Press Release
VIS Assigns Initial Entity Ratings to Maple Leaf Power Limited
Karachi, September 23, 2024: VIS Credit Rating Company Limited (‘VIS’) has assigned initial entity ratings to Maple Leaf Power Limited ('MLPL’ or 'the Company’) at 'A/A-1' (‘Single A/A-One’). Medium to long term rating of 'A' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A-1' suggests strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings is ‘Stable’.
MLPL, incorporated on October 15, 2015, is a wholly owned subsidiary of Maple Leaf Cement Factory Limited (‘MLCF’ or ‘the Holding Company’), itself a subsidiary of Kohinoor Textile Mills Limited (‘KTML’). MLPL was established to operate a 40MW coal-fired power plant in Iskanderabad, District Mianwali, Punjab, supplying electricity and steam solely to MLCF. The electricity generation license from the National Electric Power and Regulatory Authority (NEPRA) was granted on December 20, 2016, and remains valid until July 30, 2042. The project was completed on October 12, 2017, funded entirely through equity, and is managed by an in-house engineering team.
Assigned ratings take into account the overall risk profile of the non-renewable power generation sector, deemed medium-to-low. However, with the Company's energy demand dependent on the power requirements of its holding company, ratings also consider the business risk dynamics of the cement sector.
Ratings also take into account the financial profiles of the Company. The profitability profile is influenced by a tariff rate indexed to coal prices and enhanced operational efficiency, mitigating profitability risk of MLPL. Capitalization remains strong due to profit retention and minimal external funding needs, contributing to a debt-free status. Meanwhile, liquidity is deemed adequate despite a healthy current ratio with much of this liquidity is tied up in receivables from the Holding Company.
Going forward, the key financial risk indicators include the potential volatility in the energy demand from the holding company and the broader economic impacts on the cement sector. The company’s ability to adapt to changing market conditions, manage receivables effectively, and sustain its capitalization amidst potential liquidity pressures will be critical. Dependencies on economic recovery will remain important for ratings.
For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf