Press Release

VIS Assigns Preliminary Rating to Sukuk Issue of PGP Consortium Limited

Karachi, September 10, 2024: VIS Credit Rating Company Limited (‘VIS’) has assigned preliminary rating to Sukuk issue of PGP Consortium Limited (‘PGPC’ or ‘the Company’) at 'AA- (plm)' (‘Double A minus preliminary’). Medium to long term rating of 'AA-' indicates high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Outlook on the assigned ratings is ‘Stable’.

PGPC is a wholly owned subsidiary of Pakistan GasPort Limited (PGPL), whose sponsors have vast experience of establishing and operating energy sector projects. PGPC has established the country’s second and the largest LNG terminal at Port Qasim Karachi. The Company has a long-term LNG terminal Operation and Services Agreement (OSA) inked with Pakistan LNG Limited (PLL) (formerly Pakistan LNG Terminals Limited (PLTL) which merged into PLL) for usage of 600 mmscfd of the Company’s capacity, on a ‘take or pay’ basis. This ensures guaranteed revenues and cash flows backed by the provision of a revolving Standby Letter of Credit (SBLC).

PGPC plans to issue a rated, secured, listed Diminishing Musharakah Sukuk of PKR 4,000 million, including a PKR 500 million Green Shoe Option. Proceeds are planned to be used for capital expenditure and working capital requirements. The instrument will also have shelf registration of PKR 3,000 million, enabling securities sales without a separate prospectus for one-year post-listing. The Sukuk has a 5-year tenure with a 1-year grace period. Proposed profit rate is 6-month KIBOR plus a margin of up to 4.0%, with a 12% minimum floor, payable semi-annually. Security includes assignment of SBLC in favor of lenders in addition to a charge on fixed assets, establishment of a Sukuk Payment Account, and pledge of sponsors' shares.

Assigned rating of the proposed Sukuk is reflective of the underlying security of assignment of SBLC. Rating also incorporates the business risk profile of the Company, influenced by moderate cyclicality in its operating environment. Stability in gas demand, only impacted by seasonal factors, complements the profile. Although, the variation in demand does not impact PGPC's revenue and cash flow as the capacity payments are guaranteed and payable on a take-or-pay basis. Operational success is tied to maintaining the availability of LNG services infrastructure, albeit supported by a structured take-or-pay contract. Entry barriers within the industry create a low competition environment, fostering a favorable position for the Company. Risks from technology and regulation remain contained.

Assigned rating also acknowledges the financial risk profile of the Company. The profitability profile indicates an improvement. Capitalization metrics, while elevated, align with industry norms, driven by significant operational leases under IFRS-16. Financial support extended to associate influenced the liquidity profile. The liquidity profile is expected to improve as PLL's liquidated damages deductions will be completed by September 2024. Furthermore, coverage ratios provide adequate cushion for debt servicing.

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
Rating The Issue
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .