PACRA Maintains Entity Ratings of Nishat Power Limited

Nishat Power Limited (Nishat Power) runs a 200MW power plant. The company operates in the regulated power sector. It enjoys sovereign guarantee against receivables from power purchaser - NTDC - given adherence to agreed performance benchmarks. Nishat Power Limited, with in-house Operations and Maintenance (O&M), has a well-experienced team. While cost-savings are a likely outcome, it is critical to hold any operational benchmarks to avoid any consequences. The company's financial risk profile is largely dependent on repayment behavior of power purchaser. In recent period, receivables including delayed payments interest witnessed an increase. Nevertheless, the company has been managing its working capital requirements via short-term borrowings. Plant has performed up to the mark with greater availability factor than of its set benchmark. The company's conservative dividend payout provides further flexibility in financial management. Thus healthy profile of the company should help ameliorate its financial behaviour.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. Meanwhile, any significant increase in overdue receivables, as a result of rising circular debt, may negatively impact the ratings.

About the Entity
Nishat Power was established in 2007 as an independent power producer (IPP) for the purpose of electricity generation. It began commercial operations in June 2010. Nishat Power is a subsidiary of Nishat Mills Limited (Nishat Mills) and is listed on Pakistan Stock Exchanges. Nishat Mills holds 51% stake in the company followed by Allied Bank Limited (Allied Bank) (8.5%). Nishat group is a leading conglomerate with interests in textile, cement, energy, and financial sectors. Nishat Group has planned up to capacity of 20 MW solar power project that in turns delayed due to new tariff approval through competitive bidding from NEPRA. The solar project will be the wholly owned subsidiary of Nishat Power.

Nishat Power's project cost comprised 20% equity and 80% debt. Long-term debt carries mark-up at the rate of 3M Kibor + 300bps, payable on quarterly basis. The outstanding principal will be repaid in seven quarterly installments ending on July 2020. Total Principal outstanding till date is PKR 4,105mln.

The Board of Directors (BoD) comprises seven members. Nishat group dominates with five members including CEO. Two independent directors including one nominee from Allied Bank should benefit governance structure. The management team comprises qualified professionals possessing sufficient experience in power sector.