June 12, 2019 (MLN): Pakistan Credit Rating Agency (PACRA) has maintained the entity ratings of Pak Arab Refinery Limited at ‘AAA’ for long-term and ‘A1+’ for short-term. The assigned outlook on the ratings is stable.
The ratings reflect PARCO’s ownership structure- owned by the Government of Pakistan (60%) and Emirates of Abu Dhabi, through Abu Dhabi Petroleum Investments LLC (40%) – a majority owned company of Mubadala.
The Company is of strategic importance to Pakistan as it operates as an integrated pipeline, refinery, and marketing infrastructure, providing an efficient, low-cost, environment-friendly energy solutions. The company is contributing substantially towards the socio-economic benefits and forex saving and its low business risk emanates from its leading market position, strong demand for its products, and its advanced plant technology.
The ratings recognize the Company’s ability to manage its financial profile. Increasing dividend income from subsidiaries and Joint venture companies and strong investment returns reflect positively on the company’s performance.
The ratings reflect PARCO’s strengthened position in midstream and downstream sector resulting through recent acquisitions and completion of expansion projects. Going forward, PARCO is enhancing the capacity of its existing 100,000 bpd refinery to 120,000 bpd which is expected to come online by end-Dec19, all financed through internal generation.
PARCO has also initiated the development of the new state-of-the-art 250,000bpd PARCO Coastal Refinery Project, at an estimated project cost of $5 billion. Strong capital structure and sizeable equity of the company has enabled to absorb financial outflow. With these capacities to come online, the bottom line of the company is expected to increase manifold over time.
Effective management of upcoming projects, favorable regulatory regime, and consistency in Government policies remain critical for the ratings. The ratings are dependent on the sustained competitive positioning of the company.
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