Press Release
VIS Upgrades Ratings of Rousch (Pakistan) Power Limited
Karachi, July 08, 2020: VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of Rousch (Pakistan) Power Limited (RPPL) from ‘AA-/A-1’ (Double A Minus /A-One) to ‘AA/A-1’ (Double A/A-One). 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 high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 28, 2019.
The principal activity of RPPL is to generate and supply electricity to Central Power Purchasing Agency (Guarantee) Limited (CPPA-G) through its combined cycle thermal power plant, having a gross capacity of 450 MW. The assigned ratings take into account strong ownership profile of the company, with Power Management Company (Private) Limited - a part of Descon Group - and Siemens Project Ventures of Germany being the major shareholders. The business risk profile is underpinned by low off-take risk due to take or pay tariff, whereby RPPL is eligible for guaranteed capacity payments. During the period under review, significant decline in net revenue was noted mainly on account of lower dispatch demand from off-taker and higher number of other force majeure days. However, given that capacity payments are guaranteed, impact on profits and funds from operations (FFO) remained limited.
With the final payment of long-term debt in Dec’19, lower interest charge and largely stable FFO, the company’s debt servicing ability is considered sound. Moreover, minimal leverage is also a positive rating driver. Debt profile now comprises short-term borrowings only, which have been availed to meet working capital requirements due to accumulating receivables. While the company intermittently receives overdue receivables, persistency of inter-corporate debt issue is expected to remain a major liquidity challenge for the company, going forward. While the extension of interim gas supply agreement has been approved by the Economic Coordination Committee and Central Power Purchasing Agency (Guarantee) Limited and its approval is pending with Sui Northern Gas Pipelines Limited; fuel supply risk will be mitigated upon finalization of long-term GSA.
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 (Ext. 201) or mailto:info@vis.com.pk
Faryal Faheem Ahmed
Deputy CEO
VIS Entity Rating Criteria: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx