Press Release

VIS Assigns Initial Entity Ratings to EnerTech Water (Private) Limited

Karachi, June 06, 2024: VIS Credit Ratings Company Ltd. (VIS) has assigned initial entity ratings of ‘AA/A-1’ (‘Double A/A-One’) to Enertech Water (Private) Limited (‘EnerTech’ or ‘the Company’). Medium to long Term Rating of ‘AA’ reflects high credit quality; Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Short Term Rating of ‘A-1’ signifies High certainty of timely payment; Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’.

EnerTech is a Private Limited Company incorporated in Pakistan in December 2019. The Company’s principal activities are to develop, own, operate and maintain a Water Supply System having a total capacity of 45 CUSECS consisting of 60.5 km long water pipeline from Nabisar to Vajihar in Thar, Sindh, Pakistan. The Company is a wholly owned subsidiary of EnerTech Holding Company Kuwait (the ‘Holding Company’), which is a wholly owned subsidiary of National Technology Enterprise Company, and which is ultimately owned by Kuwait Investment Authority (the ‘Ultimate Holding Company’). The Holding Companies are incorporated and registered in Kuwait. The registered office of the Company is located at Office No.712, 7th Floor, Al Hafeez Business Centre, 89-B/III, Gulberg III, Lahore, Pakistan. During 2019, the Holding Company signed a Memorandum of Understanding with Government of Sindh for foreign direct investment in water supply and infrastructure projects of Sindh, Pakistan.

EnerTech Holding Company is engaged with the Government of Sindh in July 2019 for investing in Water Supply & Infrastructure Projects. The project entails drawing water from Maki Farash Canal, treating it at Nabisar, and pumping it via a 60.5km pipeline to Vajihar, with a concession agreement stipulating the project's Build, Operate, and Transfer after 25 years. Significant milestones include securing project land, obtaining environmental approvals, and signing key agreements with contractors. Financing comprises a senior secured finance facility covering 74% of the PKR 69.1 billion project cost, with the remainder sourced from equity, mezzanine debt, local sukuk, and GoS funding. Addition ally, GoS secures 50% of the debt profile through SBLC, ensuring sponsor support for cost overruns. Construction began in February 2024 after fulfilling concession agreement conditions precedents. The project received its first disbursement from the senior finance facility in February 2024.

Ratings account for the transaction's Government to Government nature, structured under the PPP Act 2016 of Pakistan between the Government of Sindh (GoS) and Enertech Holding Company. Kuwait’s sovereign ratings, notably higher than Pakistan's, provide support to the ratings. Rating also draw strength from the two tiers, fixed and variable, revenue structure under the concession agreement with GOS whereby fixed charges, mostly covering debt servicing, would continue to be available even if no water is available at pipeline intake point. The project's importance to Thar Coal Block I and GoS, along with the secured financial structure, operational track record of contractors, and insurance coverage, are key rating factors. The GoS's commitment to the project and provision of performance bonds mitigate risks. Mechanisms are in place to address cost overruns and construction delays, ensuring lender security and project continuity. Overall, the ratings reflect the robustness of the project and its strategic significance.

Ratings are underpinned by the perceived sponsor support from the Ultimate Holding Company as well as support from the GoS. Going forward, ratings will remain sensitive to the timely completion of the project, equity injection and timely capacity payments of the GoS.

For further information on this ratings announcement, please contact at 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 .