Lahore, June 24, 2021 (PPI-OT):The ratings reflect strong business profile of Narowal Energy Limited emanating from the demand risk coverage under Power Purchase Agreement (PPA) signed between CPPA-G and the Company. Meanwhile, the Implementation Agreement provides sovereign guarantee for cash flows, given adherence to agreed performance benchmarks (Availability: 96%, Efficiency: 45%). The Company continues to meet its performance benchmarks. Nevertheless, delayed payments from the power purchaser remained a challenge as the same poses pressure on Company’s working capital requirements.
Because of the mounting receivables and consequent funding thereof from banking lines, company has arranged amicable working capital lines to cover its working capital requirement out of which 79% had been utilized as at Mar-21. Furthermore, Company has also secured a long-term finance facility of PKR 25mln under the salary refinancing scheme by SBP. The loan is repayable in eight equal quarterly installments and the repayments have already started from Jan 2021, providing the much needed comfort. The ratings incorporate low operational risk, a result of in-house O and M undertaken by Hub Power Services Limited (HPSL) – an associated company.
The Company’s generation witnessed an increase during the 9MFY21 on account of better off-take from RFO based IPPs due to decline in FO prices. Narowal Energy has repaid all of its project debt obligations without availing any benefit of forbearance period indicating strong financial profile and working capital management. Sound financial profile of Hubco; the holding company, provides comfort to the ratings. Adherence to good financial discipline towards both financial and commercial obligations would remain important. Meanwhile, upholding strong operational performance in line with agreed performance levels remain important.
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