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The Pakistan Credit Rating Agency Limited
Press Release

Date
11-Jul-18

Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com

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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 Assigns Initial Entity Ratings to Narowal Energy Limited

Rating Type Entity
Current
(11-Jul-18 )
Action Initial
Long Term AA-
Short Term A1+
Outlook Stable
Rating Watch -

The ratings reflect strong business profile of Narowal Energy Limited emanating from the demand risk coverage under Power Purchase Agreement signed between CPPA-G and the company. Meanwhile, the Implementation Agreement provides sovereign guarantee for cashflows, given adherence to agreed performance benchmarks (Availability: 88%, Efficiency: 45%). The company continues to meet its performance benchmarks. Nevertheless, delayed payments from the power purchaser remained a challenge. The ratings incorporate low operational risk, a result of in-house O&M undertaken by Hub Power Services Limited (HPSL) – an associated company. The company’s generation witnessed a dip in 9MFY18 on the back of lower demand due to closure of RFO based power plants. Narowal Energy has been repaying its debt repayments (Principal and Markup) on time without availing benefit of forbearance period, facet of 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. Any significant increase in overdue receivables, in turn weakening in financial risk profile would be a concern.

About the Entity
Narowal Energy Limited (NEL) – 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 NEL completely acquired functions of Narowal Plant from March 2017 after court’s approval. Narowal Energy Limited, with 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 of four Directors, including the CEO. The members of the Board are representatives of Hubco. The management control of the NEL vests with Mr. Khalid Mansoor, the CEO. He carries with him over three decades of experience in Energy & Petrochemical sectors in leading roles for mega size projects development, execution, management and operations. He is supported by a team of experienced professionals having relevant skills and expertise in their respective fields.

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.