Pakistan Credit Rating Agency revises ratings of Nishat Power Limited

Lahore, November 27, 2012 (PPI-OT): The Pakistan Credit Rating Agency Limited (PACRA) has revised the long-term and short-term entity ratings of Nishat Power Limited (NPL) to “A+” (Single A Plus) and “A1″ (A One) respectively [Previous: AA/A1+]. The ratings denote a very low expectation of credit risk.

The ratings of NPL incorporate continuing pressure of inter-corporate debt on liquidity profile of the power sector in general, and IPPs in particular. The current regulatory structure, wherein sovereign guarantee is provided for timeliness of cash flows, given adherence to agreed performance benchmarks, ensures low business risk. This remains a critical factor in NPL’s ratings. However, at the same time, the company cannot fully isolate itself from sector related risks, that has constrained its financial profile.

On a standalone basis NPL’s performance remains strong, mainly characterized by higher efficiency as compared to agreed benchmark with the power purchaser. The company is well placed to sustain its performance in the medium term owing to i) lower maintenance requirements in initial years of operations, and ii) outsourcing of O and M operations to Wartsila Pakistan (WPK) – a recognized O and M operator with established track record. Lately, certain differences with NTDC on another critical benchmark – availability – have led to lower capacity payments. However, the company expects a positive outcome. Although weak financial discipline of the sole customer, NTDC, remains the key challenge, the ratings draw comfort from commitment to support by the parent – Nishat Mills Limited – in case the need arises.

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

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