The Pakistan Credit Rating Agency Limited
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Saadat Mirza

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PACRA Maintains Entity Ratings of Halmore Power Generation Company Limited

Rating Type Entity
(24-Mar-21 )
(25-Mar-20 )
Action Maintain Maintain
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Halmore Power Generation Company Limited (Halmore Power) runs a 225MW Combined cycle power plant. The company operates in the regulated power sector. It enjoys sovereign guarantee against receivables from power purchaser - CPPA-G - given adherence to agreed performance benchmarks. The ratings incorporate low operational risk, a result of established performance credentials of GE - the O&M operator. The company's financial risk profile is largely dependent on repayment behaviour of the power purchaser. Current borrowings, mainly short-term, reflects the need to bridge the working capital requirements and maintenance of project, because of the mounting receivables of PKR 13,361mln as on Dec’20 (June’20: PKR 11,127mln) and consequent funding thereof from banking lines, there is minimal cushion in the available working capital facilities as it has been highly utilized (i.e. 92%) as at Dec’20, warranting management’s immediate attention. The company has an outstanding long term project debt of PKR 1,227mln as at end-Dec’ 2020, payable till end of June 2021. Halmore Power, has recently signed the agreement in pursuant to MoU which will improve the liquidity in future, upon receipt of 40% of trade receivables, as first instalment, in the form of cash, PIBs and instrument rest 60% will be paid after 6 months of receipt of first instalment. Further, ROE is reduced to 12% from 15%. In actual the impact of executed agreement is yet to be seen.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. Accumulation of circular debt would pose threat to the company’s ability to continue with this practice. Sustained good financial discipline and upholding strong operational performance in line with agreed performance levels remain important. Any significant increase in overdue receivables, as a result of rise in circular debt, may impact the ratings.

About the Entity
Halmore Power Generation Company Limited, an Independent Power Producer (IPP) with gross capacity of 225 MW, operating under 2002 power policy, is a combined gas cycle turbine plant with gas as primary and HSD as secondary fuel. The company commenced commercial operations in June 2011. Mian Karim ud Din owns 99.99% shares of the company.

The four-member Board of Directors (BoD), including one executive director, is representative of the sponsoring family. Mr. Zaheer Ahmed is the Chief Executive Officer, he has over 26 years of experience in construction, operation and maintenance of power generation and transmission.

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.