Press Release

JCR-VIS Assigns Initial Entity Ratings to Artistic Energy (Pvt.) Limited

Karachi, June 26, 2018: JCR-VIS Credit Rating Company Limited has assigned initial entity ratings of ‘A/A-1’ (Single A /A-One) to Artistic Energy (Pvt.) Limited (AEL). Outlook on the assigned ratings is ‘Stable’.

AEL has established a wind power plant with an installed capacity of 49.3MW located in Jhimpir, District Thatta, Sindh. The plant comprises 29 wind turbine generators, each with a nameplate capacity of 1.7MW. Total project cost is approximately Rs. 11.7b, with 75% of the funding mobilized through debt financing. Debt is repayable over a period of 10 years.

AEL is a wholly owned subsidiary of Artistic Milliners (Pvt.) Limited (AML). The assigned ratings incorporate sound financial profile of sponsor. The ratings also take into consideration guaranteed off-take and payment by the Government of Pakistan (GoP) along with provision of liquidity support by way of reimbursement of financing cost in case of delay in payment by Central Power Purchasing Agency (CPPA). Moreover, the ratings also reflect satisfactory standalone financial profile of the company as indicated by the projections. The company will generate adequate cash flows to ensure timely debt servicing. Post sensitization for wind speeds, cushion is available in cash flows to withstand unforeseen cost overruns and decline in revenue. The sponsor, on behalf of the company, has also provided a corporate guarantee to the lending banks.

The tariff of AEL 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 of the company may exhibit seasonal variation due to differences in wind speed. However, this risk is partly mitigated by the availability of adequate wind speed as indicated by Wind Resource Assessment and Energy Yield Evaluation Study conducted by Lahmeyer International on behalf of the company.

AEL has entered into an agreement with CPPA for purchase of the energy for a period for 20 years on take or pay basis. 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. AEL may experience liquidity issues due to delay in payments by CPPA on account of circular debt issues; however, the management has the option of acquiring short term borrowing from banks, the financing cost of which will be reimbursed by CPPA to the company at a fixed rate.

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 2018 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