PACRA maintains entity ratings of PKGP

October 02, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of PakGen Power Limited (PSX: PKGP) at "AA" for 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 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 PKGP is managing its operations and maintenance (O&M) in-house.

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

During 6MCY23 the company generated 141Gwh of electricity as compared to 821Gwh same period last year depicting a decline of 83%.

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 topline of the company reported to Rs9.884bn (CY22: Rs45.833bn. 6MCY22: Rs 29.47bn).

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

Gross and Net margins for 6MFY23 clocked to 35% & 35% respectively.

Currently, there is no debt on the balance sheet of the company, short-term borrowings remain un-utilized owing to lessor generation.

However, there is adequate cushion available to the company to meet its working capital requirement in its approved STB limits, if needed.

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.

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