PACRA Maintains Entity Ratings of Pak-Arab Pipeline Company Limited - Press Release issued by The Pakistan Credit Rating Agency Limited.

Lahore -- June 11, 2021 (PPI-OT)

Following is the text of press release issued by The Pakistan Credit Rating Agency Limited (PACRA)

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The ratings are reflective of PAPCO's strategic importance to the country and its distinctive business model deriving its strength from a tariff based return structure. PAPCO operates a 786 Km pipeline network dedicated for White Oil Pipeline (WOP). The tariff follows a pre-defined pattern, determined in US$ by the GoP, providing sustainability to the company's profit base and certain cushion against exchange rate fluctuations. PAPCO has been operating its WOP for High Speed Diesel (HSD) at a capacity utilisation of ~45% in 9MFY21 (FY20: ~42%) - which is projected to be increased to ~66% as soon as MOGAS project becomes operational.

The Company's envisaged pipeline up-gradation plan for the transportation of Motor Gasoline (MOGAS) was initially expected to be completed by Dec'19. However, on account of inevitable factors and unprecedented situation of Covid-19 outbreak, the commencement of the project was stretched beyond FY20. Currently the infrastructure is complete however some approvals from ministry are yet to be received. The management expects the project to be operational by the start of FY22. Tariff assigned for MOGAS project is also determined in US$ which creates an implied hedge to cover exchange rate volatility. The expansion is debt driven; from syndicate local debt and foreign borrowings.

The liquidity risk profile of the company is considered as strong due to its sizable short term investment book on the balance sheet and its cash richness. The...