PACRA Maintains Entity Ratings of Narowal Energy Limited

The ratings reflect the strong business profile of Narowal Energy Limited (Narowal Energy or the Company) emanating from the demand risk coverage under the Power Purchase Agreement (PPA) signed between CPPA-G and the Company. Meanwhile, the Implementation Agreement provides a sovereign guarantee for cash flows, given adherence to agreed performance benchmarks (Availability: 96%, Efficiency: 45%). The ratings incorporate low operational risk, a result of in-house O&M undertaken by Hub Power Services Limited (HPSL) – an associated company, and adequate insurance coverages. During the period, 9MFY23 Narowal Energy provided ~321GWh (9MFY22 ~634GWh) of electricity to the national grid and recorded sales revenue of PKR ~16,224mln (9MFY22 PKR ~18,089mln), representing a lower demand from the power purchaser. The Company successfully paid off its Long-Term project-related debt in 2021 resulting in a favorable impact on its financial risk profile. As on March 2023, the debt profile majorly comprises short-term borrowings, which have been availed to meet working capital requirements, mainly due to delayed payments from the off-taker. The long-term facility of PKR 2.5bln has also been arranged against which the company is making timely re- payments. The announcement of the first interim dividend for FY 23 at Rs.20 per share echoes the strong equity base of the Company.
The 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 remains essential.

About the Entity
Narowal Energy Limited (Narowal Energy) – 100% owned subsidiary of The Hub Power Company Limited (Hubco) - was established in 2015 as a public limited company to take up Narowal plant of Hubco. Hubco completed demerger of its Narowal Plant and Narowal Energy completely acquired functions of Narowal Plant from March 2017 after the court’s approval. Narowal Energy Limited, with a gross capacity of 225MW, is operating under the Power Policy 2002. It began commercial operations in April 2011. The Board of Directors of Narowal Energy Limited comprises four Directors, including the CEO. The members of the Board are also Board members of HUBCO. Mr. Kamran Kamal is the CEO of the Company. He holds a Masters in Public Policy from Harvard University and a Bachelors degree in Electrical and Computer Engineering from Georgia Tech. He is supported by the team of an experienced and professional management team.