Final PR
The Pakistan Credit Rating Agency Limited

Jhangeer Hanif

Rai Umar Zafar

Applicable Criteria

  • Rating Modifiers | Outlook and Rating Watch (Jun 16) [View]
  • Correlation between Long-term and Short-term rating (Jun 16) [View]
  • Methodology | Independent Power Producers (IPP) (Jun 16) [View]

Related Research

  • Sector Study | Power Generation (Mar 17) [View]
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PACRA Assigns Positive Outlook to the Entity Ratings of Foundation Power Company Daharki Limited
 Rating Type Entity
 Action Maintain
 Long Term A+
 Short Term A1
 Outlook Positive
 Rating Watch -

The ratings reflect strong business profile of FPCDL emanating from the demand risk coverage under Power Purchase Agreement signed between NTDC and the company. The implementation agreement further provides sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. The ratings incorporate low operational risk, a result of the performance of KEPCO - the O&M operator. Fuel of the plant is 'low BTU' gas, which is supplied by an associate - Mari Petroleum Company Limited (40% owned by Fauji Foundation). Thus fuel supply risk is considered low. The company manages its working capital requirements by stretching payables to the fuel supplier and through short-term borrowings. However, the improvement in managing the commercial obligations is considered positive. The company's association with Fauji Foundation (FF) provides comfort to the ratings.

The positive outlook signifies FPCDL’s good financial conduct in the recent past. Accumulation of circular debt would pose threat to the company’s ability to continue with this practice. However, the management ably supported by sponsors remains committed to sustain improvement in management of commercial obligations and timely debt repayments. Cushion in un-utilized lines also provide comfort.
About the Entity
FPCDL was established in 2005 under the Companies Ordinance 1984 as an independent power producer. The company is operating a combined cycle power plant with a net initial capacity of 180MW. FPCDL's plant commenced operations in May 2011. FPCDL is majority owned by Daharki Power Holdings Limited, which, in turn is owned by FF (81%) and Asian Development Bank (ADB) (19%).

The six-member Board, comprising five representatives from FF and one from ADB, provides adequate guidance to the company. Lt. Gen. Khalid Nawaz Khan (Retd.) - Managing Director of FF - chairs the board. Lt. Gen. Jamil Haider (Retd.), Managing Director since 2015, is supported by an experienced senior management team.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.