April 06, 2020 (PPI-OT)

Following is the text of press release issued by VIS Credit Rating Company Limited

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VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of 'A+/A-2' (Single A Plus/A-Two) to Nishat Chunian Power Limited (NCPL). 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'.

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, sizeable 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. The Operations and Maintenance of the company is in-house, the management team has depicted satisfactory performance since FY15. Further, upholding operational performance in line with agreed performance levels would remain a key rating driver. Moreover, the ratings will be revised if there is any change in the PPA.

For more information, contact:Director Compliance and Rating Analytics,VIS Credit Rating Company LimitedVIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,Phase VII, DHA, Karachi, PakistanTel: +92-21-35311861-72Fax: +92-21-35311873Email: bilal@jcrvis.com.pkWebsite: https://www.vis.com.pk/

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© Pakistan Press International, source Asianet-Pakistan