VIS Reaffirms Ratings for Nishat Chunian Power Limited

Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings for Nishat Chunian Power Limited at ‘A+/A2’.

According to VIS, the medium to long-term rating of ‘A+’ reflects good credit quality, with adequate protection factors, while the short-term rating of ‘A2’ indicates a good likelihood of timely repayment of short-term obligations. The outlook on these ratings remains stable, with the previous ratings action announced on September 27, 2023.

Nishat Chunian Power Limited, incorporated in 2007, operates a 200 MW residual fuel oil-based power plant in District Kasur, Punjab. The company has a 25-year Power Purchase Agreement with the Central Power Purchasing Agency-Guarantee, featuring a ‘take or pay’ provision that ensures fixed costs, including Return on Equity, are covered. The plant began commercial operations in 2010 and serves as a peaking power facility with 11 generators.

The reaffirmed ratings consider the company’s low business risk profile, supported by a long-term Power Purchase Agreement valid until 2035 and a corresponding license from the Government of Pakistan. The agreement’s structure mitigates demand-side risk, ensuring capacity payments. Financially, the company has shown improved profitability due to energy sales and capacity payments, alongside satisfactory liquidity and a conservative capitalization profile with no long-term debt.

Future ratings will depend on the company’s ability to sustain its cash flow generation, maintain profitability, and manage liquidity amidst challenges such as circular debt in the energy sector and potential changes in government policies or macroeconomic conditions.

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