Press Release

VIS Maintains Entity Ratings of Engro Powergen Qadirpur Limited

Karachi, October 24, 2023: VIS Credit Rating Company Limited (VIS) has maintained entity ratings of Engro Powergen Qadirpur Limited (‘EPQL’ or ‘the Company’) at ‘AA-/A-1’ (Double A Minus/A-One). The medium to long-term rating of ‘AA-’ signifies high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. The short-term rating of ‘A-1’ signifies high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Positive’. The previous rating action was announced on July 14, 2022.
The assigned EPQL ratings reflect the Company's low business risk, primarily driven by a 25-year power purchase agreement (PPA) featuring a 'take or pay' provision with the Central Power Purchasing Agency (CPPA-G) from the Commercial Operations Date (COD). Furthermore, the Implementation Agreement (IA) between EPQL and the Government of Pakistan (GoP) via the Private Power Infrastructure Board (PPIB) was executed in 2007. Presence of long-term PPA with guaranteed capacity payments mitigates off-take risk as obligations of power purchaser are backed by sovereign guarantee. The ratings also consider EPQL's sound financial standing and the substantial experience of its sponsor, Engro Energy Limited. Additionally, the exposure to fuel supply and price uncertainties is effectively reduced through the long-term supply agreement and the tariff's integrated cost recovery mechanism. The ratings take note that as of Jan’22, the Operations and Maintenance activities are being done in-house. The operational performance of the facility consistently aligns with the stipulated normative benchmarks outlined in the PPA.
The evaluation of the financial risk profile incorporates strong debt coverage metrics and healthy cash flow generation. The ratings are underpinned by long-term debt-free balance sheet since FY20. To meet working capital needs, the Company relies solely on short-term borrowings. Leverage indicators have consistently remained at comfortable level. As projected in the IA, EPQL is encountering gas curtailment issues stemming from the depletion of the Qadirpur gas field and hence, the plant is made available on mixed mode i.e. commingling of gas and High Speed Diesel. In the meanwhile, EPQL is entitled to recover full capacity payments while making the plant available on mixed mode. To address the gas depletion issue, EPQL has presented a Gas Depletion Mitigation Plan (GDMP) to PPIB, outlining strategies for alternative fuel arrangements. Additionally, EPQL has secured 8-13MMSCFD of indigenous gas from the Badar gas field, operated by Petroleum Exploration Limited (PEL) in 2022. Concurrently, EPQL has submitted a generation license and tariff modification request to National Electric Power Regulatory Authority (NEPRA) and actively engages with relevant stakeholders for regulatory approvals. The rating considers the Company's consistently favorable merit order position in both Permeate Gas and alternative Gas scenarios, compared to projects reliant on imported fuel. The revision in rating outlook is underpinned by the Company’s sound business and financial risk profile. However, it is important to note that the Company’s ratings are dependent on its ability to sustain operational efficiency, maintain concurrent profitability, and secure regulatory approvals from NEPRA.
For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA (042-35723411-13, Ext. 8001) and/or the undersigned at 021-35311861-64 (Ext. 201) or email at

Javed Callea

Applicable Rating Criteria: Corporates (May 2023)

VIS Issue/Issuer Rating Scale

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