December 28, 2018 (MLN): Pakistan Credit Rating Agency (PACRA) has maintained entity ratings of PakGen Power Limited at ‘AA’ for long-term and ‘A1+’ for short-term, with a stable outlook forecast.
The reports suggests that the ratings reflect the regulated structure of Pakgen Power business; whereby revenues and cash flows are guaranteed by the sovereign government given adherence to agreed operational parameters.
On standalone basis, increase in delta losses between required and actual efficiency levels has impacted the operational performance. Negative delta remained a drag. Topline of the company has declined on the back of lower power demand from CPPA-G, which in turn translating into reduced profitably.
Moreover, the company has cancelled its plan of converting the Pakgen Power plant from oil fired to coal fired boiler, owing to the government policy to restrict use of imported coal on certain projects.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. Meanwhile, 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.
Copyright Mettis Link News