Press Release

VIS Reaffirms Ratings of FFBL Power Company Limited

Karachi, October 04, 2021: VIS Credit Rating Company Limited has reaffirmed the entity ratings of to FFBL Power Company Limited (FPCL) at ‘AA-/A-1’ (Double A Minus/A-One). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on October 20, 2020.

The assigned ratings draw comfort from strong sponsor profile, with FFBL being ultimately owned by the Fauji Foundation (FF), which is one of the largest conglomerate in Pakistan having businesses in diversified sectors. The ratings also take into account low business risk and improving financial profile as evident from healthy cash flow coverages and reduction in leverage indicators. Ratings factor in the FPCL’s demonstrated track record of compliance with performance parameters stipulated in the PPA, including plant availability and efficiency. Moreover, improvement in operational performance in terms of higher capacity utilization and increase in heat rate has been noted positively.

Business risk profile draws support from experience profile of in-house O&M team for plant and limited fuel supply and price risk due to long-term supply contract and cost pass through mechanism built in the tariff. Despite take and pay arrangement with KE, demand risk is limited due to low cost of power generation (compared to other existing KE plants which favorably impacts KE’s merit order position) and dispatch guarantees from KE (as built in PPA). Overall liquidity profile remains strong on the back of healthy cash flow generation and sound debt coverage metrics; recent increase in receivables if not arrested may impact free cash flows. Capitalization indicators continued to post improvement, on account of modest retention and continued repayment of debt.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at (021)35311861-70 or Mr. Arsal Ayub, CFA (Ext: 216) fax to (021)35311872-3.

Javed Callea

Applicable Rating Criteria:
Corporate Rating Methodology - August 2021

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VIS Credit Rating Company Limited