VIS Revises Ratings of Kot Addu Power Company 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 revised the entity ratings of Kot Addu Power Company Limited (KAPCO or 'the Company') from 'AA+/A-1+' (Double A/A-One) to 'AA/A-1' (Double A/A-One). The medium to long-term rating of 'AA' denotes high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions.

The short-term rating of 'A-1' denotes high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. The outlook on the assigned rating has also been revised from 'Rating Watch - Developing' to 'Stable'. The previous rating action was announced on December 10, 2021.

The rating takes into account ownership profile of the Company, with majority shareholding being held by WAPDA. Even though the Company's Power Purchase Agreement (PPA) with the Government of Pakistan (GoP) has expired in Oct'22, the strategic importance of KAPCO to the national grid is evident from NEPRA's Indicative Generation Capacity Expansion Plan (IGCEP) 2022-31, wherein the regulator has indicated that KAPCO will remain part of the system till FY26 mainly to cater for system constraints.

The extended PPA has expired in October 2022. As per the IGCEP, the Company will continue to operate till FY25, on account of system constrains of Pakistan's national grid, with limited capacity utilization. Accordingly, given pending renewal of PPA, demand risk has been incorporated in the assigned rating.

Over the years, KAPCO has entirely repaid its long term debt, and the debt on the books is...