Lahore, January 10, 2022 (PPI-OT):The ratings took comfort from strong business profile of Foundation Power Company Daharki Limited (Foundation Power) emanating from the demand risk coverage under Power Purchase Agreement and company’s association with Fauji Foundation (FF). Meanwhile, the Implementation Agreement provides sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. The ratings incorporate low operational risk, a result of the performance of KEPCO – the O and M operator.

Fuel of the plant is ‘low BTU’ gas, which is supplied by an associate – Mari Petroleum Company Limited (40% owned by Fauji Foundation). Supplier being a sister concern reduces fuel supply risk. Significant increase in account receivables create a challenge to working capital management. However, the risk is substantially mitigated through aligning payments to fuel supplier with energy billing related receipts. Short-term borrowing lines of PKR 410 million stands at end Sept-21, out of which 61% are utilized. Rating reflects the low financial risk of the company as all the project related long term loan has been repaid.

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. However, the management is ably supported by sponsor who remains committed towards commercial obligations. Further the Company is on priority list of NTDC’s payment merit order because of low unit cost of electricity.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com