PPA signed with NTDC helps Atlas Power Ltd to uphold its ratings: PACRA

October 1, 2020: Pakistan Credit Rating Agency (PACRA) has maintained entity ratings of Atlas Power Limited at AA- for long-term and A1+ for short-term with stable outlook forecast.

The ratings reflect strong business profile of Atlas Power Limited (APL) emanating from the demand risk coverage under Power Purchase Agreement signed between National Transmission & Despatch Company (NTDC) and the company.

Meanwhile, the Implementation Agreement provides sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. Nevertheless, delayed payments from the power purchaser remained a challenge. Despite higher receivable days the entity managed to sustain its financial strength.

The company has moved Operations in-house successfully by retaining staff of previous O&M operator. Atlas Power continues to meet its benchmark of availability (88%) and efficiency (45%) benchmarks.

Fuel supply risk is considered adequate as they procure from different suppliers with good credit terms. Short term borrowing lines are available and mainly used to fund any shortfall in working capital requirements.

As of June-20, short term lines utilization stood at 58%. APL project related debt has been completely paid off and have new long-term borrowings of PKR 6,500mln.

Given the liquidity situation, utilization is imputed to go up. Settlement of overdue receivables is crucial.

Sound financial profile of Atlas Group; the major sponsor, provides comfort to the ratings.

APL has made an investment (60%) in Zhenfa Pakistan New Energy Company (Pvt) Ltd, a Solar project of 100MW in Layyah. External factors such as any changes in the regulatory framework may impact ratings. The Government has signed a MoU with the IPPs operating under the Power Policy of 2002 to make some changes in sharing of savings and conversion of dollar based ROE to rupee based ROE.
Sustained good financial discipline and upholding strong operational performance in line with agreed performance levels remain important. Accumulation of circular debt would pose threat to the company’s ability to continue with this practice.

PACRA