Press Release

VIS Upgrades Entity Ratings of AJ Power (Private) Limited

Karachi, March 14, 2022: VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of AJ Power (Private) Limited (AJPL) to ‘A/A-2’ (Single A/A-Two) from ‘A-/A-2’ (Single A Minus/A-Two). Long term rating of ‘A’ signifies good credit quality; protection factors are strong. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on February 23, 2021.

The assigned ratings to AJPL take into account low business risk profile of the Company underpinned by inking of 25-year long Energy Purchase Agreement (EPA) with ‘take or pay’ provision with the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G). Presence of long-term EPA with guaranteed capacity payments mitigates off-take risk as obligations of CPPA-G are backed by sovereign guarantee. Moreover, upholding operational performance in line with agreed performance levels would remain a key-rating driver. Further, given the energy generation of the company is from a low-cost renewable source, solar, it is expected to remain high on the electricity dispatch merit order. Assessment of financial risk profile incorporates sound debt coverage metrics and healthy cash flows in relation to outstanding debt repayments. The ratings also reflect sizable margins post reduction of return on equity component of capacity purchase price and comfortable profitability indicators. Further the ratings take comfort from master agreement signed with the Government of Pakistan leading to improved liquidity indicators as a sizeable amount of outstanding trade debts were received during the rating review period. Leverage indicators have also improved on a timeline basis owing to significant internal capital generation and no dividend payout. The cash coverages and leverage indicators are expected to improve during the rating horizon on account of timely repayment of debt coupled with sizable profit generation and retention; the projected improvement in the aforementioned is captured in the assigned rating. Going forward, ratings remain dependent on sustained efficiency levels and corresponding profitability indicators.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8010) and/or the undersigned at 021-35311861-66 (Ext. 207) or email at info@vis.com.pk .



Faryal Faheem Ahmed
Deputy CEO

Applicable rating criterion: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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