Press Release
VIS Reaffirms Entity Ratings of National Power Parks Management Company (Pvt.) Limited
Lahore, December 28, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of National Power Parks Management Company (Pvt.) Limited (NPPMCL) at ‘AA+/A-1+’ (Double A Plus /A-One Plus) on ‘Rating Watch-Developing’ status. The medium to long term rating of ‘AA+’ signifies high credit quality and strong protection factors. Risk is modest but may vary slightly from time to time because of economic changes. Short term rating of ‘A-1+’ signifies highest certainty of timely payments; short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding and safety is just below risk-free Government of Pakistan’s short-term obligations. Previous rating action was announced on December 30, 2022.
Ratings are placed on ‘Rating Watch-Developing’ status because the company is on the privatization list by the Government of Pakistan (GoP). Ratings remain sensitive to the completion of privatization process of the entity which is being delayed because of certain GoP related matters.
The assigned ratings reflect the company’s strong sponsor profile and favorable nature of Power Purchase Agreement (PPA). Ratings also draw strength from the company’s strong business profile, with demand risk mitigated by PPA signed with Central Power Purchase Agency (Guarantee) Limited (CPPA) under the ‘take or pay’ arrangement. Both plants of the company being placed in top 25 projects in the merit order determined by National Transmission & Despatch Company (NTDC) and being categorized as must-run projects, provides support to the business risk profile of the company.
Despite some outages, operational metrics of both plants remained mostly satisfactory during the reporting period. Net sales increased on account of tariff indexation during FY23. Given higher proportion of capacity payments, gross margin increased in FY23 and 1QFY24. The company’s net profit improved on the back of higher sales and other income during FY23 and 1QFY24. Debt coverages remained sound. Additionally, current ratio also improved. Trade debts as percentage of net sales, though remained high, have decreased slightly on timeline basis. Trade debts being secured by Government guarantee and application of late payment surcharge provide comfort to the ratings. Given increase in equity base and gradual repayment of debt, gearing and debt leverage remained low. Post privatization and recapitalization through debt may alter the capitalization profile of the company going forward which will be reviewed by VIS. Ratings are sensitive to the privatization timeline of the company, maintaining operational efficiencies and merit order status.
For further information on this rating announcement, please contact the undersigned at 042-35723411-12 (8008) or email at info@vis.com.pk
Maimoon Rasheed
Director
Applicable Rating Criteria: Industrial Corporates (May 2023)
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
Government Supported Entities (July 2020)
https://docs.vis.com.pk/docs/Meth-GSEs202007.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf
Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .