Karachi: VIS Credit Rating Company Limited has announced an upgrade in the preference share rating of PGP Consortium Limited from ‘BBB’ to ‘BBB+’, indicating improved credit quality with reasonable and sufficient protection factors. The stable outlook reflects consistent operational performance and financial stability.

According to VIS Credit Rating Company Limited, the upgrade reflects PGP Consortium’s strategic position within Pakistan’s energy sector, particularly through its operation of the country’s largest LNG terminal at Port Qasim, Karachi. The terminal operates under a long-term agreement with Pakistan LNG Limited, ensuring stable revenue streams through ‘take or pay’ contractual arrangements backed by substantial financial guarantees.

PGP Consortium, a subsidiary of Pakistan GasPort Limited, benefits from the extensive industry experience of its parent company’s sponsors. The preference shares are non-participatory, and dividends are linked to KIBOR, with payments deferred until approved by the board. The company has options for redemption, transaction facilitation between the holding company and shareholders, and a swap option for conversion into ordinary shares under specified conditions.

The rating also considers the minimal competition due to high entry barriers in the LNG services market, stable demand with seasonal fluctuations, and revenue assurance through take-or-pay contracts. Despite the cyclicality in the gas sector, PGPC’s operations are deemed stable, supported by structured contracts and a low-impact regulatory environment. Upcoming improvements in the company’s liquidity profile post-September 2024 are anticipated, enhancing its financial risk profile and operational leasing under IFRS-16 standards.