Press Release

VIS Reaffirms Entity Ratings of FFBL Power Company Limited

Karachi, December 20, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of FFBL Power Company Limited (FPCL) at ‘AA-/A-1’ (Double AA Minus/A-One). Long-term rating of ‘AA-’ denotes high credit quality and strong protection factors; risk factors are modest but may vary slightly from time to time because of economic conditions. Short-term rating of 'A-1' denotes high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on October 27, 2022.

FPCL, a subsidiary of Fauji Fertilizer Bin Qasim Limited (FFBL) with ultimate parent being Fauji Foundation (FF), has been operating a 118 Megawatt coal-based power plant. FPCL generates power and steam for FFBL’s fertilizer complex and export power to K-Electric (KE). FF, one of the biggest conglomerates in Pakistan with sizeable financial strength and presence in diversified business sectors, continues to provide support to the assigned ratings. 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, high merit order position at 6/22 as per merit order issued in Oct'23, and dispatch guarantees built into PPA. The plant’s availability was impacted by a shutdown from Mar’23 to Aug’23 because of a technical problem in generators. However, the resultant loss of capacity revenue is covered under insurance policy. Meanwhile, FPCL sources coal from both international and local coal suppliers and is aiming to reduce reliance on imported coal, going forward.

Given revised tariff indexation, net revenue increased during CY23 while remained confined in HY23 due to partial non-availability of plant. However, gross margins improved on the back of higher contribution of capacity payments in net revenue during HY23. Despite higher financial charges, bottom-line improved during CY22 and HY23. FFO also increased owing to higher income from core operations. Debt coverages remained largely range bound. Gearing, despite growth in equity base, increased slightly by end-HY23 due to higher utilization of running finance facility for coal procurement. Trade debts, mostly emanating from the parent company, increased considerably; though the aging profile remained manageable. FPCL liquidated short-term investments in CY22 and made investments in Fauji Foods Limited (FFL), an associated concern expected to turn around during the ongoing year. Going forward, FPCL’s leverage indicators are projected to decline on account of repayment of long-term financing. However, expansion in equity base may remain limited given the sponsors expectation of higher dividend payout. The ratings remain sensitive to financing of parent’s receivables, potentially earning investments and cash dividend payouts by the company.

For further information on this rating announcement, please contact Mr. Maimoon Rasheed at 042-35723411-12 (8008) or the undersigned (Ext. 207) at 021-35311861-64 or email at

Sara Ahmed

Applicable Rating Criteria: Industrial Corporates (May 2023)

VIS Issue/Issuer Rating Scale

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