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The Pakistan Credit Rating Agency Limited

Date
30-Dec-2016
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Usama Liaquat
usama.liaquat@pacra.com

+92-42-35869504
www.pacra.com
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PACRA Maintain Entity Ratings of Pak Arab Refinery Limited
 Rating Type Entity
Current
(30-Dec-2016)
Previous
(30-Dec-2016)
 Action  Maintain
 Long Term  AAA
 Short Term  A1+
 Outlook  Stable
 Rating Watch - -

The ratings reflect PARCO’s predominantly sovereign ownership structure- owned by the Government of Pakistan (GoP) (60%) and Abu Dhabi Petroleum Investments LLC (40%- a majority owned company of Emirate of Abu Dhabi) (EAD). Additionally, it enjoys strategic importance to the GoP for its socio-economic policies and its quest of reducing the import bill. The company’s low business risk emanates from its leading market position, strong demand of its products, and its advanced plant technology. The business fundamentals also derive support from high premium product mix and diversified revenue stream. At the same time, the ratings recognize the company’s ability to manage its financial profile. Also reflected in the ratings is PARCO’s strengthened position in midstream and downstream sector with organic growth and acquisitions.

Effective management of upcoming and consistency in Government policies remain critical for the ratings. The ratings are dependent on sustained competitive positioning of the company.
About the Entity
PARCO, established in 1974, has evolved into a well-established name in the midstream and downstream oil chain. Apart from 4.5mln tones per annum refinery. It manages an extensive network of oil transportation pipelines under its name and for its subsidiary PAPCO. The network sprawled across the country, including the White Oil Pipeline, the leading network used for transportation of crude oil and refined products. Over the time, PARCO has also established its presence in the OMC industry through TOTAL PARCO Pakistan Limited (TPPL), a mid-size OMC, which has also acquired Chevron’s fuel business. The LPG business and PAPCO shares are also part of deal for the benefit of PARCO. PARCO has also increased its stake in TPPL to 50%, through a right issue and also became a 50% stakeholder in Lube business of Total Marketing Services France i.e. Total Oil Pakistan (Private) Limited. Total Oil Pakistan (Private) Limited has been merged with TPPL recently. PARCO also owns PARCO Pearl Gas (Private) limited a wholly owned subsidiary engaged in marketing and distribution of LPG.

The company’s nine-member BoD includes five nominees of GoP, including the Chairman and the MD, while the remaining four represent EAD and OMV. The Managing Director, Mr.Tariq Rizavi, has been associated with the company since beginning of his career and is supported by a team of qualified and experienced professionals.
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.
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