Press Release

VIS Reaffirms Entity Ratings of Zephyr Power (Pvt.) Limited

Karachi, August 26, 2019: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Zephyr Power (Pvt.) Limited (ZPL) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings is ‘Stable’. The long term rating of ‘A-’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment; Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating was announced on August 16, 2017.

ZPL’s assigned ratings take into account satisfactory operating track record of ZPL during the first three months of the Commercial Operations Date (COD), adequate financial profile and low exposure to business risk. The aforementioned ratings are also underpinned by an equity stake of a Development Finance Institution (DFI) wholly owned by the UK Government in the company.

ZPL operates a 50.0MW (25 Wind Turbine Generators (WTGs) of 2.0MW generation capacity each) wind power plant in the Gharo area, Thatta, Sindh. COD was achieved on March 28, 2019. Business risk profile draws support from long-term Operations & Maintenance (O&M) contract in place with experienced O&M operator and track record of compliance with normative parameters stipulated in Energy Purchase Agreement (EPA) since commencement of operations. Presence of long term EPA and awarded tariff is limited to the extent of net annual energy generation supplied to the power purchaser up to 35% of net annual plant capacity factor. Net annual energy generation supplied to the power purchaser in a year, in excess of 35% net annual plant capacity factor will be charged at the different tariffs till Net annual plant capacity factor 37% whilst above 37% the prevalent tariff will 100%. While power produced and in turn cash flows are susceptible to seasonality and possible variance in wind speed, comfort is drawn from surveys conducted by international consultants indicating adequate wind availability in the region historically. Assessment of adequate financial profile entails sound debt coverage metrics (projected) and satisfactory cash flows to service outstanding debt servicing ability. Inconsistent payment cycle exhibited by Central Power Purchasing Agency Guarantee Limited (CPPA) may translate into some liquidity pressures for the company; however, management has arranged necessary reserve funds to cover for such contingencies. Resolution of liquidated damages claim from the EPC Contractor and the settlement of the same with the claims of the power purchaser, if any, remain important from ratings perspective.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Mr. Narendar Shankar Lal (Ext: 203) at 35311861-70 or fax to 35311872.

Javed Callea

Applicable 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 not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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