VIS Reaffirms Instrument Rating of Neelum Jhelum Hydropower Company (Pvt.) Limited - Press Release issued by VIS Credit Rating Company Limited.

Karachi -- January 12, 2023 (PPI-OT)

Following is the text of press release issued by VIS Credit Rating Company Limited

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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 instalment amount is to be deposited each month so that debt payment account (DPA) on the instalment date is equivalent to the instalment 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...