Press Release

VIS Reaffirms Instrument Rating of Neelum Jhelum Hydropower Company (Pvt.) Limited

Karachi, January 12, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed instrument ratings of Neelum Jhelum Hydropower Company (Pvt.) Limited (NJHPC) at ‘AAA’ (Triple A) with a ‘Stable’ outlook. Medium to long-term rating of ‘AAA’ denotes highest credit quality; the risk factors are negligible, being slightly more than for risk-free Government of Pakistan’s debt. Previous rating action was announced on January 12, 2022.

The rating assigned to the Sukuk issue takes into account unconditional and irrevocable first demand guarantee issued by the President Islamic Republic of Pakistan (on behalf of the Government of the Islamic Republic of Pakistan) (GoP) covering issue amount of the Sukuk along with profit payments. Rating also incorporate strong financial muscle and implicit support from the parent entity, Water and Power Development Authority (WAPDA), in the form of equity injection and funding support. It also draws comfort from presence of a Debt Payment Account (DPA) which follows a waterfall mechanism. As per the waterfall mechanism, an amount equivalent to one-sixth of the installment amount is to be deposited each month so that debt payment account (DPA) on the installment date is equivalent to the installment amount. In case of any shortfall in DPA by NJHPC, WAPDA will inject the required funds.

Rating factors in extension of the interim Power Purchase Agreement (PPA) on take and pay basis with must run condition until the Company gets waiver of third-party validation for project cost or conducts the same validation. Final petition will be filed through Central Power Purchasing Agency (CPPA-G) once the condition has been met. Physical progress of the project stands at 99.96% and taking over certificate for whole of the works was signed and issued on December 21, 2021.

As informed, the project was shut down on July 04, 2022 due to an unforeseen incident at Tailrace Tunnel. The inspection of the damaged area has been done and the recovery activities are underway that are expected to be resolved by June’23, as per management. Further, as represented by management, debt servicing during the tenure of the shutdown will be arranged though monthly receipt of outstanding receivables from CPPA-G. The trustee has confirmed collection of up to date principal and interest payments in the DPA, including the last payment due at end-Dec’22. VIS will continue to track the balance of DPA on a monthly basis. Any shortfall in the same during any month may warrant revision in ratings.

The Sukuk is unlisted, privately placed, 10-year tenor instrument with 3.5 years left to maturity. Nine out of sixteen installments have been paid till end-December’22 with a balloon payment made in June’22 installment due to availability of sufficient cash flows. Moreover, the Company is negotiating a revised repayment schedule for its long-term (excluding diminishing musharaka) and short-term loans that would be aligned with the Company’s revenue stream under its final tariff and PPA. Going forward, rating remains sensitive to approval of tariff structure in line with the debt service obligations of the Company.

For further information on this rating announcement, please contact Ms. Asfia Aziz (Ext: 212) or the undersigned (Ext: 207) at 021-35311861-71 or email at

Sara Ahmed

VIS Entity Rating Criteria: Corporates (August 2021) & Rating The Issue (November 2021)

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 .

VIS Credit Rating Company Limited