PACRA Assigns Initial Entity Ratings to Narowal Energy Limited
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.
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.