Final PR
The Pakistan Credit Rating Agency Limited

Rai Umar Zafar

Hamza Ghalib

Applicable Criteria

  • Correlation between long-term and short-term rating scale (Jun 17) [View]
  • Methodology | Independent Power Producers (IPP) (May 17) [View]

Related Research

  • Sector Study | Power Generation (Mar 17) [View]
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PACRA Maintains Entity Ratings of Nishat Power Limited
 Rating Type Entity
 Action Maintain Maintain
 Long Term A+ A+
 Short Term A1 A1
 Outlook Stable Stable
 Rating Watch - -

Nishat Power Limited 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, any deviation from operational benchmarks may have its adverse implications on the company. 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 behavior.

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
NPL was established in 2007 as an independent power producer (IPP) for the purpose of electricity generation. It began commercial operations in June 2010. NPL is a subsidiary of Nishat Mills Limited (NML) and is listed on Pakistan Stock Exchanges. NML holds 51% stake in the company followed by Allied Bank Limited (ABL) (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 MWp solar power project. This is pending due to power purchaser consent with Central Power Purchasing Agency (Guarantee) Limited. Nishat Power will hold 34% stake in it.

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 eleven quarterly installments ending on July 2020.

The Board of Directors (BoD) comprises seven members. Nishat group dominates with five members including CEO. One nominee from ABL, and one independent director should benefit governance structure. 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.