The Pakistan Credit Rating Agency Limited
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Anam Waqas Ghayour

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PACRA Maintains the Entity Ratings of Atlas Power Limited.

Rating Type Entity
(22-Sep-22 )
(22-Sep-21 )
Action Maintain Maintain
Long Term AA- AA-
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The support and association of Atlas Group with Atlas Power Limited (the Company) provides comfort to the ratings. Atlas group is one of the biggest conglomerates of Pakistan with its high penetration in engineering, automobile, financial services and trading sectors. Demand risk of Atlas Power is mitigated by the power purchase agreement (PPA) and the payments are secured by the sovereign guarantee provided by GoP given that availability (88%) and efficiency (45%) benchmarks are met. Additionally, cushion is provided by the fact that PPA has twelve years to expire. 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, FY22, company provided ~1007GWh of electricity to the national grid and reported sales revenue of PKR ~29,145mln along with Net loss (N.L) of PKR ~1,896mln in FY22. This net loss represents accounting loss emanating from writing-off interest receivable and expensing out overhauling costs. The ratings take comfort from the master agreement signed with the GoP leading to improved liquidity indicators as a sizable amount of outstanding trade receivable were received during the rating review period. Consequently, the margins have trended downwards in line with the tariff discounts given by the company to the power purchaser albeit are considered to be adequate. Going forward mounting receivable remains a cause of concern. The Company has arranged amicable working capital lines, to cover its working capital requirement, out of which 54% had been utilized as at June-22. APL project related debt has been completely paid off in Oct’19. At end June’22 Company’s long term borrowings stands at PKR ~5,625mln. APL has made an investment (60%) in Zhenfa Pakistan New Energy Company (Pvt) Ltd, a Solar project of 100MW in Layyah. Zhenfa has achieved its COD in March’22. Dividend flow from Zhenfa is expected in near future. External factors such as any changes in the regulatory framework may impact ratings.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. Accumulation of circular debt would pose threat to the company’s ability to continue with this practice. 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 rise in circular debt, may impact the ratings. Timely repayments of receivable from power purchaser as per agreement remains imperative for the rating.

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 92.5% shareholding is the main sponsor of the company. Remaining shareholding lies with National Bank of Pakistan (NBP) (7.5%). 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 comprises of seven members, all members are representatives of Shirazi Investments. Mr. Frahim Ali Khan is the Chairman of the Board. The board has been actively involved in providing strategic guidance and is supported by experienced team.

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.