KARACHI: VIS Credit Rating Company Limited has assigned initial entity ratings of single A Plus/A-Two to Nishat Chunian Power Limited.
The medium to long-term rating of ‘A+’ reflects good credit quality, and adequate protection factors. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and fundamental protection factors. Outlook on the assigned rating is stable, said release on Monday.
Ratings assigned to NCPL take into demand risk coverage under Power Purchase Agreement signed with CPPA-G (Central Power Purchasing Agency). Moreover, the Implementation Agreement provides sovereign guarantee for cash flows, contingent upon adherence to stipulated performance benchmarks. Ratings draw comfort from NCPL’s association with Nishat Chunian Group; one of the leading groups in Pakistan.
Assessment of adequate financial profile entails, sizable margins, sound debt coverage metrics and healthy cash flows indicating satisfactory debt servicing ability. However, liquidity management remains a concern, given the escalating inter-corporate debt and inconsistent payment cycle exhibited by the power purchaser has led to higher utilization of short-term credit facilities; the same has a sizeable impact on the company’s bottom line on account of high financial cost incurred. Therefore, recovery of outstanding dues is considered essential to ease the pressure on liquidity.