JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the medium to long term entity ratings of Jamshoro Joint Venture Limited (JJVL) to 'A' (Single A) from 'BBB+' (Triple B Plus) and short-term entity ratings to 'A 2' (Single A Two) from 'A 3' (Single A Three).
The medium to long-term secured debt rating has also been upgraded to 'A+' (Single A Plus) from 'A -' (Single A Minus). The outlook on the medium to long-term ratings is 'Stable'.
The upgrade takes into account the successful commissioning of the Liquefied Petroleum Gas (LPG) extraction plant, albeit later than expected due to certain modifications, and subsequent strong ongoing cash flow generation as the plant has started operating on high capacity utilisation in the current year.
The technology utilised in the LPG plant is state-of-the-art licensed by Ortloff Engineers Ltd, and was engineered, constructed and commissioned by the Hanover Company of Houston, Texas, which is currently the operation and maintenance contractor for the plant. Although, it was initially expected that JJVL's capacity would take some time to be absorbed in the local market, strong demand has meant that JJVL is more or less assured complete offtake of its entire production.
"We expect that now the leverage level of the company will fall rapidly with the ongoing strong cashflow generation as initial teething problems faced at the LPG plant as well as the storage constraints are being resolved."
Meanwhile the repayments of the initial project financing, amounting to Rs 1,235 million, started from the first quarter of FY2006 and is more than adequately covered from the current level of cashflow generation while the management also intends to conserve excess cash build-up specifically for this purpose.
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