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The Pakistan Credit Rating Agency Limited
Press Release

Date
04-Nov-20

Analyst
Saadat Mirza
saadat.mirza@pacra.com
+92-42-35869504
www.pacra.com

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PACRA Maintains Entity Ratings of Habibullah Coastal Power Company (Pvt.) Limited

Rating Type Entity
Current
(04-Nov-20)
Previous
(15-Nov-19)
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Developing Developing
Rating Watch Yes Yes

Habibullah Power's Gas Supply Agreement (GSA) with Sui Southern Gas Company Limited (SSGCL), expired in Sep 2019. The company applied for renewal of GSA in Mar 2018. The company is in negotiation with SSGCL for finalization of GSA. In 2019 Economic Coordination Committee (ECC) has approved the proposal by power division for supply of gas to plant for interim period of 3 to 6 months which was further extended by CPPAG only for the period of 12 months. Due to non-availability of gas, company's generation during the period was zero. The Company enjoys significant strategic advantage due to its location. There is no other power generation facility in the close vicinity of Quetta which makes HCPC Power Plant a must run facility for stability of national grid and power security of Quetta City. The company’s project debt has been paid and it only borrows to meet its short term needs or for BMR purposes. Consequently, the Company continues to enjoy sound coverages, underpinned by leveraged structure. The company has sizeable liquidity available (cash and cash equivalents PKR ~1,465mln).
There is uncertainty as to the timely finalization of GSA with SSGCL. The ratings have a developing outlook and are placed on rating watch. PACRA would review the ratings once these agreements are finalized. The management is confident based on rational argument as to the finalization of GSA and continued operations of the Company.
Comfort can be drawn from Company’s low leveraged balance sheet, favorable delta between WAPDA receivables/payable and management’s action to refurbish/revamp the machinery so generation will be according to the benchmarks as set by the NEPRA once GSA is renewed. Although well-managed, in-house O&M activities expose the company to operational risk; thus upholding strong operational performance in line with agreed performance levels would remain a key driver of the ratings.

About the Entity
Habibullah Coastal was established in 1995 as an independent power producer. The company is operating a combined cycle power plant with gross capacity of 140MW (Net Capacity: 129.5MW). Habibullah Coastal’s plant commenced operations in 1999. The Ultimate Beneficiary of the Company is M/s Ithaca Capital Limited, with 92.5% shareholding, which is a privately held investment holding company. Ithaca Capital is owned by Mr. Saad Faruqui - a seasoned business man with main interests in Transportation, Security and technology ventures. Mr. Saad Saeed Faruqui is the Chief Executive officer of the Company. Mr.Saad Saeed Faruqui is taking exit from the power sector and new investor is extensively in dialogue with the concerned authorities for GSA renewal. The transfer of ownership is in transition phase, represented by the management at an advanced stage. Mr.Ali Jehangir Siddiqui is expected to take over control. Overall control vests in four member board. Other board members are seasoned professionals with diverse experienced background.

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.