Press Release

JCR-VIS Reaffirms Entity Ratings of Kot Addu Power Company Limited

Karachi, November 20, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Kot Addu Power Company Limited (KAPCO) at ‘AA+/A-1+’ (Double A Plus/A-One Plus). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on December 29, 2014.

Ratings assigned to KAPCO take into account its low business risk and leading position in the Independent Power Producer (IPP) sector. KAPCO is the second largest IPP, in terms of electricity generation, with a nameplate capacity of 1600MW. Under the 25 year Power Purchase Agreement (PPA) with Water and Power Development Authority (WAPDA), the company sells electricity to the sole off-taker while payments from WAPDA are guaranteed by Government of Pakistan (GoP). Delays in payments are managed partly through offsetting receivables with payables and borrowings under an arrangement facilitated by GoP. Going forward, the company plans to setup a 660MW coal based power plant in Punjab; materialization of the same may take some time.

Revenues during FY15 declined attributable to lower fuel cost component of Energy Purchase Price as oil prices have continued to remain depressed. However, gross margins improved on account of increased thermal efficiency and lower repair and overhaul cost despite a fall in revenue as oil prices in tariff are a pass through item and as such do not affect the margins. Improved gross margins yield better profitability during the outgoing year.

Falling oil prices has reduced the working capital requirement of the company and in turn trade debts. However, cashflows remained subdued on account of outstanding level of trade debts yet were comfortable for debt servicing.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) at 021-35311861-71 or Mr. Maimoon Rasheed at 042-35723411-3 or fax to 021-35311872-3.



Jamal Abbas Zaidi
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (October 2003)

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 November 20, 2015 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.