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JCR-VIS assigns AAA to NJHPC.

KARACHI -- JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned preliminary rating of 'AAA' (Triple A) to the proposed Sukuk issue of Rs 100 billion of Neelum-Jhelum Hydropower Company (Private) Limited (NJHPC).

The outlook on the assigned rating is 'stable'. The rating will be finalized upon review of signed legal documents and issuance of Government of Pakistan guarantee.

NJHPC was set up to design, construct, own, operate and maintain

Neelum Jhelum Hydropower Project (NJHPP), a 969 MW project in Azad Jammu and Kashmir NJHPP will add around 5% to the country's total installed power generation capacity. It will be the 4th largest hydropower project in the country representing 12% of total installed hydel capacity.

Annual electricity generation from the project is expected at 5.15 billion units at average 59.4% capacity utilization. As per the revised PC-1 2015, the total project cost is estimated at Rs 404 billion with the project having achieved 80% physical completion around three fourth of the total cost is being funded through debt while the remaining portion will be funded through equity.

The first generating unit of the project in expected to start production by mid-2017 and the rest of the three units are planned to come online in a phased manner by December 2017.

Sukuk will be unlisted, privately placed having a tenor of 10 years (inclusive of a grace period of 2 year) and will be used to fund the NJHPP. Sukuk will have semi-annual principal and rental payments and draw down is planned in three tranches.

Apart from government of Pakistan (GoP) guarantee, security structure of the Sukuk entails charge on all unencumbered present on future assets of the company and exclusive lien over debt payment account (DPA). As per the waterfall mechanism, an amount equivalent to one-sixth of the installment amount will be deposited each month so that DPA on the installment date is equivalent to the installment amount. In case of any shortfall in DPA Account by NJHPC, WAPDA will inject the required funds.

The assigned rating to the proposed Sukuk issue incorporates the following factors.

Unconditional and irrevocable first demand guarantee issued by the President Islamic Republic of Pakistan (on behalf of the GoP) covering issue amount of the Sukuk alongwith profit payments. GoP would pay the entire called amount immediately upon receiving a demand notice from the trustee.

Ratings also reflect financial strength and demonstrated support from the parent entity, Water and Power Development authority, in the form of equity injection and funding support.

Financial viability is supported by the tariff mechanism for hydropower projects which is based on cost plus return on investment.

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Publication:The Frontier Star (Northwest Frontier Province, Pakistan)
Geographic Code:9PAKI
Date:Apr 13, 2016
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