Press Release
VIS Reaffirms Entity Ratings of Rousch (Pakistan) Power Limited
Karachi, May 20, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Rousch (Pakistan) Power Limited (‘RPPL’ or ‘the Company’) at ‘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 24, 2021.
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 takes 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. Operational Risk is considered manageable in view of satisfactory O&M arrangement in place and adequate insurance coverages. Ratings derive support from the absence of demand risk, given a 30-year PPA with CPPA-G that will expire in 2030.
In accordance with the MoU signed with the Government of Pakistan (GoP), RPPL’s trade debts as of Nov’20 were settled in full by Nov’21. As a result, liquidity risk had reduced at the cost of a slightly lower future revenue stream. Nevertheless, despite the settlement, the Company continues to face the issue of receivables build up, which had increased to Rs. 10b as of Dec’21. The buildup of receivables is a concern, as the same may translate in higher liquidity risk going forward; however, the rating incorporates very low risk on receivables from GoP.
With long-term debt having been retired in 2019, miniscule interest charge on short term borrowing utilization and stable FFO, the company’s debt servicing ability is considered sound. The quantum of equity declined, as the Company paid off the balance received from GoP as dividends to shareholders. Going forward, as such there are no plans to raise additional debt; accordingly the balance sheet is likely to remain debt-free. While extension of interim GSA by Ministry of Energy (Power and Petroleum Divisions) has been working smoothly in terms of availability of RLNG, finalization of a long-term gas supply arrangement is considered important from a ratings perspective. VIS will continue to monitor the developments in this regard, as and when these materialize.
For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA (Ext: 216) or the undersigned (Ext. 201) at 021-35311861-70 or email at info@vis.com.pk.
Javed Callea
Advisor
Applicable Rating Criteria: Corporate Rating Methodology (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf