Lahore, September 27, 2021 (PPI-OT):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 and 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 and 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.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com