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The Pakistan Credit Rating Agency Limited

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

Muhammad Hassan
muhammad.hassan@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 Assigns Initial Entity Ratings to Habibullah Coastal Power Company (Pvt.) Limited
 Rating Type Entity
Current
(29-Dec-2017)
 Action Initial
 Long Term A
 Short Term A1
 Outlook Stable
 Rating Watch -

The ratings of Habibullah Coastal Power Company (Pvt.) Limited (Habibullah Coastal), an established IPP, reflect its stable business profile emanating from the demand risk coverage under Power Purchase Agreement signed between power purchaser and the company. Meanwhile, the Implementation Agreement provides sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. Habibullah Coastal has a Gas Supply Agreement with Sui Southern Gas Company (SSGC) for 20 years, ending in Sep 2019. The company can apply for extension of GSA in no less than 2 years or more than 18 months prior to expiry of GSA. The company is in arbitration with SSGC to settle overdue liquidated damages. A favourable decision will provide one time comfort to the profitability of Habibullah Coastal. The company’s project debt has been paid and it only borrows to meet its short term needs or for BMR purposes. Consequently, the company continues to enjoy sound coverages, underpinned by leveraged structure. However, like other IPPs, its financial profile remains dependent on the payment behaviour of the power purchaser.

Although well-managed, in-house O&M activities expose the company to operational risk; thus upholding strong operational performance in line with agreed performance levels would remain a key driver of the ratings. Meanwhile, extension in GSA with SSGC and arbitration with SSGC are critical and success here would beneficially impact the ratings.
About the Entity
Habibullah Coastal was established in 1995 as an independent power producer. The company is operating a combined cycle power plant with a net capacity of 129MW. Habibullah Coastal’s plant commenced operations in 1999. It has signed a 30 years Power Purchase Agreement with the power purchaser of which 18 years has lapsed. The Ultimate Benificiary of the Company is M/S Ithaca Capital Limited which is a privately held investment holding company and, through its subsidiary, is a manager of third party private equity. Ithaca Capital is owned by Mr. Saad Faruqui. - a seasoned business man with main interests in Transportation, Security and technology ventures.

Overall control vests in five member board. Mr. Saad Saeed Faruqui is the Chief Executive officer of the company. Other board members are seasoned professionals with diverse experienced background. He is assisted by an able 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.
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