PACRA Maintains Entity Ratings of Atlas Power Limited

The support and association of Atlas Group with Atlas Power Limited (the Company) provides comfort to the ratings. Atlas group is amongst the biggest conglomerates of Pakistan with its high penetration in engineering, automobile, financial services and trading sectors. The rating also reflects the strong business profile of the Company emanating from the demand risk coverage under 25 years long power purchase agreement (PPA) from Commercial Operations Date (COD) signed with Central Power Purchasing Agency (CPPA-G), with ‘take or pay’ provision. Meanwhile, the payments are secured by the sovereign guarantee provided by GoP given that availability (88%) and efficiency (45%) benchmarks are met under implementation agreement (IA). The company has moved Operations in-house successfully by retaining staff of previous O&M operator. Fuel supply risk is considered adequate as they procure from different suppliers with good credit terms. During the period, FY23, company generated ~522GWh of electricity to the national grid a decline of approx. 48% (YoY) bases and subsequently reported a sales revenue of PKR ~22,547mln (PKR ~29,145mln), a decline of ~ 22.6%. This decrease in generation is mainly attributed to shift of electricity demand towards the less expensive sources of generation i.e., Hydro, Solar, Wind and Biogas from the power purchase in wake of a cost-effective energy basket, and the same trend is expected to be followed going forward. Despite fall in revenue margins benefitted from lower load factors and appreciation of USD against PKR due to indexed-based tariff structure. The Company has arranged amicable working capital lines, to cover its working capital requirement, out of which only 18% had been utilized as at June-23. APL project related debt has been completely paid off in Oct’19. At end June’23 Company’s long term borrowings stands at PKR ~5,812mln. APL has made an investment (80%) in Atlas Solar Limited, a Solar project of 100MW in Layyah. ASL has achieved its COD in April ’22. Dividend flow from Atlas Solar limited is expected in near future. During FY 23 liquidity of the Company has improved due to receipt of outstanding payments in June 2023 of PKR 2,777mln under circular debt management program.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. 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 a rise in circular debt, may impact the ratings. Timely repayments of receivable from power purchaser as per agreement remains imperative for the rating. External factors such as any changes in the regulatory framework may impact ratings.

About the Entity
Atlas Power, a public limited unlisted company, was established in January 2007. The company operates a 225 MW thermal power plant which is operational since 2009. Shirazi Investments (Pvt.) Limited with 92.09% shareholding is the main sponsor of the company. The remaining shareholding lies with the National Bank of Pakistan (NBP) (7.91%). Shirazi Investments is the holding company of Atlas Group - having dominant interests in auto and allied segments - cars, motorcycles, batteries - and non-banking financial industry - insurance and asset management.
Atlas Power’s board consists of seven members, six members are representatives of Shirazi Investments and one member represents NBP. Mr. Frahim Ali Khan is the Chairman of the Board. The board has been actively involved in providing strategic guidance and is supported by an experienced team.