The Pakistan Credit Rating Agency Limited
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Hamza Ghalib

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PACRA Maintains Entity Ratings of Atlas Power Limited

Rating Type Entity
Action Maintain Maintain
Long Term AA- AA-
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings of Atlas power reflect its strong financial profile. APL's good credit terms with fuel supplier and efficient inventory management have enabled it better management of debt repayments. Nevertheless, delayed payments from the power purchaser remained a challenge. Despite higher receivable days the entity managed to sustain its financial strength. Business risk is considered low exhibited by demand risk coverage under the Power Purchase Agreement signed between Power Purchaser and the company. The implementation agreement further provides a sovereign guarantee for cash flows, given adherence to agreed performance benchmarks. The ratings incorporate low operational risk, a result of the performance of MAN Diesel Pakistan - the O&M operator. APL continues to meet its availability (~95%) and efficiency (45%) benchmarks. Meanwhile, the company continues to enjoy sound coverages, though its financial profile is highly dependent on the timely repayment of the receivables. The recent sizeable payment of PKR 200bln to IPPs, including Atlas Power, has improved the liquidity position. The Company has been paying dividends which in times of need is an internal source of liquidity available. The company has been managing its working capital requirements through a mix of internal cash generation and short-term borrowings. Lately, the management has slightly increased available lines that provide support. The total outstanding balance of project related debt as at end-Mar19 is PKR 1,840mln, payable till October 2019. The sound financial profile of Atlas Group; the major sponsor, provides comfort to the ratings. The ratings continue to take comfort from APL's association with good business groups – Atlas Group, Allied Bank Limited, and National Bank of Pakistan.
Adherence to good financial discipline towards both financial and commercial obligations would remain important. Meanwhile, upholding strong operational performance in line with agreed performance levels remain important. However, the management ably supported by sponsors’ remains committed to sustain improvement in the management of commercial obligations and timely debt repayments.

About the Entity
APL, a public limited unlisted company, was established in January 2007. APL operates a 225 MW thermal power plant which is operational since 2009. Shirazi Investments (Pvt.) Limited with 85% shareholding in APL is the main sponsor of the Company. Remaining shareholding lies with Allied Bank Limited (ABL) (7.5%) and National Bank of Pakistan (NBP) (7.5%). Shirazi Investments functions as 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. Operations and maintenance of the plant are outsourced to MAN Diesel and Turbo till June-2021.

Atlas Group, through professional representation, maintains good governance standards in its entities. APL’s board comprises nine members, including the CEO, with six representatives of Shirazi Investments, one representative of ABL and two independent directors. Mr. Yusuf H. Shirazi is the Chairman of Atlas Group. The board has been actively involved in providing strategic guidance to the company and implementing strong internal control framework. Mr. Razi-ur-Rahman has replaced Mr. Maqsood Ahmad as new CEO of APL effective from 01 April 2019, whereas Mr. Maqsood Ahmad has joined the board as an executive director effective from 18 March 2019. Mr. Razi has been associated with the group for ~25 years. He is supported by a skilled team of professionals.

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.