View of the Source Documents and Information Submitted by AEPL, the Authority Has Decided to Allow the Adjustments in the Reference Tariff Ofaeplasspecified Below

National Electric Power Regulatory Authority Islamic Republic of Pakistan

NEPRA Tower, Attaturk Avenue (East), G-5/1, Islamabad Ph: +92-51-9206500, Fax: +92-51-2600026 Registrar Web: www.nepra.org.pk, E-mail: [email protected]

No. NEPRA/TRF-352/AEPL-2016/5631-5633 April 4, 2019

Subject: Decision of National Electric Power Regulatory Authority in the matter of Adjustments at Commercial Operations Date (COD) of Artistic Energy (Private) Limited 'Case No. NEPRA/TRF-352/AEPL-20161

Dear Sir,

Enclosed please find herewith the subject Decision of the Authority (09 pages) in the matter of Adjustments at Commercial Operations Date (COD) of Artistic Energy (Private) Limited in Case No. NEPRA/TRF-352/AEPL-2016.

3. The Decision is being intimated to the Federal Government for the purpose of notification in the official gazette pursuant to Section 31(7) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997.

4. The Order of the Authority at Paragraph 5 of the Decision is to be notified in the official Gazette.

Enclosure: As above cry t:rti ( Syed Safeer Hussain )

Secretary Ministry of Energy (Power Division) `A' Block, Pak Secretariat Islamabad

CC: 1. Secretary, Cabinet Division, Cabinet Secretariat, Islamabad. 2. Secretary, Ministry of Finance, 'Q' Block, Pak Secretariat, Islamabad.

Decision of NEPRA on Tariff Adjustments at COD Artistic Energy (Private) Limited

DECISION OF NATIONAL ELECTRIC POWER REGULATORY AUTHORITY IN THE MATTER OF TARIFF U OUU t 4 t4 1 4 t LAEPL) CASE NO. NEPRA/TRF-352/AEPL-2016

INTRODUCTION

1. Artistic Energy (Private) Limited formerly known as Hartford Alternative Energy (Private) Limited(hereinafter referred to as "AEPL")on September 02, 2015 filed an application for unconditional acceptance of upfront tariff for wind power generation projects determined and issued by the Authority on June 24, 2015. AEPL filed the application in the prescribed manner which was accepted by the Authority and decision in this regard was issued on March 31, 2016. This upfront tariff had few openers which required to be adjusted after the Project had attained commercial operations.

2. AEPLin its COD stage tariff adjustment request dated March 30, 2018 submitted that it had achieved financial close on December 26, 2016as confirmed by AEDB vide letter No. B/3/1/HAE/10dated December 26, 2016. Later HAEPLattained the commercial operations on March 16, 2018as confirmed by CPPAG vide letter No. DGMT-III/MT-IX/AEPL/20/6850-60 dated March 20, 2018. Accordingly AEPL submitted its request for adjustment of relevant components of its tariff at commercial operations date (hereinafter referred to as "COD").

3. Following two adjustments were allowed in the upfront tariff determination dated March 31, 2016; i. Adjustment on account of savings in cost of debt ii. Adjustment on account of variations in KIBOR

4. Based on review of the source documents and information submitted by AEPL, the Authority has decided to allow the adjustments in the reference tariff ofAEPLasspecified below:

4.1 Adjustment on account of savings in cost of debt 4.1.1 In the upfront tariff, the Authority had assessed tariff on the basis of 3 months KIBOR of 8.22% plus a spread of 300 basis points. It is also referred that in case negotiated spread is less than the referred limits, the savings in the spread over KIBOR will be shared by the power purchaser and the power producer (AEPL) in the ratio of 60:40 respectively.

4.1.2 AEPLvide its COD Tariff Adjustment request submitted copies of Financing Agreements reflecting that it had entered into two financing agreements with cumulative value of(Rs. 9.830 billion): (i) Commercial Facility Agreement with a consortium of Bank AL Habib Limited, Faysal Bank Limited and Habib Metropolitan Bank Limited dated November 01, 2016 with a total commitment of Rs. 6 billion (ii) Istisna Agreement between AEPL and Meezan Bank Limited dated November 01, 2016 with a total commitment of Rs. 3.830 billion. AEPL further submitted that the aforementioned Commercial Facility Agreement of Rs. 6 billion has been refinanced under the State Bank of Pakistan Financing Scheme for Renewable Projects under with the base rate of2% (refinance rate of SBP) plus a spread of 400 points (4%). Whereas in the Istisna Agreement of Rs. 3.830 billion the interest rate is KIBOR + 3% plus the spread of 300 points (3%):

Decision of NEPRA on Tariff Adjustments at COD Artistic Energy (Private) Limited

Sr. Lender Amount in USD Spread over LIBOR Bank AL Habib Limited, Faysal Bank Limited and Habib 6 billion Refinanced from SBP (ceiling for SBP at 6% 1 Metropolitan Bank Limited (Dated Nov 01, 2016) refinancing also) (base rate 2% + spread of 4%) 2 Meezan Bank Limited 3.83 billion KIBOR + 3% (Dated Nov 01, 2016) Total 9.83 billion 6% & KIBOR + 3%

4.1.3 The Authority while considering the above financing arrangements also considered its earlier decision of July 18, 2018 regarding Adjustment of Tariff of Renewable Energy Power Projects availing State Bank of Pakistan Revised Financing Scheme wherein it was decided:

"In case the company secures full or certain portion of debt under the Revised Financing Scheme introduced by State Bank of Pakistan then its tariff shall be adjusted on the terms and conditions as provided in the Revised Financing Scheme. The cost of financing under the said Scheme shall be taken as 6%. The savings in the cost of financing as given in the Scheme (i.e. if the cost is less than 6%), if negotiated/availed by the company, shall be shared in the ratio of 60:40 between the power purchaser and power producer."

4.1.4 In view of above and with no saving in spread ceilings allowed, the Authority decided to allow the tariff with SBP refinance rate of 6% (base rate 2% + spread of 4%) and KIBOR plus 300 points (3.00%) for Istisna Agreement against the 75% debt component approved in the project cost.

4.2 Adjustment on account of variations in KIBOR 4.2.1 In the UFT, the Authority had assessed interest during construction of USD 0.192 million per MW. As per the mechanism given, the interest during construction is to be reassessed after COD for the allowed construction period of eighteen months. This computation starts from the date of financial close, by applying 3 months KIBOR of last day of the preceding quarter (plus allowed spread thereon), on the basis of phasing for debt injection applied in the computation of upfront tariff.

4.2.2 AEPL submitted a cumulative claim of USD 5.677 million on account of IDC after incorporating variations in KIBOR during the construction period.

4.2.3 The calculation of IDC basing 75% of adjusted CAPEX which is USD 76.411 million is segregated into two modes of debt financing sources Rs. 6 billion on the SBP's fixed rate of 6% and the remaining debt amount of Rs. 1.966 billion on KIBOR + 3% for istisna Arrangement.

4.2.4 As per the mechanism defined in the tariff determination and the Authority's decision dated July 18, 2018, the Authority decided to allow an IDC component of USD 5.677 million after incorporating the variations in KIBOR restricting IDC within the construction period of eighteen months.

2 Decision of NEPRA on Tariff Adjustments at COD Artistic Energy (Private) Limited

ORDER

5. Pursuant to section 31(7) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 read with Rule 6 of the National Electric Power Regulatory Authority Licensing (Generation) Rules, 2000, AEPL (the applicant) is allowed to charge the following specified/approved tariff for delivery of electricity to the power purchaser; COD STAGE TARIFF ON BOO BASIS

PPrincipal Return on Years 0 & M Insurance repayment Interest Total tariff equity of debt 1 1.5039 0.6349 3.6623 3.9144 4.0667 13.7821 2 1.5039 0.6349 3.6623 4.2059 3.7752 13.7821 3 1.5039 0.6349 3.6623 4.5213 3.4598 13.7821 4 1.5039 0.6349 3.6623 4.8627 3.1183 13.7821 5 1.5039 0.6349 3.6623 5.2326 2.7484 13.7821 6 1.5039 0.6349 3.6623 5.6336 2.3475 13.7821 7 1.5039 0.6349 3.6623 6.0685 1.9125 13.7821 8 1.5039 0.6349 3.6623 6.5405 1.4405 13.7821 9 1.5039 0.6349 3.6623 7.0532 0.9278 13.7821 10 1.5039 0.6349 3.6623 7.6104 0.3707 13.7821 11 to 20 1.5039 0.6349 3.6623 _ - 5.8011 Levelized - Rs./kWh. 11.5613 PKR/US $ & Indexation PKR/US $ PKR/US $ PKR/US $ KIBOR US CPI

This tariff is applicable for wind power generation from this project as licensed also.

(ii) This tariff will be limited to the extent of net annual energy generation supplied to the power purchaser up to 35% 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 following tariffs

Net annual plant capacity factor % of the prevalent tariff

Above 35% to 36% 75% Above 36% to 37% 80% Above 37% 100%

3 Decision of NEPRA on Tariff Adjustments at COD Artistic Energy (Private) Limited

(iii) The wind risk is to be borne by AEPL (power producer).

(iv) As tabulated above, no adjustment for certified emission reductions has been accounted for in this tariff. However, upon actual realization of carbon credits, the same shall be distributed between the power purchaser and the applicant in accordance with the applicable GOP Policy for Development of Renewable Energy for Power Generation, 2006, as amended from time to time.

(v) No adjustment is allowed in this tariff beyond allowed period for project construction.

(vi) This tariff will be applicable for a period of twenty (20) years from the commencement of commercial operations.

(vii) The terms and conditions specified herein form an integral part of this tariff.

(viii) This tariff has been finalized on the basis of information and source documents provided by the AEPL regarding its financing structure and not subject to any further revision except for adjustments as allowed here under.

(ix) Indexations/adjustment

The tariff allowed to applicant, will remain unchanged throughout the tariff control period, except for the adjustments due to indexations/adjustment detailed in this order. The indexations of Operation & Maintenance Cost, return on equity, principal repayment of debt and interest is allowed on quarterly basis on 1st July, 1st October, 1st January and 1st April. Whereas, insurance component will be adjusted annually. The mechanism of indexations/adjustment will be as under:

(a) Indexations applicable to 0 & M:

OM (FREV) = OM (FREF) * US CPI (REV)/ US CPI (REF) * ER (REV) / ER(REF)

Where:

OM (FREV) The revised applicable O&M tariff component indexed with US CPI and exchange rate parity

OM (FREF) The reference O&M tariff component for the relevant period

US CPI (REV) The revised US CPI (all urban consumers) based on latest available information with respect to US CPI (notified by US Bureau of Labor Statistics)

US CPI (REF) = Reference US CPI (all urban consumers)-current reference 233.707 US CPI (all urban consumers) for the month of January, 2015 as notified by the

4 Decision of NEPRA on Tariff Adjustments at COD Artistic Energy (Private) Limited

US Bureau of Labor Statistics

ER(REV) Revised TT & OD selling rate of US Dollar as notified by the National Bank of Pakistan as at the last day of the preceding quarter

ER(REF) = Reference TT & OD selling rate of US dollar - current reference 101.50

(b) Adjustment of insurance component

The actual insurance cost for the minimum cover required under contractual obligations with the power purchaser not exceeding 1% of Rs. 194.67 million per MW (US $ 1.9179 million per MW) will be treated as pass-through. Insurance component of reference tariff shall be adjusted annually as per actual, upon production of authentic documentary evidence by the applicant, according to the following formula:

AIC = Ins (Ref) / P (Ref) * P (Act) Where AIC = Adjusted insurance component of tariff Ins oleo = Reference insurance component of tariff

P (Ref) = Reference premium @ 1% of Rs.194.67 million

P (Act) = Actual premium per MW of installed capacity or 1% of US $ 1.9179 million converted into Pak Rupees on exchange rate prevailing on the 1st day of the insurance coverage period, whichever is lower

ROE (LREV) = ROE (LREF) * ER (REV) / ER (REF)

Where:

ROE (LREV) The revised applicable return on equity tariff component indexed with exchange rate parity

ROE (LREF) The reference return on equity tariff component for the relevant period

ER(REV) = Revised TT & OD selling rate of US Dollar as notified by the National Bank of Pakistan as at the last day of the preceding quarter

ER(REF) = Reference TT & OD selling rate of US dollar - current reference 101.50

5 Decision of NEPRA on Tariff Adjustments at COD Artistic Energy (Private) Limited

(d) Indexations applicable to interest after achieving COD

01 P (REV) * (KIBOR (REV) - 8.22%) /4

Where:

AI The variation in interest charges applicable corresponding to variation in 3 months KIBOR. DI can be positive or negative depending upon whether 3 months KIBOR (REV) per annum > or < 8.22%. The interest payment obligation will be enhanced or reduced to the extent of Al for each quarter under adjustment.

P (Rev) is the outstanding principal (as indicated in the attached debt service schedule to this order at Annex 1(b)), on a quarterly basis at the relevant quarterly calculations date. Quarter 1 shall commence on the commercial operations date (i.e. the first figure will be used for the purposes of calculation of interest for the first quarter after commercial operations date).

KIBOR (Rev) Revised 3 months KIBOR rate as at the last day of the preceding quarter

Note: The variations in KIBOR would only be allowed on the amount of debt not financed under the State Bank of Pakistan Revised Financing Scheme (i.e outstanding principal in the attached debt service schedule to this order at Annex-1(b)

(x) Other Terms and Conditions of Tara

General:

• General assumptions, which are not covered in this decision, determination of the Authority in the matter of upfront tariff for wind power generation dated June 24, 2015 and National Electric Power Regulatory Authority Upfront Tariff (Approval & Procedure) Regulations, 2011, may be dealt with as per the standard terms of the Energy Purchase Agreement.

6 Decision of NEPRA on Tariff Adjustments at COD Artistic Energy (Private) Limited

The order at paragraph 5.is recommended for notification by the Federal Government in the official gazette in accordance with Section 31(7) of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997.

AUTHORITY

L)/770% (Rafique Ahmed Shailtif) (Saif Ullah Chattha) Member ► Member 2,0 • 3 .7-011 ft11111111111k .4710

(Rehmatullah) Member/ Vice Chairman Annex-I(a) UPFRONT TARIFF FOR WIND POWER PROJECTS Revised Debt Servicing Schedule for AEPL based on COD adjustment Artistic Energy (Private) Limited

Debt A 11101111t (Rs.) 6,000,000,000 haerest Rate SBP 6% 600% Annual Energy (k Wh) I 51, 153,800

Principal ' Balance Total Debt Relevant Base amount Interest , p ipal Repayment Principal Interest Quartersrt (PKR) (PKR) Se7ict Re ayment (PKR) (PKR) (Million PKR). %,--- . Rti:/kWh . ' Rs lirWh' 1 6,000,000,000 110,562,610 90,000,000 5,889,437,390 200,562,610 2 5,889,437,390 112,221,049 88,341,561 5,777,216,340 200,562,610 2.9923 2.3152 3 5,777,216,340 113,904,365 86,658,245 5,663,311,975 200,562,610 4 5,663,311,975 115,612,931 84,949,680 5,547,699,045 200,562,610 5 5,547,699,045 117,347,125 83,215,486 5,430,351,920 200,562,610 6 5,430,351,920 119,107,331 81,455,279 5,311,244,589 200,562,610 3.1759 2.1316 7 5,311,244,589 120,893,941 79,668,669 5,190,350,648 200,562,610 8 5,190,350,648 122,707,350 77,855,260 5,067,643,297 200,562,610 9 5,067,643,297 124,547,961 76,014,649 4,943,095,336 200,562,610 10 4,943,095,336 126,416,180 74,146,430 4,816,679,156 200,562,610 3.3708 1.9367 11 4,816,679,156 128,312,423 72,250,187 4,688,366,733 200,562,610 12 4,688,366,733 130,237,109 70,325,501 4,558,129,624 200,562,610 13 4,558,129,624 132,190,666 68,371,944 4,425,938,958 200,562,610 14 4,425,938,958 134,173,526 66,389,084 4,291,765,433 200,562,610 3.5777 1.7298 15 4,291,765,433 136,186,129 64,376,481 4,155,579,304 200,562,610 16 4,155,579,304 138,228,921 62,333,690 4,017,350,383 200,562,610 17 4,017,350,383 140,302,354 60,260,256 3,877,048,029 200,562,610 18 3,877,048,029 142,406,890 58,155,720 3,734,641,139 200,562,610 3.7972 1.5103 19 3,734,641,139 144,542,993 56,019,617 3,590,098,146 200,562,610 20 3,590,098,146 146,711,138 53,851,472 3,443,387,008 200,562,610 21 3,443,387,008 148,911,805 51,650,805 3,294,475,203 200,562,610 22 3,294,475,203 151,145,482 49,417,128 3,143,329,721 200,562,610 4.0302 1.2773 23 3,143,329,721 153,412,664 47,149,946 2,989,917,056 200,562,610 24 2,989,917,056 155,713,854 44,848,756 2,834,203,202 200,562,610 25 2,834,203,202 158,049,562 42,513,048 2,676,153,640 200,562,610 26 2,676,153,640 160,420,306 40,142,305 2,515,733,334 200,562,610 4.2775 1.0300 27 2,515,733,334 162,826,610 37,736,000 2,352,906,724 200,562,610 28 2,352,906,724 165,269,009 35,293,601 2,187,637,715 200,562,610 29 2,187,637,715 167,748,044 32,814,566 2,019,889,670 200,562,610 30 2,019,889,670 170,264,265 30,298,345 1,849,625,405 200,562,610 4.5400 0.7675 31 1,849,625,405 172,818,229 27,744,381 1,676,807,176 200,562,610 32 1,676,807,176 175,410,503 25,152,108 1,501,396,674 200,562,610 33 1,501,396,674 178,041,660 22,520,950 1,323,355,014 200,562,610 34 1,323,355,014 180,712,285 19,850,325 1,142,642,729 200,562,610 4.8186 0.4889 35 1,142,642,729 183,422,969 17,139,641 959,219,759 200,562,610 36 959,219,759 186,174,314 14,388,296 773,045,446 200,562,610 37 773,045,446 188,966,929 11,595,682 584,078,517 200,562,610 38 584,078,517 191,801,432 8,761,178 392,277,085 200,562,610 5.1143 0.1932 39 392,277,085 194,678,454 5,884,156 197,598,631 200,562,610 40 197,598,631 197,598,631 2,963,979 (0) 200,562,610 Annex-1(b) UPFRONT TARIFF FOR WIND POWER PROJECTS Revised Debt Servicing Schedule for AEPL based on COD adjustment Artistic Energy (Private) Limited

Debt Amount (Rs.) 2,410,647147 Interest Rate (Kibor+396) 11.22% Annual Energy (kWh) 151,153,800

• nnual Principal . Balance Total Debt - Annual Relevant Base amount Interest Principal Repayment Principal Service --• Interest Quarters (PKR) (PKR) • Repayment ..., ,. (PKR) (PKR) (Million PKR) : ',AA.. ics./xWh ' Ra./kWh 1 2,410,647,147 33,409,838 67,618,652 2,377,237,309 101,028,490 2 2,377,237,309 34,346,984 66,681,507 2,342,890,325 101,028,490 0.9220 1.7515 3 2,342,890,325 35,310,417 65,718,074 2,307,579,909 101,028,490 4 2,307,579,909 36,300,874 64,727,616 2,271,279,035 101,028,490 5 2,271,279,035 37,319,113 63,709,377 2,233,959,922 101,028,490 6 2,233,959,922 38,365,914 62,662,576 2,195,594,007 101,028,490 1.0299 1.6436 7 2,195,594,007 39,442,078 61,586,412 2,156,151,929 101,028,490 8 2,156,151,929 40,548,429 60,480,062 2,115,603,501 101,028,490 9 2,115,603,501 41,685,812 59,342,678 2,073,917,689 101,028,490 10 2,073,917,689 42,855,099 58,173,391 2,031,062,590 101,028,490 1.1504 1.5231 11 2,031,062,590 44,057,185 56,971,306 1,987,005,405 101,028,490 12 1,987,005,405 45,292,989 55,735,502 1,941,712,417 101,028,490 13 1,941,712,417 46,563,457 54,465,033 1,895,148,960 101,028,490 14 1,895,148,960 47,869,562 53,158,928 1,847,279,398 101,028,490 1.2850 1.3885 15 1,847,279,398 49,212,303 51,816,187 1,798,067,095 101,028,490 16 1,798,067,095 50,592,708 50,435,782 1,747,474,387 101,028,490 17 1,747,474,387 52,011,834 49,016,657 1,695,462,553 101,028,490 18 1,695,462,553 53,470,766 47,557,725 1,641,991,787 101,028,490 1.4354 1.2381 19 1,641,991,787 54,970,621 46,057,870 1,587,021,167 101,028,490 20 1,587,021,167 56,512,546 44,515,944 1,530,508,620 101,028,490 21 1,530,508,620 58,097,723 42,930,767 1,472,410,897 101,028,490 22 1,472,410,897 59,727,365 41,301,126 1,412,683,533 101,028,490 1.6034 1.0702 23 1,412,683,533 61,402,717 39,625,773 1,351,280,816 101,028,490 24 1,351,280,816 63,125,063 37,903,427 1,288,155,752 101,028,490 25 1,288,155,752 64,895,721 36,132,769 1,223,260,031 101,028,490 26 1,223,260,031 66,716,046 34,312,444 1,156,543,985 101,028,490 1.7910 0.8826 27 1,156,543,985 68,587,431 32,441,059 1,087,956,553 101,028,490 28 1,087,956,553 70,511,309 30,517,181 1,017,445,244 101,028,490 29 1,017,445,244 72,489,151 28,539,339 944,956,093 101,028,490 30 944,956,093 74,522,472 26,506,018 870,433,622 101,028,490 2.0005 0.6730 31 870,433,622 76,612,827 24,415,663 793,820,794 101,028,490 32 793,820,794 78,761,817 22,266,673 715,058,978 101,028,490 33 715,058,978 80,971,086 20,057,404 634,087,892 101,028,490 34 634,087,892 83,242,325 17,786,165 550,845,567 101,028,490 2.2346 0.4389 35 550,845,567 85,577,272 15,451,218 465,268,295 101,028,490 36 465,268,295 87,977,714 13,050,776 377,290,580 101,028,490 37 377,290,580 90,445,489 10,583,001 286,845,091 101,028,490 38 286,845,091 92,982,485 8,046,005 193,862,606 101,028,490 2.4961 0.1775 39 193,862,606 95,590,644 5,437,846 98,271,962 101,028,490 40 98,271,962 98,271,962 2,756,529 0 101,028,490