Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Punjab Thermal Power (Private) Limited at ‘AA’ for the medium to long term and ‘A-1’ for the short term, indicating a stable and high-quality credit status. The ratings reflect strong protection factors and the likelihood of timely repayment obligations, influenced by the company’s operational and financial strategies.

According to VIS Credit Rating Company Limited, the rating reassurance takes into account Punjab Thermal Power’s low business risk profile, supported by robust agreements with the Government of Pakistan. The long-term Power Purchase Agreement and Implementation Agreement provide a secure financial environment, mitigating demand-side risks and ensuring consistent revenue through capacity payments guaranteed by the government. Despite a reduction in the return on equity from 15% to 12%, the agreements maintain the company’s profitability and financial stability.

The financial health of Punjab Thermal Power is bolstered by improved profitability post-Commercial Operations Date, primarily driven by energy sales and capacity payments. Adequate liquidity and a supportive capital structure further enhance the company’s creditworthiness. However, the ongoing circular debt crisis in Pakistan’s energy sector poses a potential risk to financial stability.

Future ratings will hinge on the effectiveness of macroeconomic hedging, tariff indexation, cost pass-throughs, and any significant regulatory or governmental policy changes affecting the energy sector.