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Lahore, September 27, 2019 (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) 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. Despite higher receivable days the entity managed to sustain its financial strength.
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 adequate as they procure from different suppliers with good credit terms. Although there are delays in payments from power purchaser, the company manages the impact by aligning the payments to fuel supplier with its receipts. 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. There is cushion available in short-term lines. Nishat Power continues to meet its availability (88%) and efficiency (45%) benchmarks. Given the liquidity situation, utilization is imputed to go up. Settlement of overdue receivables is crucial. The company has an outstanding long term debt of PKR 3,040mln as at end-June19, payable till June 2020. 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 and timely debt repayments.
For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com