Press Release

VIS Reaffirms Ratings of FFBL Power Company Limited

Karachi, October 27, 2022: VIS Credit Rating Company Limited has reaffirmed the entity ratings of to FFBL Power Company Limited (FPCL) at ‘AA-/A-1’ (Double A Minus/A-One). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on October 04, 2021.

Ratings reaffirmation continues to take into account the strong sponsor strength, Fauji Fertilizer Bin Qasim Limited (FFBL), with ultimate parent being Fauji Foundation (FF), which is one of Pakistan's largest conglomerates with sizable financial strength and presence in diversified business sectors. Rating further factor in the presence of 30-year power purchasing/steam supply agreements with the parent company and K-Electric (KE), which will expire in 2047. Despite 'take and pay' arrangement with KE, off-take risk is deemed moderate due to low cost of power generation vis-à-vis other existing KE plants, improvement in merit order position to 6/29 (Sept'21: 17/40) as per merit order issued in Sept'22, and dispatch guarantees built into PPA. Furthermore, experienced in-house O&M team for plant and limited fuel supply/price risk due to long-term supply contract and cost pass through mechanism built in the tariff translates into low business risk. Ratings are also supported by FPCL's strong financial metrics and demonstrated track record of compliance with performance parameters stipulated in the PPA (including plant availability and efficiency).

Net sales revenue increased significantly in 2021 and in the ongoing year, owing to rising fuel prices and a significant rupee depreciation over the review period. Due to unique power tariff models with fixed bottom line in form of ROE gross profit margin fell when higher denominator number (swelled up sales number) was seen vis-à-vis fixed PKR numerator of profit (depicting ROE component of tariff). Liquidity metrics remain strong, with healthy cash flow generation for debt servicing. Trade debts though have depicted an increasing trend on a timeline basis, aging profile remains sound with ~90% of receivables outstanding for less than 60 days. Leverage indicators, despite growth in equity base, have remained at similar levels due to higher utilization of running finance facility for coal procurement.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 204) or the undersigned (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.

Sara Ahmed

Applicable Rating Criteria: Corporate Rating Methodology – August 2021

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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited