PACRA Maintains Entity Ratings of Narowal Energy Limited

The ratings reflect the strong business profile of Narowal Energy Limited (“Narowal Energy” or “the Company”), underpinned by demand risk coverage through the Power Purchase Agreement (PPA) executed with the Central Power Purchasing Agency Guarantee Limited (CPPA-G). Additionally, the Implementation Agreement provides sovereign backing for the Company’s cash flows, subject to adherence to defined performance benchmarks. During the review period, the Company performed above these benchmarks, maintaining a plant availability of 99% and operational efficiency of 45.6%, which underscores its strong operational capability and reliability. Operational risk remains low, supported by the in-house operations and maintenance (O&M) framework managed by Hub Power Services Limited (HPSL), an associated entity. This arrangement ensures effective oversight, timely maintenance, and overall plant reliability. Adequate insurance coverages further reinforce operational resilience. During 9MFY25, the Company generated approximately 22 GWh of electricity, a sharp decline compared to 179 GWh in the corresponding period of the previous year (9MFY24). As a result, sales revenue declined significantly to PKR 4,641 million from PKR 12,500 million in 9MFY24. The decrease in dispatch and revenue was primarily due to reduced demand from the power purchaser, following the Company’s placement on the merit order list and transitional impacts related to ongoing amendments in the Power Purchase Agreement, including changes in tariff structure and indexation mechanism.
Narowal Energy's financial risk profile remains sound, supported by the full repayment of its long-term project-related debt in 2021. As of March 2025, the debt profile primarily consists of short-term borrowings, utilized to bridge working capital needs arising from delayed payments by the off-taker. The Company also reported a dividend payable of PKR 4,998 million to its parent, The Hub Power Company Limited (HUBCO), demonstrating strong earnings capacity and sustained equity support. Overall, the Company's robust ownership structure, financial discipline, and contractual safeguards under the PPA framework continue to support the assigned rating. Moreover, with the execution of the amended PPA, Narowal Energy enters a new operational phase marked by tariff adjustments and a shift to a hybrid take-and-pay model for return on equity. While this may reduce revenue certainty compared to the original take-or-pay structure, the continued capacity payments, low leverage structure, and fully paid-off project debt provide a key comfort point.
The strong financial standing of HUBCO, the holding company, provides added assurance to the assigned ratings. Maintaining consistent financial discipline in fulfilling both financial and commercial obligations will be a key consideration moving forward. Meanwhile, upholding strong operational performance in line with agreed performance levels remains essential.

About the Entity
Narowal Energy Limited, a wholly owned subsidiary of The Hub Power Company Limited, was incorporated in 2015 as a public limited company to assume ownership and operations of HUBCO’s Narowal Plant. Following the successful completion of a court-approved demerger, Narowal Energy took full operational control of the plant in March 2017. Operating under the Power Policy 2002, the Company commenced commercial operations in April 2011 and maintains a gross generation capacity of 225 MW. The Board of Directors comprises four members, including the Chief Executive Officer, all of whom also serve on HUBCO’s Board, ensuring strategic alignment. Mr. Kamran Kamal serves as the CEO of Narowal Energy, supported by a seasoned and capable management team.