Press Release

VIS Reaffirms Entity Ratings of Zephyr Power Limited

Karachi, April 30, 2025: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Zephyr Power Limited (“ZPL” or “the Company”) at 'A+/A1' (Single A plus/A One). Medium to long term rating of 'A+' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of 'A1' indicates a strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. The outlook on the assigned ratings remains “Stable”. Previous Rating action was announced on April 18, 2024.

Incorporated as a private limited company in 2005, subsequently converted into a public unlisted company in June 2021, ZPL principally operates a wind based Independent Power Project (IPP) with a total capacity of 50 MW employing 25 Wind Turbine Generators (WTGs) located at Gharo, Thatta, Sindh. The IPP interconnection is maintained and operated by the National Transmission Despatch Company (NTDC) a Government of Pakistan (“GOP”) owned entity. The Company entered into Energy Purchase Agreement (EPA) with the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G) a GOP owned entity on April 13, 2017. The EPA is based on the 2006 Renewable Energy Policy and the 2015 Upfront Tariff awarded by the National Electric Power Regulatory Authority (NEPRA). The Company achieved its Commercial Operations Date on March 28, 2019. The term of the EPA is for twenty years commencing from the date of COD.

The assigned ratings incorporate the business risk profile of Pakistan’s renewable energy sector, assessed as medium, supported by favorable policy incentives, rising energy demand, and natural resource availability. Government policies, including the Alternative and Renewable Energy Policy 2019 and the Indicative Generation Capacity Expansion Plan 2047 (“IGCEP 2047”), aim to enhance renewable energy's share in the power mix through competitive bidding and infrastructural reforms. Geographic and climatic conditions, coupled with growing international interest, continue to support sectoral development. Nonetheless, regulatory and technological shifts along with the high capital intensity create barriers to entry. Substitution from conventional energy sources and market entry dynamics remain considerations. The ratings also reflect comfort from the Company’s sponsor profile, comprising foreign ownership by a government-backed Development Finance Institution and experienced local equity partners. Revenue certainty is underpinned by a long-term Energy Purchase Agreement with CPPA-G, backed by sovereign guarantees. Operational reliability is maintained through long-term O&M arrangements with an established international service provider under a defined plant availability commitment.

Additionally, the assigned ratings also consider the financial risk profile of the Company. Profitability has improved, supported by tariff indexation mechanisms linked to inflation, exchange rates, and interest rates. Revenue was further supplemented by compensation clauses in the energy purchase agreement for low offtakes. The gross margin remained within historical trends, despite fluctuations due to tariff adjustment timing and debt servicing costs. Capitalization metrics strengthened, reflecting scheduled long-term debt repayments and internal equity generation, while limited working capital needs and stable receivables from a sovereign-backed counterparty contributed to a conservative capital structure. Liquidity remained sound, supported by profit retention and limited capital outflows, as indicated by a strong current ratio. Debt servicing capacity improved with higher production and tariff adjustments, although a decline in subsequent production levels moderated the coverage ratio, albeit remaining in a healthy range.

For further information on this rating announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.


Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .