Pakistan Credit Rating Agency maintains Ratings of Nishat Power Limited

Lahore, July 05, 2012 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has maintained long-term and short-term entity ratings of Nishat Power Limited (NPL) at “AA” (Double A) and “A1+”(A one plus) respectively. The ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

The ratings of NPL reflect the GoP’s guaranteed stream of cash flows till the life of Power Purchase Agreement (PPA) signed between the company and National Transmission and Despatch Company (NTDC); the power purchaser. However, this requires adherence to agreed performance benchmarks, which mainly relate to Operations and Maintenance (O and M) of the power plant.

Appointment of Wartsila Pakistan (WPK) as the O and M contractor would transfer any entity related liability on WPK, in case of non compliance, signifying low operational risk emanating from the established track record of WPK with considerable experience in Pakistan, as a power plant operator.

The fuel supply risk is mitigated by long-term Fuel Supply Agreement (FSA) with Shell Pakistan Limited. Nevertheless, upholding a strong governance structure along with effective monitoring of the plant operations by the management would ensure sustainability of operations on agreed parameters as per PPA.

The weak financial discipline of the sole customer, NTDC, is the key challenge faced by the company. Nonetheless, the ratings draw comfort from the explicit commitment to support by the parent – Nishat Mills Limited – in case the need rises.

Keeping in view the ongoing inter-corporate debt issue and implications of the same for IPPs, the company’s ratings remain on Rating Watch.

For more information, contact:
Hammad Rashid
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