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The Pakistan Credit Rating Agency Limited
Press Release

Date
01-Nov-21

Analyst
Anam Waqas Ghayour
anam.waqas@pacra.com
+92-42-35869504
www.pacra.com

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PACRA Maintains Entity Ratings of Habibullah Coastal Power Company (Pvt) Limited

Rating Type Entity
Current
(01-Nov-21 )
Previous
(04-Nov-20 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Developing Developing
Rating Watch Yes Yes

Habibullah Coastal Power Company (Pvt) Limited Gas Supply Agreement (GSA) with Sui Southern Gas Company Limited (SSGCL), expired in Sep 2019. Central Power Purchasing Agency (CPPA-G) has approved the amendments under which the Term of the PPA will be extended for 5 years excluding six-month testing period and 466 days of Other Force Majeure Event (OFME) period. The arrangement will be on Take and Pay basis for 3 months, Take or Pay basis for 8 months and one month schedule outages during which the capacity payments shall be made. The purchase of power will be on existing tariff of PKR 9.71 per Kilowatt hour (KWh) comprising energy factor of PKR 7.82 per KWh and capacity factor of PKR 1.89 per KWh. SSGCL has agreed to extend the GSA in line with the PPA period with a provision that hybrid gas (65% indigenous gas and 35% RLNG) will be supplied to HCPC. After approval of GSA and amendments in the PPA from respective parties (CPPA-G and SSGCL), the summary is referred to the Economic Coordination Committee (ECC) of the cabinet for final approval. Due to non-availability of gas, the company’s generation during the period was zero. The Company enjoys significant strategic advantage due to its location. There is no other power generation facility in the close vicinity of Quetta which makes HCPC Power Plant a must run facility for stability of national grid and power security of Quetta City. The company’s project debt has been paid and it only borrows to meet its short term needs.
There is uncertainty as to the timely finalization and approval of PPA and GSA from the ECC. The supply of Gas and the company’s operations are highly dependent on the approval. The ratings have a developing outlook and are placed on rating watch. PACRA would review the ratings once these agreements are finalized. The management is confident based on rational argument as to the finalization of PPA and continued operations of the Company.
Comfort can be drawn from Company’s low leveraged balance sheet. Additionally, CPPA-G has approved the settlement of Liquidated Damages (LDs) amounting to PKR 3,263.452mln against which the company will withdraw LDs claims from SSGCL amounting to about PKR 3,470mln. The same is referred to ECC of the cabinet for approval. Although well-managed, in-house O&M activities expose the company to operational risk; thus, upholding strong operational performance in line with agreed performance levels would remain a key driver of the ratings.

About the Entity
Habibullah Coastal was established in 1995 as an independent power producer. The company is operating a combined cycle power plant with gross capacity of 140MW (Net Capacity: 129.5MW). Habibullah Coastal plant commenced operations in 1999. The ultimate parent of the company is AB Investments LLC, a UAE entity holding 92.5% ownership interest in the company through its wholly owned subsidiaries. AB Investments is owned by Mr. Ali Jehangir Siddiqui who has the experience of working on key positions in different sectors. After the transfer of ownership in December 2020, the company has shown significant progress towards the finalization of PPA & GSA. Hence the management expects to continue operating the plant once the final approval is granted by the ECC. Habibullah Coastal is governed by a five-member board. All board members are qualified individuals with relevant experience of working in the Energy Sector.

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.