Press Release

VIS Reaffirms Entity Ratings of Nishat Chunian Power Limited

Karachi, November 25, 2024: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Nishat Chunian Power Limited (‘NCPL’ or ‘the Company’) at from ‘A+/A2’ (Single A Plus/A Two). Medium to long term rating of 'A+' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains Stable. Previous ratings action was announced on September 27, 2023.

NCPL was incorporated in 2007 as a public limited company with primary activity of operating a 200 MW residual fuel oil (RFO) based power plant in District Kasur, Punjab. The Company has 25-year and 75 days Power Purchase Agreement (PPA) entailing ‘take or pay’ provision with Central Power Purchasing Agency-Guarantee (CPPA-G) with net production levels of 195.72 MWh (megawatt per hour). The project started commercial operations in 2010. The facility has 11 generators allowing it to be used as a peaking power plant.

Assigned ratings take into account NCPL’s low business risk profile, supported by the execution of a long-term Power Purchase Agreement (PPA) signed in 2007, valid until 2035, and a corresponding license from the Government of Pakistan (GoP). The Implementation Agreement (IA) with the GoP, facilitated by the Private Power and Infrastructure Board (PPIB), provides further assurance. The PPA’s “Take or Pay” structure mitigates demand-side risk, ensuring capacity payments and guaranteeing fixed costs, including Return on Equity (ROE), which was renegotiated to 17% without USD indexation in 2021.

Assigned ratings also consider the company’s financial risk profile. Profitability has shown improvement driven by revenue from energy sales and capacity payments. Satisfactory liquidity is evident through the retention of cash reserves and maintenance of the current ratio. The Company’s capitalization profile remains conservative with no long-term debt, reflecting complete repayment of plant construction loans. Short-term debt has been significantly reduced, primarily utilized for working capital requirements. In addition, credit risk is minimized as receivables from Central Power Purchasing Agency (CPPA-G) are backed by a GoP guarantee. Consequently, a healthy coverage profile has been sustained.

Going forward, ratings are sensitive to changes in the Company’s cash flow generation, given its dependence on timely payments from CPPA-G amidst circular debt concerns in the energy sector. The ability to maintain profitability and liquidity profiles will remain crucial. Any shifts in government policies, regulatory frameworks, or macroeconomic conditions could impact future profitability and leverage indicators. Future ratings will also be underpinned on the Company’s capacity to maintain its operational and financial metrics in line with historical trends amidst possible changes in operational dynamics.

For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.









Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .