Press Release

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

Karachi, January 12, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the rating of ‘AAA’ (Triple A) assigned to Sukuk issue of Rs. 100b of Neelum Jhelum Hydropower Company (Pvt.) Limited (NJHPC). The medium to long-term rating of ‘AAA’ denotes highest credit quality with negligible risk factors being only slightly more than risk-free Government of Pakistan’s debt. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on December 31, 2020.

The rating assigned to the Sukuk issue take 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. GoP would immediately pay the entire called amount once the demand notice from the trustee is received. Ratings 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.

The Sukuk is unlisted, privately placed, 10-year tenor instrument with grace period of two years. The company signed an interim PPA with CPPA-G on January 8, 2020, which was valid for one year effective from revised tariff notification dated October 17, 2019, and was extendable with mutual consent of all parties. Subsequent to the lapse of one year ended on October 16, 2020, the management did not opt for extension of interim PPA, as a petition was filed regarding final tariff with CPPA-G in November’2020. CPPA-G forwarded Company’s request to NEPRA in February’2021. The public hearing was held on June 21, 2021 at NEPRA Head office; however, the tariff petition could not proceed on its merits due to pending third-party validation of project costs. Resultantly, the interim tariff has been extended on take and pay basis with must run condition until the company either gets waiver of third-party validation requirement or conducts the validation. After complying with either of the two conditions, the company will file a final tariff petition through CPPA-G. The Planning Commission of Pakistan has invited Request for Proposals (RFP) for cost validations through third-party in August 2021. The award of contract for validation engagement is still awaited. While there were shortfalls in scheduled payments of related party loans owing to non-finalization of tariff structure, the company is making timely payments of Sukuk. First seven installments have been made till December 28, 2021. 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, the ratings are dependent on tariff structure being approved in line with the debt service coverage obligations of the company.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at021-35311861-70 (Ext: 201) or email at info@vis.com.pk





Faryal Ahmad Faheem
Deputy CEO

VIS Entity Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .