Press Release

Ratings of National Power Parks Management Company (Pvt.) Limited

Karachi, December 31, 2019: VIS Credit Rating Company Limited has placed the entity ratings of “AA+/A-1+” (Double A-Plus/A-One Plus) assigned to National Power Parks Management Company (Pvt.) Limited (NPPMCL) under ‘Rating Watch-Developing’ status in the view of planned sale of 100% shareholding of the company by Government of Pakistan (GOP). The medium to long-term rating of ‘AA+’ denotes high credit quality coupled with strong protection factors. Moreover, risk factors may vary slightly with possible changes in the economy. The short-term rating of ‘A-1+’ denotes highest certainty of timely payments, liquidity factors are excellent and just below risk-free government of Pakistan’s short-term obligations. The previous rating action was announced on December 31, 2018.

The assigned ratings take into account strong ownership profile; NPPMCL is owned and controlled by the GOP via Pakistan Development Fund Limited (PDFL). NPPMCL has established two Re-liquefied Natural Gas (RLNG) based Combined Cycle Gas Turbine (CCGT) power plants, Haveli Bahadur Shah (HBS) and Balloki, under the Power Generation Policy, 2015 that offers a guaranteed equity Internal Rate of Return (IRR), cost indexation and pass-through structure. Electricity generated from both plants is being sold to the Central Power Purchase Agency (Guarantee) Limited (CPPA) under a Power Purchase Agreement (PPA), and the obligations of CPPA are guaranteed by the GOP under the Implementation Agreement (IA).

Both power plants remained operational during FY19 and contributed towards higher revenue, margins and profitability of the company. Trade receivables from CPPA increased on account of higher electricity delivered to the national grid, though receivables as a percentage of revenue moderated by end-FY19. Trade receivables are secured by a guarantee from the GoP under the IA. Otherwise, liquidity position of the company is supported by healthy cash flows generation. In line with higher profits, the company generated higher funds from operations (FFO) during FY19 despite increase in finance cost and tax payment. With higher cash flows and absence of long-term debt repayment, the company’s FFO to total debt and debt service coverage ratios improved. Leverage indicators improved on the back of profits retention by end-FY19. Cash and bank balance stood lower at end-FY19 due to settlement of Standby Letter of Credit (SBLC) that was encashed by the Sui Northern Gas Pipelines Limited (SNGPL) against disputed invoices; the case is now pending for hearing at the London Court of International Arbitration. In order to discharge its liabilities the company has arranged borrowing lines from a consortium of commercial banks subsequent to the year end.

As per the direction of Economic Coordination Committee (ECC), the Privatization Commission (PC) is expediting the privatization process of NPPMCL. The PC has floated an invitation seeking expression of interest (EOI) and statement of qualification from interested parties to acquire up to 100% of the equity stake with management control in either i) NPPMCL (in case both power plants will be acquired by the same investor) or ii) two companies each of which will own one of the power plants (in case different investors will acquire the power plants). The completion timeline of privatization process is yet to be announced. VIS will continue to monitor the privatization of NPPMCL, with focus on any material change in the existing legal agreements.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (201) or email at

Javed Callea

VIS Entity Rating Criteria: Corporates (May 2019)

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