PACRA Maintains Entity Ratings of PakGen Power Limited

The ratings reflect the regulated structure of Pakgen Power Limited (Pakgen Power) business; whereby revenues and cash flows are guaranteed by the sovereign government given adherence to agreed operational parameters. A risk of any decrease in efficiency factor against the required benchmark would be borne by the Company itself given the fact, Pakgen Power is managing its operations and maintenance (O&M) in-house. During the period under review, Pakgen power continues to meet its availability and other performance benchmarks. During 6MCY 23 Pakgen power generated 141Gwh of electricity as compared to 821Gwh same period last year depicting a decline of 83%. This decrease in generation is mainly attributed to shift of electricity demand towards a less expensive source of generation i.e., Hydro, Solar, Wind and Biogas from the power purchase in wake of cost-effective energy basket. The same trend is expected to be followed in upcoming periods. During 6MCY23 the topline of the company reported to PKR 9,884mln (CY22: PKR: 45,833mln. 6MCY22: PKR: 29,472mln). Despite fall in revenue, margins benefitted from lower load factors, appreciation of USD against PKR and lessor utilization of short term working capital lines. Gross and Net margins for 6MFY23 clocked to 35% & 35% respectively. Currently there is no debt on the balance sheet of the Company, short term borrowings remain un-utilized owing to lessor generation. However, there is adequate cushion available to the company to meet its working capital requirement in its approved STB limits, if needed. The ratings stemmed from the fact that the long-term debt of the company was fully paid successfully in June 2010.
Sustained good financial discipline and upholding strong operational performance in line with agreed performance levels remain important. Delay in receiving the amounts from Power purchaser owing to accumulation of circular debt remains a cause of concern. The PPA of the Company expected to expire in CY28, the Company plans / strategy in upcoming years with reference to utilization of plant after expiry remains imperative for the ratings, going forward. Any change in regulatory requirements may affect the ratings.

About the Entity
Pakgen Power Limited was established for electricity generation under the power policy 1994 as an Independent Power Producer (IPP). The plant, with a total project cost of USD 347mln, is located at Mehmood Kot, near Muzaffargarh (Punjab) and has an installed capacity of 365MW. The PPA has a remaining contractual life of approx. 5 years under the PPA. Pakgen Power is listed on Pakistan Stock Exchange. The major shareholder of the company is Nishat Group (57.93%) directly through individuals and related parties. Majority of the board members are nominated by Nishat Group and are group Executives. At present, Mr. Muhammad Ali Zeb is the Chairman of the Board of the company. Mian Hassan Mansha, heading the Nishat Group's interest in power sector, is the CEO of the Company.