperative for the ratings, going forward. Any change in regulatory requirements may affect the ratings.

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