Press Release

JCR-VIS Assigns Initial Entity Ratings to Zephyr Power (Pvt.) Limited

Karachi, August 16, 2017: JCR-VIS Credit Rating Company Limited has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus /A-Two) to Zephyr Power (Pvt.) Limited (ZPL). Outlook on the assigned ratings is ‘Stable’.

ZPL is building an independent wind power project (IPP) in the Gharo, Sindh. The plant is based on 25 Gamesa 2.0 MW Wind Turbine Generators (“WTG”). The IPP has been established under the unsolicited proposal of Policy for Development of Renewable Energy for Power Generation, 2006.

The aforementioned ratings of ZPL are underpinned by an equity stake of a Development Finance Institution (DFI) wholly owned by the UK Government. Ratings also incorporate the reputation and successful track record of the Engineering, Procurement & Construction (EPC) and the Operations & Maintenance (O&M) contractors. Moreover, the ratings also take comfort from provisions of liquidated damages to be paid by the contractors in case of any delay on their part. However, construction risk is inherent in the project and management's ability to effectively manage the same is considered important from ratings perspective. Going forward, JCR-VIS will track achievement of major milestones vis-à-vis communicated timelines.

The tariff of ZPL is approved under the Upfront Tariff Regime, 2015 from the National Electric Power Regulatory Authority (NEPRA); the tariff mandates that wind risk will be borne by the power producer. Cash flows along with wind speed will fluctuate due to seasonal variation in the same. However, given the available wind resources as per the Wind Resource Assessment, use of efficient technology and presence of a fully funded Debt Service Reserve Account (DSRA), reduce the wind variability risk.

ZPL has entered into an agreement with Central Power Purchasing Agency (CPPA) for purchase of the energy generated by the IPP. Payment obligations of the power purchaser are guaranteed by the Government of Pakistan and risk of non-evacuation of power at the grid also rests with CPPA.

Total project cost is approximately USD 116.6 million, with around 70% of the funding mobilized through local and foreign debt financing. Debt is repayable over a period of 10 years. Project cash flows are a function of the aforementioned tariff with forecasted cash flows sufficient to meet the debt obligations.

For further information on this rating announcement, please contact the undersigned (Ext. 201) at 021-35311861-70.

Javed Callea

Applicable Rating Criteria: Industrial Corporates (May 2016)

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 2017 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited