logo
The Pakistan Credit Rating Agency Limited
Press Release

Date
24-Sep-21

Analyst
Anam Waqas Ghayour
anam.waqas@pacra.com
+92-42-35869504
www.pacra.com

Applicable Criteria

Related Research

Disclaimer
This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains the Entity Ratings of Nishat Power Limited

Rating Type Entity
Current
(24-Sep-21)
Previous
(25-Sep-20)
Action Maintain Upgrade
Long Term AA- AA-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect strong business profile of Nishat Power Limited (Nishat Power) emanating from the demand risk coverage under Power Purchase Agreement signed between National Transmission & Despatch Company (NTDC) / Central Power Purchasing Agency (CPPA-G) and the company. Meanwhile, the Implementation Agreement provides sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. Nishat Power continues to meet its availability (88%) and other performance benchmarks. Nishat Power, with in-house Operations and Maintenance (O&M), has a well-experienced team and has been demonstrating satisfactory performance. Fuel supply risk is considered low as they procure from different suppliers with good credit terms. The management is harnessing internal resources for working capital funding and working to reduce the dependability on external lines. The company is managing its working capital requirements through internal cash generation, short-term borrowing lines are available and its usage has decreased from ~60% to ~33%; facet of strong cash management. The ratings stemmed from the fact that the long-term debt of the company was fully paid successfully in June-2020 and now the only debt on the financial statements of Nishat Power is short-term debt. The liquidity situation, utilization is imputed to go up. The Government has signed an agreement with the IPPs operating under the Power Policy of 2002 to review their tariff structure. Sound financial profile of Nishat Mills Limited; the major sponsor, provides comfort to the ratings.
Sustained good financial discipline and upholding strong operational performance in line with agreed performance levels remain important. Accumulation of circular debt would pose threat to the company’s ability to continue with this practice. However, the management ably supported by sponsors’ remains committed to sustain improvement in management of commercial obligations reflected by the timely and fully repayment of long-debt.

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 Exchange. 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. The Board of Directors (BoD) comprises seven members. Nishat group dominates with five members including CEO. Two independent directors should benefit governance structure. All the board members are seasoned professionals having interests in various sectors of the industry. The management team comprises qualified professionals possessing sufficient experience in power sector.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.