VIS Reaffirms Entity Ratings of Punjab Thermal Power (Private) Limited

Karachi, July 01, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings assigned to Punjab Thermal Power (Pvt.) Limited (PTPL) at ‘AA-/A-1’ (Double A Minus/A-One). The medium to long-term rating of ‘AA-’ denotes high credit quality coupled with strong protection factors. Moreover, risk factors may vary slightly with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on June 10, 2020.

The ratings assigned to PTPL incorporate its strong ownership profile being wholly owned by a sub-sovereign, Government of Punjab (GoPb) through Energy Department. PTPL is a combined cycle power project of 1,263.2 MW (net 1,242.7 MW) on Re-gasified Liquefied Natural Gas (RLNG) as the primary fuel and High-Speed Diesel (HSD) as back-up fuel located near Haveli Bahadur Shah/Trimmu Barrage, District Jhang, Punjab, Pakistan. The project was approved by the Cabinet Committee on Energy (CCoE) of the Federal Government in June 2017. PTPL filed application for grant of generation license in July 2017; meanwhile, National Electric Power Regulatory Authority (NEPRA) granted power generation license to PTPL in February 2018.

Power Purchase Agreement (PPA) has been signed for 30 years with Central Power Purchasing Agency Guarantee Limited (CPPA-G) in June 2020. CCoE approved reduction in capacity charges of Government owned projects in Aug’20 and revised the ROE to 12% with dollar-based indexation. The company entered into Gas Supply Arrangement for 15 years with Sui Northern Gas Pipeline Limited in August 2020. Financial close was achieved in April 2021. Given delays in project completion, project cost was revised upward.

The cost overruns until the physical completion date of the project are to be determined at the time of COD and will be claimed under the tariff true-up. The project is contemplated to achieve commercial operations by end-Mar’22. Business risk profile draws support from long-term Operations and Maintenance (O and M) contract in place with an experienced O and M operator. The ratings also draw comfort from government guaranteed cash flow stream under the agreement upon meeting certain performance benchmarks. Meanwhile, the ratings are sensitive to achievement of commercial operations within stipulated timeframe.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873

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