The Pakistan Credit Rating Agency Limited
Press Release


Anam Waqas Ghayour

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains the Entity Ratings of Nishat Power Limited

Rating Type Entity
(24-Sep-22 )
(24-Sep-21 )
Action Maintain Maintain
Long Term AA- AA-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect strong business profile of Nishat Power Limited (Nishat Power) emanating from the demand risk coverage under Power Purchase Agreement signed between Central Power Purchasing Agency (CPPA-G) and the company. Meanwhile, the Implementation Agreement provides sovereign guarantee for cashflows, given adherence to agreed performance benchmarks. Nishat Power continues to meet its availability and other performance benchmarks. Nishat Power, with in-house Operations and Maintenance (O&M), has a well-experienced team and has been demonstrating satisfactory performance. Fuel supply risk is considered low as they procure from different suppliers with good credit terms. Pursuant to the Master Agreement, NPL received both of the tranches as agreed with CPPA-G. Enabling the company to manage the working capital with lower utilization of short-term borrwings. Consequently, liquidity situation improved manifold. During 9MFY22, generated 518GWh of electricity i.e. 99% of total generation of FY21 (523GWh). The Company recorded revenue of PKR 14,304mln as compared to revenue of PKR 7,879mln in 9MFY21. The increase in generation is mainly attributed to the higher electricity demand from the power purchaser in wake of shortfall during the peak season. The ratings stemmed from the fact that the long-term debt of the company was fully paid successfully in 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 reflected by the timely and fully repayment of long-debt.

About the Entity
Nishat Power was established in 2007 as an independent power producer (IPP) for the purpose of electricity generation. It began commercial operations in June 2010. Nishat Power is a subsidiary of Nishat Mills Limited (Nishat Mills) and is listed on Pakistan Stock Exchange. Nishat Mills holds 51% stake in the company followed by Allied Bank Limited (Allied Bank) (8.5%). Nishat group is a leading conglomerate with interests in textile, cement, energy, and financial sectors. The Board of Directors (BoD) comprises seven members. Nishat group dominates with five members including CEO. Two independent directors should benefit governance structure. All the board members are seasoned professionals having interests in various sectors of the industry. The management team comprises qualified professionals possessing sufficient experience in power sector.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.