Pakistan Credit Rating Agency (Pacra) has assigned long-term entity rating of "AA-" (double A minus) and short-term rating of "A1+" (A one plus) to Foundation Power Company (Daharki) Limited (FPCDL). These ratings denote a very low expectation of credit risk emanating from a very strong capacity for timely payment of financial commitments.
The ratings reflect strong financial profile and demonstrated support of key sponsor - Fauji Foundation (FF) - who also has experience of running another IPP. Given the current structure of power policy, the financial risk is low owing to guaranteed cash flow stream by GoP, subject to adherence to agreed performance parameters under PPA.
The operational risk is mitigated through outsourcing of O&M to an international O&M operator - Korean Power Services (KPS). Although KPS possesses extensive international experience in running power plants, given limited previous exposure in Pakistan, its ability to ensure effective O&M operations remains to be seen.
The fuel supply risk is mitigated by entering into long-term gas supply contract with Mari Gas. The key sponsor of' FPDCL is also a major shareholder in Mari Gas. Nevertheless, weak financial discipline of the sole power purchaser and prevailing circular debt remains a concern.-PR