The Pakistan Credit Rating Agency Limited
Press Release


Hamza Ghalib

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Pak Arab Refinery Limited

Rating Type Entity
(05-Jun-18 )
(23-Jun-17 )
Action Maintain Maintain
Long Term AAA AAA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect PARCO’s ownership structure- owned by the Government of Pakistan (GoP) (60%) and Emirates of Abu Dhabi(EAD), through Abu Dhabi Petroleum Investments LLC (40%) - a majority owned company of EAD. The Company is of strategic importance to the Country as it operates as an integrated pipeline, refinery and marketing infrastructure, providing an efficient, low-cost, environment-friendly energy solutions. The company is contributing substantially towards the socio economic benefits and forex saving and its low business risk emanates from its leading market position, strong demand of its products, and its advanced plant technology. The ratings recognize the Company’s ability to manage its financial profile. Increasing dividend income from subsidiaries and Joint venture companies and strong investment returns reflect positively on the company’s performance. The ratings reflects PARCO’s strengthened position in midstream and downstream sector resulting through recent acquisitions and completion of expansion projects. Going forward, PARCO is enhancing capacity of its existing 100,000 bpd refinery to 120,000 bpd through the revamp of existing units and addition of new units which is expected to come online in FY19. PARCO has also initiated the development of the new state-of-the-art 250,000bpd PARCO Coastal Refinery Project, at an estimated project cost of $5bln. The financing structure will be finalized upon completion of FEED study. Strong capital structure and sizeable equity of the company has enabled to absorb financial outflow. With these capacities to come online, bottom line of the company is expected to increase manifold over the time.
Effective management of upcoming projects, favorable regulatory regime, and consistency in Government policies remain critical for the ratings. The ratings are dependent on the sustained competitive positioning of the company.

About the Entity
Established in 1974, Pak-Arab Refinery Ltd (PARCO) is a 60:40 joint venture between the Government of Pakistan and Emirates of Abu Dhabi through its investment arm, Abu Dhabi Petroleum Investments (ADPI). PARCO started out as a pipeline company. With capacity enhancements and network expansion, the network is now over 2000 km of cross-country oil pipeline and finished products pipeline by the name of Pak Arab Pipeline Company - a joint venture between PARCO, PSO, Shell, and Total PARCO. A Mid-Country Refinery was established in 2000, which is the most modern refinery in Pakistan with a capacity of 100,000 BPD (about 25% of the country`s refining capacity) and a strategic storage of about 1.5 million tons. PARCO also has major investments in marketing operations which include: TOTAL PARCO Pakistan Ltd (TPPL)-a joint venture in a rapidly expanding retail fuel/lubricants network and PARCO Pearl Gas Ltd - one of the largest LPG marketing/distribution company. PARCO is also engaged in the direct supply of oil products to industrial customers and the Armed Forces through the Pearl brand.PARCO’s equity investment in its related business is as follows; a) PAPCO - 51%; b) PARCO Pearl Gas (Pvt) limited - 100%; c) Total PARCO – 50%.
The Company’s Ten-member Board of Directors (BoD) includes six nominees of the GoP, including the Chairman and the Managing Director (MD), while the remaining four are EAD nominees, one of whom is an OMV representative. The Managing Director, Mr.Tariq Rizavi, has been associated with the company since the beginning of his career and is supported by a team of qualified and experienced professionals.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.