lishat Energy Limited M&a NISHAT 9.435.2016 egistrar National Electric Power Regulatory Authority 2nd Floor, OPF Building, Sector G-5/2, Kslamabad SUBJECT: Application for a Generation License for Nishat Energy Limited i\lorez Abdullah (the Chief Financial Officer), being the duly authorized representative of Nishat (:,nergy Limited by virtue of Board Resolution dated 30th April, 2016, hereby apply to the National Electric Power Regulatory Authority for the grant of a Generation License to Nishat Energy Limited _airsuant to Section 15 of the Regulation of Generation, Transmission and Distribution of Electric Power 1997. certify that the documents-in-support attached with this application are prepared and submitted in conformity with the provisions of the National Electric Power Regulatory Authority Licensing (Application and Modification Procedure) Regulations, 1999 ("AMPR"), and undertake to abide by the terms and provisions of the above-said regulations. I further undertake and confirm that the :reformation provided in the attached documents-in-support is true and correct to the best of my knowledge and belief. Pay Order in the sum of Pak Rupees 659, 272, being the non-refundable license application fee 2ulated in accordance with Schedule II of the AMPR, is also attached herewith. Further, additional locuments/information, pursuant to the AMPR, are attached herewith. 7,) P 0- W`-itj Norez Abdullah Chief Financial Officer Nishat Energy Limited HEAD OFFICE : 1-B AZIZ AVENUE, CANAL BANK, GULBERG V, LAHORE. TEL: +92-42-35717090-96, 35717159-63, Fax: +92-42-35717239 APPLICATION FOR THE GRANT OF A GENERATION LICENSE UNDER SECTION 15 OF THE ACT AND REGULATION 3 OF THE AMP REGULATIONS 1. NEPRA's Participation in the Process 1.1. Section 15 of the Regulation of Generation, Transmission, and Distribution of Electric Power Act, 1997 (the "Act") provides, inter alia, that: "(i) No person except under the authority of a license issued by the Authority • under this Act and subject to the conditions specified in this Act and as may be imposed by the Authority, construct own or operate a generation facility. (2) An application for the grant of a license for a generation facility shall specify- (i) the type of facility for which the license is applied; (ii) the location of the generation facility; and (iii) the expected life of the generation facility." 1.2. Furthermore, Regulation 3 of the National Electric Power Regulatory Authority (Application and Modification Procedure) Regulations, 1999 (the "AMP • Regulations") provides that an application for a license shall be made in the form specified in the AMP Regulations and further enumerates the documents required to be submitted to the Authority along with the requisite application. 1.3. This Application for the grant of a generation license is made pursuant to Section 15 of the Act and Regulation 3 of the AMP Regulations (this "Application"). 2. Introduction of the Applicant/Sponsor 2.1. As required under the Section 24 of Act, Nishat Energy Limited (the "Applicant" or the "Company" or the "Project Company") is an entity incorporated under the Companies Ordinance, 1984, to act as a special purpose vehicle (the "SPV') and develop a 1x660 MW coal fired power plant at Tehsil Liaqatpur, District Rahimyar Khan, Punjab (the "Project"). The constitutive documents and latest audited financial statements and tax return of the Applicant are annexed herewith as Annex- A hereto. 2.2. By way of background and introduction, M/S TBEA Xinjiang SunOasis Co., Limited (the "Sponsors" or "TBEA") has shown interest in participating in the Project as a co- sponsor to provide technical and project financing proficiencies. TBEA is a well-known and upcoming thermal power project developers in China with a proven track record of developing, financing, constructing, and operating coal fired projects in China. TBEA has signed a consortium agreement on 16th December 2015 which lays out the understanding and broad framework for future cooperation on the Project wherein TBEA, inter alia, has taken up the lead role in arranging the financing from china and also doing the EPC works on turnkey basis. A copy of the consortium agreement is annexed as Annex-B hereto. After having signed the understanding as encompassed in the agreement appended as Annex-B to this Application, the board of LOI issuing agency, M/S Punjab Power Development Board (`PPDB') has approved the change in consortium members and their sponsorship interests through their letter appended as Annex-C. Therefore subject to satisfaction of the conditions precedents in the Consortium Agreement, the following shall be the revised shareholding: Nishat Power Limited Main Sponsor 25% Nishat Mills Limited Initial Sponsor 5% TBEA 70% 2.3. TBEA's parent company was established in 1993 and since then it has diversified itself into wide variety of businesses including manufacturing of transformers, reactors, inductors, cables, high purity aluminum, solar silicon wafers, coal mining, gold mining, grid operations, thermal power engineering and O&M. With vastly varied experience and expertise, the group is now becoming one of the frontline OEM and EPC contractors in Western China which is eyeing to further expand its presence overseas by developing power projects itself. Their existing overseas portfolio includes development in Central Asia, India, East Africa and lately Pakistan. 2.4. TBEA as a turnkey EPC contractor, Coal miner and OEM for heavy duty electrical equipment compliments Nishat Group's (the "Nishat") strength in the consortium who enjoys rich local O&M and development experience in Pakistan power sector on both liquid fuel (HFO) and solid fuel (coal) consumption. The Sponsors has undertaken to provide foreign non-existent man power and expertise in coal plant operations which is lacked by Nishat for large coal fired operations. All local personnel is to be provided/hired by Nishat based on its strong O&M reputation in the Pakistan power industry. The financial strength and developing/operating ability of Nishat in power industry is amply demonstrated in the Statement of Qualification document filed with PPDB under a competitive qualification process • as a result of which Nishat was awarded the Letter of Intent by PPDB. 2.5. TBEA, as per the consortium agreement, has taken a lead role in procuring Chinese financing which will also ease the burden on Nishat from seeking project financing from local banking channel with visible Foreign Exchange liquidity constraints imposed by State Bank of Pakistan. 2.6. Nishat Power Limited (the "Main Sponsors") is a public limited company incorporated in February 2007, formed under the Power Policy 2002 as an independent Power Producer (the "IPP"). The company is a subsidiary of Nishat Mills Limited. The principal activity of the company is to build, own, operate, establish and maintain a fuel fired power station having gross capacity of 200 MW in Jamber Kalan, Tehsil Pattoki, and District Kasur Punjab. 2.7. Nishat Mills Limited (the "Initial Sponsor") is the flagship company of Nishat • Group. It was established in 1951. It is one of the most modern, largest vertically integrated textile companies in Pakistan. The Initial Sponsor has 227,640 spindles, 789 Toyota air jet looms. The Company also has the most modern textile dyeing and processing units, 2 stitching units for home textile, two stitching units for garments and Power Generation facilities with a captive power capacity of 120 MW. The Company's total export for the year 2015 was Rs. 39.868 billion (US$ 393.683 million). Due to the application of prudent management policies, consolidation of operations, a strong balance sheet and an effective marketing strategy, the growth trend is expected to continue in the years to come. The Company's production facilities comprise of spinning, weaving, processing, stitching and power generation. 2.8. The latest available Credit Ratings, Financial History and Thermal Power Projects Experience of Nishat Power Limited, Nishat Mills Limited and TBEA is attached as Annex-D hereto. 2.9. The Project Company have further collaborated with professional firms that are highly qualified and committed to developing and commissioning the Project on a fast track basis. Collectively, the sponsors along with their professional alliances, presents a vastly experienced team of power sector professionals of international repute. The Main Sponsor has entered into agreement with ENERGEN Infra (Mauritius) Limited for latter to act as an advisor in negotiating the EPC contract with potential EPC contractor from China. The agreement is enclosed as Annex- E hereto. 2.10. A preliminary EPC proposal was also gathered by Nishat from SEPCO to set up ix66oMW project to assess the interests of EPC players and budgeted EPC costs, timelines and financing support from the Chinese banks before entering into a consortium agreement with TBEA. The preliminary EPC proposal and SEPCO's introduction is enclosed as Annex-F hereto. 3. The Project Overview 3.1 Project Company 3.1.1 The Company is developing its Project under the NEPRA Upfront Tariff regime. The Letter Of Intent (the "LOI") has been awarded by Punjab Power Development Board (the "PPDB") to the Sponsors wherein Nishat Power Limited was nominated as the Main Sponsors. The Project Company is diligently working towards the early implementation of the Project, on a Build Own and Operate (BOO) basis. The construction of 66o MW power plant on super-critical technology will take approximately forty-eight (48) months or less from the issuance of notice to proceed to the EPC contractor. The plant commissioning is expected in the fourth quarter of 2020. The original LOT dated 15th October, 2014 (appended in Annex — C) was awarded to Nishat Group and Associates with the following composition of shareholding: Nishat Power Limited Main Sponsor 25% Lalpir Power Limited Initial Sponsor 25% Pakgen Power Limited 25% Nishat Mills Limited 25% 3.1.2 However, Nishat Group and Associates requested for change in consortium members for LOI.