PACRA Maintains Entity Ratings of Foundation Power Company Daharki Limited

The ratings take comfort from strong business profile of Foundation Power Company Daharki Limited (Foundation Power) emanating from the demand risk coverage under Power Purchase Agreement and company's association with Fauji Foundation (FF). Meanwhile, the Implementation Agreement provides sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. The ratings incorporate low operational risk, a result of the performance of KEPCO - the O&M operator. However, the company has recently transitioned from outsourced O&M to self O&M and with experience technical/operational team, envisages to maintain the higher performance standards as demonstrated in the past. Fuel of the plant is 'low BTU' gas, which is supplied by an associate –Mari Petroleum Company Limited (40% owned by Fauji Foundation). Supplier being a sister concern reduces fuel supply risk. Payments received from Government against outstanding receivables under the signed MoU has slightly improved the liquidity profile. However, receivables have started to pile up again as a result of ongoing circular debt issue in the power sector. Working Capital Management risk is substantially mitigated through aligning payments to fuel supplier with energy billing related receipts. As end September 2023, the Company has no borrowings apart from the loan from Fauji Foundation which is classified under equity. Rating reflects the low financial risk of the company as all the project related long term loan has been repaid. The plants operational statistics including availability and efficiency were as per the required benchmarks throughout the period, therefore providing additional comfort over the assigned ratings.
Sustained good financial discipline and upholding strong operational performance in line with agreed performance levels remain important. Accumulation of circular debt would pose threat to the company's ability to continue with this practice. However, the management is ably supported by sponsor who remains committed towards commercial obligations. Further the Company is on priority list of NTDC's payment merit order because of low unit cost of electricity.

About the Entity
Foundation Power was established in 2005 under the Companies Ordinance 1984 as an independent power producer. The company is operating a combined cycle power plant with a net initial capacity of 180MW. Foundation Power's plant commenced operations in May 2011. Foundation Power is wholly owned by Daharki Power Holdings Limited, which, in turn is a wholly owned subsidiary of FF (100%). The Board constitutes of six members. All the representatives are from Fauji Foundation and provides adequate guidance to the company. Maj Gen (Retd) Muhammad Junaid, HI(M), is the Managing Director of Foundation Power. He is assisted by a team of qualified professionals having requisite experience.