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The Pakistan Credit Rating Agency Limited

Date
22-Dec-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Hamza Ghalib
hamza.ghalib@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Correlation between long-term and short-term rating scale (Jun 17) [View]
  • Methodology | Independent Power Producers (IPP) (May 17) [View]

Related Research

  • Sector Study | Power Generation (Mar 17) [View]
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PACRA Maintains Entity Ratings of Atlas Power Limited
 Rating Type Entity
Current
(22-Dec-2017)
Previous
(23-Jun-2017)
 Action Maintain Maintain
 Long Term AA- AA-
 Short Term A1+ A1+
 Outlook Stable Stable
 Rating Watch - -

The ratings of APL reflect its strong financial profile. APL's good credit terms with fuel supplier and efficient inventory management has enabled it better management of debt repayments. Nevertheless, delayed payments from the power purchaser remained a challenge. Despite higher receivable days the entity managed to sustain its financial strength. Business risk is considered low exhibited by demand risk coverage under Power Purchase Agreement signed between NTDC and the company. The implementation agreement further provides sovereign guarantee for cash flows, given adherence to agreed performance benchmarks. The ratings incorporate low operational risk, a result of the performance of MAN Diesel Pakistan - the O&M operator. APL continues to meet its availability (88%) and efficiency (45%) benchmarks. APL has total long term debt of PKR 6,151 mln as at end-Jun17 payable till October 2019. Sound financial profile of Atlas Group; the major sponsor, provides comfort to the ratings.

Adherence to good financial discipline towards both financial and commercial obligations would remain important. Meanwhile, upholding strong operational performance in line with agreed performance levels remain important. Any significant increase in overdue receivables, in turn weakening in financial risk profile would be a concern.
About the Entity
APL, a public limited unlisted company, was established in January 2007. APL operates a 225 MW thermal power plant which is operational since 2009. Shirazi Investments (Pvt.) Limited with 85% shareholding in APL is the main sponsor of the Company. Remaining shareholding lies with Allied Bank Limited (ABL) (7.5%) and National Bank of Pakistan (NBP) (7.5%). Shirazi Investments functions as the holding company of Atlas Group - having dominant interests in auto and allied segments - cars, motorcycles, batteries - and non banking financial industry - insurance and asset management.

APL's board comprises nine members, excluding the CEO, with five representatives of Shirazi Investments, two independent directors, and one representative each of NBP and ABL. Mr. Maqsood A. Basraa, the CEO of APL, has extensive experience within the group, where he has served under various capacities since 1989. He is supported by a skilled team of 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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