PACRA REAFFIRMS AAA (TRIPPLE A) RATING FOR

PAK-ARAB REFINERY LIMITED

 

Lahore: February 19, 2002

For the fifth year running, the Pakistan Credit Rating Agency (PACRA) has maintained the entity ratings of Pak-Arab Refinery Limited (PARCO) at 'AAA' (Triple A) and 'A1+' (Single A one plus) for the long-term and short-term respectively. The entity ratings are applicable to the senior unsecured creditors of the company. The rating of the secured TFC of Rs. 2.5 bln has been maintained at 'AAA' (Triple A). These ratings denote the lowest expectation of credit risk and an exceptionally strong capacity for timely payment of financial commitments. PARCO continues to be the only company in Pakistan - out of over a hundred entities rated by PACRA - that has been assigned an entity rating of AAA.

PARCO - a joint venture between the Government of Pakistan (60%) and the Emirate of Abu Dhabi (40%) - is involved in refining, transporting and marketing of various petroleum products, including the introduction of unleaded MOGAS in the country.

PARCO's ratings reflect stable and efficient business operations, effective management policies, high margins on pipeline operations and the GoP guaranteed 25% minimum return on the paid-up capital attributable to the successful first year operations of the Mid-Country Refinery. As a result, the company's business and financial risk continues to be low. However, the liquidity levels are expected to remain dependent on the pace of agreed disbursements of the shortfall in the guaranteed return (SGR) by the GoP. Having peaked, gearing should now assume a declining trend as a result of gradual repayment of loans. Meanwhile, the management's capability to successfully accomplish its business and financial objectives remains fully demonstrated through marketing joint ventures with TOTAL-PARCO (France) and SHV (Holland).

GoP has assigned PARCO the responsibility of implementing the White Oil Pipeline Project. A new company - Pak-Arab Pipeline Company (PAPCO) - has already been incorporated, in which PARCO has 51% stake. The project will substantially augment the future revenue stream of PARCO.