Press Release

VIS Assigns Initial Entity Ratings to Zhenfa Pakistan New Energy Company Limited

Karachi, December 03, 2021: VIS Credit Rating Company Limited has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Zhenfa Pakistan New Energy Company Limited (ZPNECL). The medium to long-term rating of ‘A-’ signifies good credit quality with strong protection factors. Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned rating is ‘Stable’.

The ratings assigned to ZPNECL incorporate the company being a part of ‘Atlas Group’ which is one the biggest and renowned conglomerates in the country with business interests in automobiles, batteries, insurance, asset management, trading and energy. The ratings take into account the company’s low business risk profile underpinned by inking of energy purchase agreement with the Central Power Purchasing Agency (Guarantee) Limited with the inbuilt ‘take or pay’ provision for a period of 25 years. 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.

The company was granted power generation license by National Electric Power Regulatory Authority on July 10th, 2017. The financial close was achieved in February’2021 meanwhile the plant is expected to begin commercial operations by 31st March’22. The project will be financed through debt to equity mix of 80:20, where debt matrix comprises three-fifths of foreign funding while the remaining will be contributed by country’s leading commercial bank. The Construction Contract has been signed with Hydrochina International Engineering Company Limited (HIECL) as onshore construction contractor while Hangzhou Huachen Electrical Power Control Co. Limited is the offshore supplier. HIECL is a subsidiary of ‘PowerChina’, one of the biggest construction groups in the power sector with engagement in over 100 countries. HIECL is also the O&M contractor for the initial two years of warranty period. In case of delay in achieving the COD, the EPC contactors will be liable to pay a certain amount of liquidated damages (LDs). Moreover, HIECL as the O&M operator, is also obligated to pay LDs if the plant is unable to maintain benchmark availability. The company has adequate insurance coverages for cargo, operations, erection, liability, third party and terrorism. The ratings remain dependent upon timely completion of the project as per terms of agreement with the power purchaser. Moreover, upholding operational performance in line with agreed performance levels would remain a key rating driver.

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. 201) or email at .

Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Corporates (August 2021)

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