VIS Reaffirms Engro Powergen Qadirpur Ratings with Stable Outlook

Engro Powergen Qadirpur Limited (EPQL) has received a significant endorsement from VIS Credit Rating Company Limited, which has reaffirmed the entity ratings of the company at 'AA-/A-1'. This rating indicates that EPQL possesses high credit quality and low business risk, making it a reliable player in the energy sector. The long-term rating of 'AA-' suggests that the company has a strong ability to repay its debts on time, while the short-term rating of 'A-1' emphasizes its capability to meet immediate financial obligations due to robust liquidity.

On September 4, 2024, VIS announced that the outlook on these ratings has been revised from 'Positive' to 'Stable'. This change reflects the current operational environment and the company's performance. EPQL operates a 226.52 MW combined cycle power plant, which began commercial operations in 2010. The plant plays a crucial role in supplying electricity to the national grid under a 25-year Power Purchase Agreement (PPA) with the Central Power Purchasing Agency-Guaranteed (CPPA-G).

One of the key aspects of EPQL's operations is its ability to convert low BTU, high-sulfur gas into electricity, in line with the Power Policy of 2002. The company is primarily owned by Engro Energy Limited, which holds a 68.9% stake, and is a subsidiary of Engro Corporation. The ratings assigned to EPQL reflect the low business risk associated with its long-term PPA, which ensures a steady revenue stream.

Moreover, EPQL's risk profile is bolstered by its Implementation Agreement with the Government of Pakistan, which guarantees capacity payments. This agreement significantly reduces credit risks for the company. The stability of the ratings is further enhanced by tariff indexations and protective measures against macroeconomic variables, including inflation and currency exchange rates.

VIS has pointed out that EPQL's liquidity is supported by structured cash conversion and sovereign guarantees on receivables. This ensures that the company maintains sufficient coverage, even in the face of occasional payment delays. However, it is important to note that EPQL's future ratings will hinge on its ability to navigate fluctuations in fuel supply and any major regulatory changes that may impact the energy sector.

As the energy landscape continues to evolve, EPQL's ratings will be closely monitored, taking into account macroeconomic factors and shifts in its operational environment. With ongoing developments in the sector, stakeholders will be keenly observing how EPQL adapts to these changes. The reaffirmation of its ratings not only reflects the company's current standing but also sets the stage for its future endeavors in the energy market.