PACRA maintains entity ratings of Nishat Chunian Power Ltd

November 6, 2018 (MLN): Pakistan Credit Rating Agency (PACRA) has maintained entity ratings of Nishat Chunian Power Limited at ‘A+’ for long term and ‘A1’ for short term, with a ‘stable’ outlook forecast.

According to the rating agency, the ratings reflect strong business profile of Nishat Chunian Power Limited (Nishat Chunian Power) emanating from the demand risk coverage under Power Purchase Agreement signed between NTDC (through Central Power Purchasing Agency) and the company.

Meanwhile, the Implementation Agreement provides sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. Nevertheless, delayed payments from the power purchaser remained a challenge, the press release reported.

“Despite higher receivable days the entity managed to sustain its financial strength.”

Nishat Chunian Power, with in-house Operations and Maintenance (O&M), has a well-experienced team and has been demonstrating satisfactory performance since 2015.

Furthermore, fuel supply risk is considered adequate as they procure from different suppliers with good credit terms; being managed since 2011.

“Although there are delays in payments from power purchaser, the company manages the impact by aligning the payments to fuel supplier with its receipts,” the report said. “This keeps working capital needs under check. Short term borrowing lines are available and mainly used to fund any short-fall in working capital requirements,” it added.  

Nishat Chunian Power continues to meet its availability (88%) and efficiency (45%) benchmarks. The company has an outstanding long term debt of PKR 4,492mln as at end-Sept18 payable till June 2020. Sound financial profile of Nishat Chunian Group; 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 and timely debt repayments.

Nishat Chunian Power was established in 2007 as an independent power producer (IPP) for the purpose of electricity generation. It is a subsidiary of Nishat Chunian Limited (NCL). Nishat Chunian Group is a leading conglomerate with interests in textile, energy, and entertainment sector.

Nishat Chunian 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 at end-Sept18, will be repaid in seven quarterly installments.

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