Home »Fuel and Energy » Pakistan » Jamshoro joint venture gets BBB+/A-3 ratings

  • News Desk
  • Jan 6th, 2004
  • Comments Off on Jamshoro joint venture gets BBB+/A-3 ratings
JCR-VIS Credit Rating has assigned initial medium to long-term and short-term entity ratings of BBB+ (triple B plus) and A-3 (single A three) to Jamshoro Joint Venture Ltd (JJVL), a liquefied petroleum gas (LPG) extraction project.

The project's secured debt has been assigned a preliminary rating of A- (Single A minus).

The outlook on the medium to long-term and secured debt ratings is 'Stable'. The preliminary secured debt rating will be converted into final after review of all signed legal documents.

The assigned ratings take into consideration the fact that the construction risk of the project has been mitigated by capping the price of the plant and equipment being supplied for the project and the vast experience in engineering and construction enjoyed by the project contractors.

The LPG extraction plant will be based on SCORE technology patented by independent engineers and guarantees propane recovery rates of above 95 percent. Based on independent studies carried out by international organisations and government's increased emphasis on supplying LPG to the Northern Areas, high potential exists in the Pakistan's LPG sector, which mitigates the project off-take risk.

The project will have a debt to equity ration of 65:35, with 15 percent cumulative preference shares forming approximately 43 percent of the total equity, which may place a drag on future earnings.

However, the project's projected cash flows have been tested for different stress scenarios and are found to provide ample coverage to debt repayment even in such instances.

The rating also takes into account protection factors in form of debt repayment reserve account to be established 30 days before the first principal payment, which will be initially of Rs 50 million and thereafter be injected with additional Rs 25 million each before the second and third principal repayment.

In the event this reserve account is utilised to facilitate the repayment of any instalment, the balance reserve account will be replenished to Rs 100 million before the next principal becomes payable.

Furthermore, JJVL will maintain a debt leverage of not more than 1.9 multiples of earnings and will follow uniform sales and credit terms for all its customers.

Copyright Business Recorder, 2004


the author

Top
Close
Close