Pakistan Water and Power Development Authority

U.S.$500,000,000 7.500 per cent. Notes due 2031

Issue Price: 100.000 per cent.
The U.S.$500,000,000 7.500 per cent. Notes due 2031 (the Notes) are being issued by the Pakistan Water and Power
Development Authority (WAPDA or the Issuer), an autonomous and statutory body under the administrative control of, and
wholly owned by, the Government of Pakistan (the Government) which is responsible for the operation, maintenance,
upgrade and expansion of hydroelectric power plants (HPPs), large water reservoirs and the construction of new projects for
power generation and water storage in the Islamic Republic of Pakistan (Pakistan).
In accordance with Section 24 of the Water and Power Development Authority Act 1958 (the WAPDA Act), the
Government of Pakistan (the Government) has assumed certain obligations to the creditors of WAPDA in the event of a
default by WAPDA in the performance of its obligations. These obligations are limited to grants made by the Government
and loans passed by WAPDA with the sanction of the Government. If WAPDA were to default on the Notes, the
Noteholders' Representative (as defined herein), on behalf of the Noteholders, could seek to enforce WAPDA's obligations
under the Notes against the Government pursuant to Section 24 of the WAPDA Act. However, this procedure is untested.
See "Risk Factors—Factors which are material for the purpose of assessing the market risks associated with the Notes—
Risks related to the Notes generally—The procedure for enforcing WAPDA's obligations under the Notes against the
Government is untested".
The Notes will bear interest from (and including) 4 June 2021 (the Closing Date) to (but excluding) 4 June 2031 (the
Maturity Date) at a fixed rate of 7.500 per cent. per annum. Interest will be payable semi-annually in arrear on 4 June and 4
December in each year up to the Maturity Date, commencing on 4 December 2021; provided that if any such date is not a
Business Day (as defined in Condition 7.4), then such payment will be made on the next Business Day.
AN INVESTMENT IN THE NOTES INVOLVES CERTAIN RISKS. PROSPECTIVE INVESTORS SHOULD
CONSIDER THE RISK FACTORS SET FORTH UNDER "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS
OFFERING CIRCULAR.
The Notes are expected to be admitted to trading on the London Stock Exchange plc's (the London Stock Exchange)
International Securities Market (ISM) on or about the Closing Date. The ISM is not a UK regulated market for the purposes
of Regulation (EU) No 600/2014 on markets in financial instruments as it forms part of domestic law by virtue of the
European Union (Withdrawal) Act 2018 (the EUWA) (UK MiFIR).
The ISM is a market designated for professional investors. Notes admitted to trading on the ISM are not admitted to
the Official List of the Financial Conduct Authority. The London Stock Exchange has not approved or verified the
contents of this Offering Circular. This Offering Circular comprises admission particulars for the purposes of the
admission to trading of the Notes on the ISM.
The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the
Securities Act) or with any securities regulatory authority of any state or other jurisdiction of the United States and may not
be offered or sold within the United States (as defined in Regulation S under the Securities Act (Regulation S)) except
pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
Accordingly, the Notes are being offered or sold solely to persons outside the United States in reliance on Regulation S.
Each purchaser of the Notes is hereby notified that the offer and sale of Notes to it is being made in reliance on the
exemption from the registration requirements of the Securities Act provided by Regulation S.
This document may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the
Rules on the offer of Securities and Continuing Obligations issued by the Capital Market Authority.
The Capital Market Authority does not make any representation as to the accuracy or completeness of this document, and
expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this
document. Prospective purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of
the information relating to the securities. If you do not understand the contents of this document, you should consult an
authorised financial adviser.
The Notes are expected to be rated B- by Fitch Ratings Ltd. (Fitch) and B- by S&P Global Ratings Europe Limited (S&P).
As of the date of this Offering Circular, Fitch is established in the United Kingdom (the UK) and is registered under
Regulation (EC) No 1060/2009 as it forms part of domestic law by virtue of the EUWA (the UK CRA Regulation). The
ratings issued by Fitch have been endorsed by Fitch Ratings Ireland Limited (Fitch Ireland). The ratings issued by S&P
have been endorsed by S&P Global Ratings UK Limited (S&P UK). S&P UK is established in the UK and registered under
the UK CRA Regulation. As such, the ratings issued by Fitch and S&P may be used for regulatory purposes in the UK in
accordance with the UK CRA Regulation. Each of S&P and Fitch Ireland is established in the European Union (the EU) and
registered under Regulation (EC) No. 1060/2009 (the CRA Regulation). As such, each of S&P and Fitch Ireland is included
in the list of credit rating agencies published by the European Securities and Markets Authority on its website (at
http://www.esma.europa.eu/page/List-registered-and-certified-CRAs) in accordance with the CRA Regulation. A rating is
not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time
by the assigning rating organisation.
Delivery of the Notes in book-entry form will be made on the Closing Date. Notes will be represented at all times by
interests in a global certificate in registered form (the Global Certificate) deposited on or about the Closing Date with, and
registered in the name of a nominee for, a common depositary (the Common Depositary) for Euroclear Bank SA/NV
(Euroclear) and Clearstream Banking, S.A. (Clearstream, Luxembourg). Interests in the Global Certificate will be shown
on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream, Luxembourg.
Definitive Certificates evidencing holdings of interests in the Notes will be issued in exchange for interests in the Global
Certificate only in certain limited circumstances described herein.

Sole Global Coordinator, Joint Bookrunner, Green Structuring Agent and Development Finance Structuring
Agent
J.P. Morgan

Joint Bookrunners

Deutsche Bank Standard Chartered Bank

Co-Manager

Habib Bank Limited

The date of this Offering Circular is 2 June 2021.

This offering circular (the Offering Circular) comprises admission particulars in respect of the Notes
which are admitted to trading, in accordance with the International Securities Market Rulebook
effective as of 25 February 2019 (as may be modified and/or supplemented and/or restated from time
to time, the ISM Rulebook). This Offering Circular does not comprise a prospectus for the purposes
of Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the EUWA, and has not
been approved by the competent authority in the UK or in any member state of the European
Economic Area (the EEA).
The Issuer accepts responsibility for the information contained in this Offering Circular. Having taken
all reasonable care to ensure that such is the case, the information contained in the Offering Circular
is, to the best of the knowledge of the Issuer, in accordance with the facts and contains no omission
likely to affect its import.
The information on the websites to which this Offering Circular refers does not form part of this
Offering Circular. No person is or has been authorised to give any information or to make any
representation not contained in or not consistent with this Offering Circular or any other information
supplied in connection with the offering of the Notes and, if given or made, such information or
representation must not be relied upon as having been authorised by the Issuer, the Managers (as
defined under "Subscription and Sale"), the Noteholders' Representative (as defined herein), the
Agents (as defined in the Conditions) or any other person.
Neither the delivery of this document nor any offer, sale or delivery of any Notes shall, under any
circumstances, constitute a representation or create any implication that the information contained
herein is correct as of any time subsequent to the date hereof or that there has been no change in the
affairs of any party mentioned herein since that date.
Neither the Managers, the Noteholders' Representative nor the Agents has verified (i) the information
contained herein or (ii) any statement, representation, or warranty, or compliance with any covenant,
of the Issuer contained in the Notes or any other agreement or document relating to the Notes.
Accordingly, no representation, warranty or undertaking, express or implied, is made and no
responsibility or liability is accepted by any of them as to (a) the accuracy, adequacy, reasonableness
or completeness of the information contained in this Offering Circular or any other information
provided by the Issuer in connection with the Notes, their distribution or their future performance or
(b) the execution, legality, effectiveness, adequacy, genuineness, validity, enforceability or
admissibility in evidence of the Notes or any other agreement or document relating to the Notes.
Neither this Offering Circular nor any other information supplied in connection with the Notes is
intended to provide the basis of any credit or other evaluation or should be considered as a
recommendation by the Issuer, the Managers, the Noteholders' Representative or the Agents that any
recipient of this Offering Circular should purchase any of the Notes. Each investor contemplating
purchasing any Notes should make its own independent investigation of the financial condition and
affairs, and its own appraisal of the creditworthiness, of the Issuer. Neither the Managers, the
Noteholders' Representative nor the Agents accept any liability in relation to the information
contained in this Offering Circular or any other information provided by the Issuer in connection with
the Notes.
In connection with the issue and sale of the Notes, each of the Managers and any of their respective
affiliates acting as an investor for its own account may take up Notes and in that capacity may retain,
purchase or sell for its own account such securities and any securities of the Issuer or related
investments, and may offer or sell such securities or other investments otherwise than in connection
with the issue and sale of the Notes. Accordingly, references in this Offering Circular to the Notes
being offered, issued or sold should be read as including any offer, issue or sale of securities to the

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Managers and any of their affiliates acting in such capacity. The Managers do not intend to disclose
the extent of any such transactions or investments otherwise than in accordance with any legal or
regulatory obligation to do so.
No comment is made or advice given by the Issuer, the Managers, the Noteholders' Representative or
the Agents in respect of taxation matters relating to the Notes or the legality of the purchase of the
Notes by an investor under any applicable law.
This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy any
Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such
jurisdiction.
The distribution of this Offering Circular and the offer or sale of the Notes may be restricted by law in
certain jurisdictions. None of the Issuer, the Managers, the Noteholders' Representative or the Agents
represents that this Offering Circular may be lawfully distributed, or that any Notes may be lawfully
offered, in compliance with any applicable registration or other requirements in any such jurisdiction,
or pursuant to an exemption available thereunder, or assumes any responsibility for facilitating any
such distribution or offering. In particular, no action has been taken by the Issuer, the Managers, the
Noteholders' Representative or the Agents which is intended to permit a public offering of any Notes
or distribution of this Offering Circular in any jurisdiction where action for that purpose is required.
Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Offering Circular
nor any advertisement or other offering material may be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with any applicable laws and regulations.
Persons into whose possession this Offering Circular or any Notes may come must inform themselves
about, and observe, any such restrictions on the distribution of this Offering Circular and the offering
and sale of the Notes. In particular, there are restrictions on the distribution of this Offering Circular
and the offer or sale of Notes in the United States, the United Kingdom, Pakistan, the United Arab
Emirates (excluding the Dubai International Financial Centre and the Abu Dhabi Global Market), the
Dubai International Financial Centre, the Abu Dhabi Global Market, Japan, Hong Kong, and
Singapore, see "Subscription and Sale".
None of the Green Bond Framework or the Second Party Opinion (each as defined herein) form part
of this Offering Circular.

Suitability of investments
The Notes may not be a suitable investment for all investors. Each potential investor in the Notes
must determine the suitability of that investment in light of its own circumstances. In particular, each
potential investor should:
 have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the
merits and risks of investing in the Notes and the information contained or incorporated by
reference in this Offering Circular;
 have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the Notes and the impact the Notes will have
on its overall investment portfolio;
 have sufficient financial resources and liquidity to bear all of the risks of an investment in the
Notes, including where the currency of payment is different from the potential investor's
currency;
 understand thoroughly the terms of the Notes and be familiar with the behaviour of financial
markets; and

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  be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for
economic and other factors that may affect its investment and its ability to bear the applicable
risks.
Legal investment considerations may restrict certain investments. The investment activities of certain
investors are subject to investment laws and regulations, or review or regulation by certain authorities.
Each potential investor should consult its legal advisers to determine whether and to what extent (1)
Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing
and (3) other restrictions apply to its purchase or pledge of the Notes. Financial institutions should
consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the
Notes under any applicable risk-based capital or similar rules.
No assurance is given by the Issuer and the Development Finance Structuring Agent that investing in
the Notes or the use of proceeds by the Issuer will satisfy, whether in whole or in part, any present or
future investor expectations or requirements with respect to development impact financing, including
related sustainability criteria or goals. See "Development Impact". No independent verification as to
the accuracy or completeness or lack thereof of the "Development Impact" section of this Offering
Circular has been done by J.P. Morgan Securities plc in its role as the Development Finance
Structuring Agent. The information contained in the section "Development Impact" of this Offering
Circular (a) is not a substitute for an investor's independent evaluation and analysis and (b) should not
be considered as a recommendation by the Development Finance Structuring Agent that any
transactions or related projects described in the "Development Impact" section of the Offering
Circular achieve any particular development finance criteria or requirement to which it may be
subject. The "Development Impact" section of this Offering Circular has been prepared, in part, based
on certain forward-looking statements and projections provided by WAPDA. Any such statements
and projections reflect various estimates and assumptions by WAPDA concerning anticipated results.
No representations or warranties are made by the Development Finance Structuring Agent as to the
accuracy of any such statements or projections. Whether or not any such forward looking statements
or projections are in fact achieved will depend upon future events some of which may not be within
the control of WAPDA. See "—Cautionary Statement Regarding Forward-Looking Statements".
Accordingly, actual results may vary from the projected results and such variations may be material.
No fiduciary duties are owed to any party by the Development Finance Structuring Agent.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some statements in this Offering Circular may be deemed to be "forward-looking statements".
Forward-looking statements involve risks, uncertainties and assumptions, and include statements
(other than statements of historical fact) concerning the Issuer's plans, objectives, goals, strategies and
future operations and performance and the assumptions underlying these forward-looking statements.
When used in this Offering Circular, the words "anticipates", "estimates", "expects", "believes",
"intends", "plans", "aims", "seeks", "may", "will", "should" and any similar expressions generally
identify forward-looking statements. The Issuer has based these forward-looking statements on the
current view of its management with respect to, among other things, the Issuer's business strategy,
management plans and objectives, future events and financial performance. Although the Issuer
believes that the expectations, estimates and projections reflected in its forward-looking statements
are reasonable, if one or more of the risks or uncertainties materialise, including those identified
below or which the Issuer has otherwise identified in this Offering Circular, or if any of the Issuer's
underlying assumptions prove to be incomplete or inaccurate, the Issuer's actual results of operation
may vary from those expected, estimated or predicted.
Important factors that could cause the actual results of operation to differ materially from any
forward-looking statements include, among others, macro-economic and financial market conditions
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and, in particular, political and economic conditions in Pakistan, including changes in the Pakistani
economy, changes in the regulatory framework applicable to the Issuer and impact of the coronavirus
(COVID-19) pandemic.
These forward-looking statements speak only as at the date of this Offering Circular. Additional
factors that could cause actual results, performance or achievements to differ materially include, but
are not limited to, those discussed under "Risk Factors". Without prejudice to any requirements under
applicable laws and regulations, the Issuer expressly disclaims any obligation or undertaking to
disseminate after the date of this Offering Circular any updates or revisions to any forward-looking
statements contained herein to reflect any change in expectations thereof or any change in events,
conditions or circumstances on which any forward-looking statement is based.
EXCHANGE RATE INFORMATION
Pakistan has had a market-based unitary exchange rate system since May 1999. Under this unitary
exchange rate system, the floating inter-bank rate applies to all foreign exchange receipts and
payments both in the public and private sectors.
The following table sets forth the average and period end exchange rates for the periods presented,
expressed in Rupees per U.S. dollar, not adjusted for inflation, as published by the State Bank of
Pakistan (the SBP). The Federal Reserve Bank of New York does not report a noon buying rate for
Rupees.

Period Average During Period Indicated Period End

2016-17 104.80 104.85

2017-18 109.97 121.50
2018-19 136.27 160.05
2019-2020 158.26 168.05
July 2020 166.98 166.98
August 2020 167.98 166.24
September 2020 166.05 165.70
October 2020 162.80 160.26
November 2020 159.39 159.42
December 2020 160.32 159.83
January 2021 160.39 160.10
February 2021 159.27 158.10
March 2021 156.11 152.76
April 2021 153.35 153.45
May 2021 (through 21 May) 153.00 153.36
Source: State Bank of Pakistan (https://www.sbp.org.pk/ecodata/rates/m2m/M2M-History.asp)

Currency conversions contained in this Offering Circular should not be construed as representations
that Rupees have been, could have been, or could be converted into U.S. dollars at the indicated or
any other exchange rate.

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 CERTAIN PUBLICLY AVAILABLE INFORMATION
Certain statistical data and other information appearing in this Offering Circular have been extracted
from public sources identified herein. The Issuer does not accept any responsibility for the factual
correctness of any such statistics or information but the Issuer confirms that such statistics and
information have been accurately reproduced and that, so far as the Issuer is aware and has been able
to ascertain from statistics and information published by those public sources, no facts have been
omitted which would render the reproduced statistics and information inaccurate or misleading.
Unless otherwise noted, data from public sources is presented on the basis of Pakistani fiscal year
ending on 30 June of each year. In this Offering Circular, fiscal year is denoted as "FY".
NOTICE TO THE RESIDENTS OF THE ISLAMIC REPUBLIC OF PAKISTAN
THE NOTES ARE NOT BEING OFFERED OR SOLD AND MAY NOT BE OFFERED, SOLD OR
TRANSFERRED DIRECTLY OR INDIRECTLY IN PAKISTAN, TO RESIDENTS IN PAKISTAN
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, SUCH PERSONS.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
This Offering Circular includes the following financial information:
 the audited financial statements of Pakistan Water and Power Development Authority
(Hydroelectric – NEPRA regulated business) (WAPDA Hydroelectric) as at and for the year
ended 30 June 2020 (the 2020 Financial Statements); and
 the audited financial statements of WAPDA Hydroelectric as at and for the year ended 30
June 2019 (the 2019 Financial Statements and, together with the 2020 Financial Statements,
the Annual Financial Statements).
The Annual Financial Statements have been prepared in accordance with the accounting and reporting
standards as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan
comprise:
 International Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board (the IASB) and notified under the Companies Act, 2017 by the Securities
and Exchange Commission of Pakistan (the SECP); and
 Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered
Accountants of Pakistan (ICAP) as notified under the Companies Act, 2017.
Where the provisions and directive issued under the Companies Act, 2017, differ from IFRS, the
provisions of and directives issued under the Companies Act, 2017 have been followed.
The SECP through its S.R.O. no.24(I)/2012 dated 16 January 2012 and S.R.O 986(I)/2019 dated 2
September 2019, has granted an exemption applicable to companies that have executed their power
purchase agreements (PPAs) prior to 1 January 2019 from certain IFRS requirements as follows:
 an exemption from IFRS 16 (Leases) (IFRS 16) to the extent of PPAs executed before the
effective date of IFRS 16, which is 1 January 2019;
 International Accounting Standard 21 (The Effects of Changes in Foreign Exchange Rates)
(IAS 21) to the extent of capitalisation of exchange differences; and
 in the case of capitalisation of exchange differences as set forth above, recognition of
embedded derivative under IFRS 9 (Financial Instruments) (IFRS 9) shall not be permitted.

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The SECP, through its S.R.O no. 985(I)/2019 dated 2 September 2019, promulgated an exemption
from the requirements contained in IFRS 9 (Financial Instruments) related to the application of the
Expected Credit Losses method. This exemption is applicable until 30 June 2021, in respect of
financial assets due or ultimately due from the Government of Pakistan, provided that companies shall
follow the relevant requirements of IAS 39 – Financial Instruments: Recognition and Measurement, in
respect of such financial assets during the exemption period.
WAPDA Hydroelectric has availed itself of these exemptions in the preparation of the Annual
Financial Statements.
IFRS 16
WAPDA entered into its PPA with the National Transmission and Dispatch Company (NTDC) on 24
January 2011 and the Central Power Purchasing Agency (CPPAG) subsequently became a party to
the PPA. Under the PPA, WAPDA is obligated to sell and deliver all output of its power plants in
accordance with the provisions of the PPA. The PPA would therefore fall under the definition of a
lease for purposes of IFRS 16. WAPDA Hydroelectric has, however, availed itself of the SECP
exemption as noted above.
IAS 21
Pursuant to the SECP exemption for capitalisation of exchange losses under IAS 21, the exchange
gain/(loss) resulting from the difference in exchange rates on the date of recording of invoices related
to underdeveloped HPPs and payments to contractors and consultants is capitalised as part of capital
work in progress.
IFRS 9
WAPDA Hydroelectric's most material financial asset includes the trade receivable from CPPAG.
WAPDA Hydroelectric has not recorded an expected credit loss (ECL) against these financial assets.
The impairment under IFRS 9 on financial assets other than these assets is insignificant and
accordingly has not been incorporated in the Annual Financial Statements, except as specifically
disclosed otherwise.
WAPDA Hydroelectric's financial year ends on 30 June. References in this Offering Circular to 2019
and 2020 are to the 12 month period ending on 30 June in each such year.

The Annual Financial Statements have been audited by E&Y Ford Rhodes (EY), independent
auditors, in accordance with International Standards on Auditing (ISA) as applicable in Pakistan. EY
have issued audit reports on the Annual Financial Statements. Prior to 30 June 2018, WAPDA
Hydroelectric prepared its financial statements in accordance with a separate framework. The
financial statements for the year ended 30 June 2019 are the first financial statements of WAPDA
Hydroelectric prepared in accordance with IFRS as applicable in Pakistan (General Financial
Reporting Framework). Accordingly, the comparative information as at and for the year ended 30
June 2018 included in the statement of financial position, statement of profit or loss, statement of
comprehensive income, statement of cash flows, statement of changes in equity and related notes to
the financial statements as at and for the year ended 30 June 2019 is unaudited.
Unless otherwise noted, all financial data in this Offering Circular is derived from the Annual
Financial Statements.

Translations of amounts from U.S. dollars or euro to Rupees and vice versa in this Offering Circular
are solely for the convenience of the reader.

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Certain figures and percentages included in this Offering Circular have been subject to rounding
adjustments. Accordingly, figures shown in the same category presented in different tables may vary
slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the
figures which precede them.
The language of this Offering Circular is English. Certain legislative references and technical terms
have been cited by reference to the original Pakistani term in order that the correct technical meaning
may be ascribed to them under Pakistani law.
Following the publication of this Offering Circular, a supplement may be prepared by the Issuer or
inaccuracy relating to information included in this Offering Circular which is capable of affecting the
assessment of the Notes. Statements contained in any such supplement (or contained in any document
incorporated by reference therein) shall, to the extent applicable (whether expressly, by implication or
otherwise) be deemed to modify or supersede statements contained in this Offering Circular or in a
document which is incorporated by reference in this Offering Circular.
Non-IFRS Measures
This Offering Circular include certain financial measures that are not measures of performance
specifically defined by IFRS, including EBITDA, total debt, net debt, total debt/EBITDA and net
debt/EBITDA.
EBITDA means, in respect of any period, profit for the year and net movements in regulatory deferral
account debit balances of WAPDA Hydroelectric after adding back finance costs and depreciation of
WAPDA Hydroelectric's assets.
Total debt means, as at a particular date, long-term financing - interest bearing plus short-term
borrowings plus current portion of long-term financing. Net debt means as at a particular date, long-
term financing - interest bearing plus short-term borrowings plus current portion of long-term
financing, less bank balances. Short-term borrowings represent accrued but unpaid debt servicing to
the Government and public sector enterprises (which are not pursuant to loan agreements) and are
non-interest bearing and payable on demand by nature.
WAPDA has presented these measures in this document because Management uses them as tools to
measure the WAPDA Hydroelectric's operational performance and the profitability of its operations
and its leverage. Prospective investors should use caution when reviewing any of these measures or
the calculation thereof and should not consider these measures as absolute measures of the WAPDA
Hydroelectric's financial performance or liquidity, as alternatives to operating profit, total
indebtedness or any other performance measures derived in accordance with IFRS, or as alternatives
to cash flow from operating activities as a measure of the WAPDA Hydroelectric's performance, or
consider it to be comparable to other companies' calculations with the same or similar titles. In
addition, these measures should not be used instead of, or considered as an alternative to, the figures
presented in the Annual Financial Statements.
These measures are not uniformly or legally defined measures and are not recognised under IFRS or
any other generally accepted accounting principles. WAPDA is not presenting them as measures of
WAPDA Hydroelectric's financial performance. Each of these measures has important limitations as
an analytical tool and prospective investors should not consider any of them in isolation or as a
substitute for analysis of the WAPDA Hydroelectric's results of operations. Management considers
these measures to be important indicators of its representative recurring operations.

vii
 STABILISATION
In connection with the issue of the Notes, J.P. Morgan Securities plc (the Stabilisation Manager) (or
persons acting on behalf of the Stabilisation Manager) may effect transactions with a view to
supporting the market price of the Notes at a level higher than that which might otherwise prevail.
However, stabilisation may not necessarily occur. Any stabilisation action may begin on or after the
Closing Date and, if begun, may cease at any time, but it must end no later than the earlier of 30 days
after the Closing Date and 60 days after the date of the allotment of the Notes. Any stabilisation action
must be conducted by the Stabilisation Manager (or persons acting on behalf of the Stabilisation
Manager) in accordance with all applicable laws and rules.
ENFORCEMENT OF FOREIGN COURT JUDGMENTS AND SERVICE OF PROCESS
In Pakistan, statutory recognition is given to foreign judgments under section 13 of the Pakistan Code
of Civil Procedure 1908 (the Code). This provides that a foreign judgment shall be conclusive as to
any matter thereby directly adjudicated upon except (i) where it has not been pronounced by a court of
competent jurisdiction, (ii) where it has not been given on the merits of the case, (iii) where it appears
on the face of the proceedings to be founded on an incorrect view of international law or a refusal to
recognise the law of Pakistan in cases where such law is applicable, (iv) where the proceedings in
which the judgment was obtained were opposed to natural justice, (v) where it has been obtained by
fraud, or (vi) where it sustains a claim founded on a breach of any law in force in Pakistan.
Section 44A of the Code provides that where a foreign judgment has been rendered by a court in any
country or territory outside Pakistan which the Government has, by notification, declared to be a
reciprocating territory, it may be enforced in Pakistan as if the judgment has been rendered by the
relevant court in Pakistan. The High Court of Justice in England is a court in a reciprocating territory
for the purposes of section 44A and, accordingly, a money judgment of that court would, subject to
the exceptions contained in section 13 of the Code, be enforceable as if the judgment were the
judgment of a district court in Pakistan.
Accordingly, upon obtaining a foreign judgment, three possible courses are open to the holder:
(a) obtaining execution of the judgment by proceedings under section 44A, where these
provisions are applicable, as they are in the case of a judgment of the High Court of Justice in
England, for which the limitation period for initiating proceedings in Pakistan is three years
from the date of the English judgment;
(b) filing a suit in Pakistan on the basis of the foreign judgment treating it as the cause of action,
for which the limitation period is six years from the date of the foreign judgment; and
(c) filing a suit in Pakistan on the original cause of action, for which the limitation period is three
years from when the cause of action arises.
In the case of proceedings described in paragraph (c) above, where the Pakistani court will have the
power to assess the damages, it is possible that a Pakistani court will not award damages on the same
basis as a foreign court, especially if it viewed the award of such damages as being contrary to
Pakistani public policy.
Section 82 of the Code requires a decree against the Issuer to specify a period within which it is to be
satisfied. If it remains unsatisfied at the expiry of such period, the Court issuing such decree is
required to issue a report for the Orders of the Provincial Government within which such Court is
situated. Execution proceedings can only be initiated against the Issuer three months after the date of
such report.

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 PROHIBITION OF SALES TO EEA RETAIL INVESTORS
The Notes are not intended to be offered, sold or otherwise made available to and should not be
offered, sold or otherwise made available to any retail investor in the EEA. For these purposes, a retail
investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article
4(1) of Directive 2014/65/EU (as amended, MiFID II) or (ii) a customer within the meaning of
Directive (EU) 2016/97 (the Insurance Distribution Directive), where that customer would not
qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently no
key information document required by Regulation (EU) No 1286/2014 (as amended, the PRIIPs
Regulation) for offering or selling the Notes or otherwise making them available to retail investors in
the EEA has been prepared and therefore offering or selling the Notes or otherwise making them
available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation.
PROHIBITION OF SALES TO UK RETAIL INVESTORS
The Notes are not intended to be offered, sold or otherwise made available to and should not be
offered, sold or otherwise made available to any retail investor in the UK. For these purposes, a retail
investor means a person who is one (or more) of: (i) a retail client as defined point (8) of Article 2 of
Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the EUWA or (ii) a
customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (the
FSMA) and any rules or regulations made under the FSMA to implement the Insurance Distribution
Directive, where that customer would not qualify as a professional client, as defined in point (8) of
Article 2(1) of UK MiFIR. Consequently no key information document required by the PRIIPs
Regulation as it forms part of domestic law by virtue of the EUWA for offering or selling the Notes or
otherwise making them available to retail investors in the UK has been prepared and therefore
offering or selling the Notes or otherwise making them available to any retail investor in the UK may
be unlawful under the UK PRIIPS Regulation.
MIFID II PRODUCT GOVERNANCE/PROFESSIONAL INVESTORS AND ECPS ONLY
TARGET MARKET/NEGATIVE TARGET MARKET
Solely for the purposes of the manufacturer's product approval process, the target market assessment
in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible
counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for
distribution of the Notes to eligible counterparties and professional clients are appropriate. The target
market assessment indicates that the Notes are incompatible with the needs, characteristic and
objectives of clients which are retail clients (as defined in MiFID II) and accordingly the Notes shall
not be offered or sold to any retail clients. Any person subsequently offering, selling or
recommending the Notes (a distributor) should take into consideration the manufacturer's target
market assessment. However, a distributor subject to MiFID II is responsible for undertaking its own
target market assessment in respect of the Notes (by either adopting or refining the manufacturer's
target market assessment) and determining appropriate distribution channels.
UK MIFIR PRODUCT GOVERNANCE/PROFESSIONAL INVESTORS AND ECPS ONLY
TARGET MARKET/NEGATIVE TARGET MARKET
Solely for the purposes of each manufacturer's product approval process, the target market assessment
in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is only
eligible counterparties, as defined in the FCA Handbook Conduct of Business Sourcebook (COBS)
and professional clients, as defined in UK MiFIR; and (ii) all channels for distribution of the Notes to
eligible counterparties and professional clients are appropriate. The target market assessment indicates
that the Notes are incompatible with the needs, characteristic and objectives of clients which are retail
clients (as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of
ix
domestic law by virtue of the EUWA) and accordingly the Notes shall not be offered or sold to any
retail clients. Any person subsequently offering, selling or recommending the Notes (a distributor)
should take into consideration the manufacturers' target market assessment. However, a distributor
subject to the FCA Handbook Product Intervention and Product Governance Sourcebook is
responsible for undertaking its own target market assessment in respect of the Notes (by either
adopting or refining the manufacturers' target market assessment) and determining appropriate
distribution channels.
PRODUCT CLASSIFICATION PURSUANT TO SECTION 309B OF THE SECURITIES
AND FUTURES ACT (CHAPTER 289 OF SINGAPORE)
In connection with Section 309B of the Securities and Futures Act (Chapter 289) of Singapore and the
Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore (the CMP
Regulations 2018), the Issuer has determined the classification of the Notes as prescribed capital
markets products (as defined in the CMP Regulations 2018) and Excluded Investment Products (as
defined in the Monetary Authority of Singapore (the MAS) Notice SFA 04-N12: Notice on the Sale
of Investment Products and the MAS Notice FAA-N16: Notice on Recommendations on Investment
Products).

x
 TABLE OF CONTENTS

OVERVIEW OF THE OFFERING ..................................................................................................... 1

RISK FACTORS .................................................................................................................................... 5

CAPITALISATION AND INDEBTEDNESS ................................................................................... 43

SELECTED FINANCIAL AND OPERATING INFORMATION ................................................. 44

USE OF PROCEEDS .......................................................................................................................... 48

GREEN BOND FRAMEWORK ........................................................................................................ 49

DEVELOPMENT IMPACT ............................................................................................................... 50

BUSINESS ............................................................................................................................................ 52

MANAGEMENT AND EMPLOYEES .............................................................................................. 80

SHAREHOLDERS AND RELATED PARTY TRANSACTIONS ................................................. 85

TERMS AND CONDITIONS OF THE NOTES .............................................................................. 90

GLOBAL CERTIFICATE ................................................................................................................ 126

TAXATION ........................................................................................................................................ 129

SUBSCRIPTION AND SALE........................................................................................................... 130

GENERAL INFORMATION ........................................................................................................... 135

INDEX TO FINANCIAL STATEMENTS .......................................................................................F-1

 OVERVIEW OF THE OFFERING
The following overview should be read as an introduction to, and is qualified in its entirety by
reference to, the more detailed information appearing elsewhere in this Offering Circular. This
overview may not contain all of the information that prospective investors should consider before
deciding to invest in the Notes. Accordingly, any decision by a prospective investor to invest in the
Notes should be based on a consideration of this Offering Circular as a whole.
Words and expressions defined in "Terms and Conditions of the Notes" and "Global Certificates"
shall have the same meanings in this overview. Reference to a "Condition" is to a numbered condition
of the Terms and Conditions of the Notes (the Conditions).

Issuer Pakistan Water and Power Development Authority

LEI 213800UA74QOTK6IES10

Sole Global Coordinator, Green J.P. Morgan Securities plc

Structuring Agent and Development
Finance Structuring Agent

Joint Bookrunners J.P. Morgan Securities plc

Deutsche Bank Aktiengesellschaft
Standard Chartered Bank

Co-Manager Habib Bank Limited

Noteholders' Representative and The Bank of New York Mellon, London Branch
Principal Paying Agent

Registrar and Transfer Agent The Bank of New York Mellon SA/NV, Dublin Branch

Summary of the Notes

Notes U.S.$500,000,000 7.500 per cent. Notes due 2031.

Closing Date 4 June 2021.

Issue Price 100.000 per cent. of the aggregate principal amount of the
Notes.

Interest and Interest Payment Dates
The Notes will bear interest from (and including) the
Closing Date to (but excluding) the Maturity Date at a
fixed rate of 7.500 per cent. per annum. Interest will be
payable semi-annually in arrear on each of 4 June and 4
December in each year up to the Maturity Date, provided
that if any such date is not a Business Day (as defined in
Condition 7.4), then the Noteholders will not be entitled to
payment until the next following Business Day in the
relevant place and will not be entitled to further interest or
other payment in respect of such delay.

1
Maturity Date
Ranking
Negative Pledge and Other Covenants
Events of Default
Change of Control Event
Redemption for Taxation Reasons
Optional Redemption
4 June 2031.
The Notes will be direct, unconditional, unsubordinated
obligations of the Issuer subject to the provisions of
Condition 5 (Covenants).
The terms of the Notes contain a negative pledge provision
binding on the Issuer as further described in Condition 5.1
and the Issuer has agreed to certain other restrictive
covenants as set out in Condition 5.
The terms of the Notes will permit the acceleration of the
Notes following the occurrence of certain events of default
as further described in Condition 11.
On the occurrence of a Change of Control Event,
Noteholders will have the right to require the Issuer to
redeem their Notes as further described in Condition 8.4.
A Change of Control Event will occur if at any time the
Government of Pakistan, ceases to directly or indirectly
wholly own and control the Issuer.
The Notes may be redeemed at the option of the Issuer in
whole, but not in part, at any time (subject to certain
conditions), at their principal amount together with interest
accrued to but excluding the date fixed for redemption if
(a) as a result of any change in, or amendment to, the laws
or regulations of a Relevant Jurisdiction, or any change in
the application or official interpretation of the laws or
regulations of a Relevant Jurisdiction, which change or
amendment becomes effective after 2 June 2021, on the
next Interest Payment Date the Issuer would be required to
pay additional amounts as provided or referred to in
Condition 8; and (b) the requirement cannot be avoided by
the Issuer taking reasonable measures available to it.
See Condition 8.2 for further details.
The Issuer may redeem the Notes in whole, but not in part,
on giving not less than 30 and nor more than 60 days'
notice, at any time prior to the day that is 90 days prior to
the Maturity Date at the Make-Whole Redemption Price,
as further described in Condition 8.3 or during the period
commencing on (and including) the day that is 90 days
prior to the Maturity Date to (but excluding) the Maturity
Date at their principal amount, together with interest
accrued to the date fixed for redemption.
See Condition 8.3 for further details.
2
Form and Delivery of the Notes The Notes will be issued in registered global form only.

The Notes will be represented on issue by beneficial

Clearance and Settlement
interests in the Global Certificate which will be deposited
with, and registered in the name of a nominee for, a
common depositary for Euroclear and Clearstream,
Luxembourg. Definitive Certificates evidencing holdings
of Notes will be issued in exchange for interests in the
Global Certificate only in the limited circumstances
described under "Global Certificate".
Holders of the Notes must hold their interest in the Global
Certificate in book-entry form through Euroclear or
Clearstream, Luxembourg. Transfers within and between
Euroclear and Clearstream, Luxembourg will be in
accordance with the usual rules and operating procedures
of the relevant clearance systems.

Denominations The Notes will be issued in minimum denominations of

U.S.$200,000 and integral multiples of U.S.$1,000 in
excess thereof.

Withholding Tax All payments of principal and interest in respect of the

Notes by the Issuer under the Notes are to be made without
withholding or deduction for, or on account of, any present
or future taxes or duties of whatever nature imposed or
levied by or on behalf of any Relevant Jurisdiction, unless
such withholding or deduction is required by law. In such
event, the Issuer will pay to the Noteholders such
additional amounts as may be necessary to ensure that the
full amount which otherwise would have been due and
payable under the Notes is received by the Noteholders.

Further Issues: The Issuer may from time to time without the consent of
the Noteholders, create and issue additional notes having
the same terms and conditions as the existing Notes in all
respects save for the date and the amount of the first
payment of the interest thereon and the date from which
the interest starts to accrue so that the issue shall be
consolidated and form a single series with the existing
Notes.

Use of Proceeds The net proceeds to be received by WAPDA from the

issuance of the Notes, after the deduction of commissions,
fees and estimated expenses are expected to be
approximately U.S.$499.0 million. An amount equal to the
net proceeds will be used to finance and/or refinance
Eligible Green Projects.

3
Listing Application has been made to the London Stock Exchange
for the Notes to be admitted to the ISM. The ISM is not a
UK regulated market for the purposes of UK MiFIR.

Ratings B- by Fitch.
B- by S&P.
A rating is not a recommendation to buy, sell or hold
securities and may be subject to suspension, reduction or
withdrawal at any time by the assigning rating
organisation.

Noteholders' Meetings A summary of the provisions for convening meetings of

Noteholders to consider matters relating to their interests
as such is set out in Condition 15.

Tax Considerations See "Taxation" for a description of certain tax

considerations applicable to the Notes.

Governing Law The Notes and any non-contractual obligations arising out
of or in connection with the Notes will be governed by,
and shall be construed in accordance with, English law.

Selling Restrictions There are restrictions on the distribution of this Offering

Circular and the offer or sale of Notes in the United States,
the United Kingdom, Pakistan, the United Arab Emirates
(excluding the Dubai International Financial Centre and
the Abu Dhabi Global Market), the Dubai International
Financial Centre, the Abu Dhabi Global Market, Japan,
Hong Kong and Singapore.

ISIN XS2348591707

CFI DBFNFR

FISN PAKISTAN WATER/7.5EUR NT 20310604 R

Common Code 234859170

4
 RISK FACTORS
The purchase of Notes may involve substantial risks and is suitable only for sophisticated investors
who have the knowledge and experience in financial and business matters necessary to enable them to
evaluate the risks and merits of an investment in the Notes. Before making an investment decision,
prospective purchasers of Notes should consider carefully, in the light of their own financial
circumstances and investment objectives, all of the information in this Offering Circular.
The Issuer believes that the factors described below represent the principal risks inherent in investing
in the Notes, but the inability of the Issuer to pay any amounts on or in connection with any Note may
occur for other reasons and the Issuer does not represent that the statements below regarding the
risks of holding any Note are exhaustive. There may also be other considerations, including some
which may not be presently known to the Issuer or which the Issuer currently deems immaterial, that
may impact any investment in the Notes.
Prospective investors should also read the detailed information set out elsewhere in this Offering
Circular and reach their own views prior to making any investment decision. Words and expressions
defined in "Terms and Conditions of the Notes" shall have the same meanings in this section.

FACTORS THAT MAY AFFECT THE ISSUER'S ABILITY TO FULFIL ITS

OBLIGATIONS UNDER NOTES
WAPDA is wholly owned and controlled by the Government, operates under the WAPDA Act and
the Government has a substantial degree of influence over WAPDA's operations through its
regulatory, taxation and legislative powers and also controls most of the key players in the
Pakistani power sector. This may result in WAPDA operating its business in a manner that does
not provide adequate economic returns to WAPDA or align with the interests of the Noteholders.
WAPDA is wholly owned and controlled by the Government, operates under the WAPDA Act and
the Government has a substantial degree of influence over WAPDA's operations through its
regulatory, taxation and legislative powers. The Government may pursue initiatives that do not align
with the interests of the Noteholders, for example in relation to subsidies for certain segments of the
population, that adversely affect the return WAPDA earns on its investment in its infrastructure. See
also "—WAPDA operates in a highly regulated environment and changes in laws, government policy
and regulations can significantly affect its operations and financial performance".
Furthermore, the Government controls most of the other key players in the Pakistani power sector,
including the NTDC, which is the national transmission company, and the CPPAG, which acts as the
power market operator in Pakistan, as well as generation companies (GENCOs) and electricity
distribution companies (DISCOs), which sell electricity directly to end customers. Given Government
ownership across these various entities, there can be no assurance that the Pakistani power sector will
operate in a manner that provides an adequate economic return to WAPDA. For example, certain
inefficiencies in the sector have led to a "circular debt" phenomenon, which is described in "—Risk
factors related to the Government—There can be no assurance that the Government will be able to
manage effectively the "circular debt" issue inherent in the Pakistani electricity sector".
If the Government pursues an agenda that compromises the return WAPDA earns on its assets or if
there are market distortions or inefficiencies across the various Government-owned entities operating
in the Pakistani power sector, WAPDA's business, results of operations and financial condition could
be materially adversely affected.

5
WAPDA's operations are located in, and its revenue is sourced from, Pakistan, and any
deterioration in macroeconomic conditions in Pakistan will adversely affect its business.
Substantially all of WAPDA's revenue is derived from the Government. All of the revenue of its
hydroelectric power generation business, which accounted for approximately 95 per cent. of its total
revenue in the year ended 30 June 2020, is derived from WAPDA's power purchase agreement (PPA)
with NTDC and CPPAG and ultimately from individual Pakistani customers, who purchase electricity
from DISCOs. Accordingly, WAPDA's results of operations are, and are expected to continue to be,
affected by political, financial and economic developments in or affecting Pakistan and, in particular,
by the level of economic activity in Pakistan.
In addition to gross domestic product (GDP) growth, factors such as inflation, interest and foreign
currency exchange rates, as well as unemployment, personal income and the financial condition of
Pakistani companies, can have a material impact on customer demand for WAPDA's services. While
historically, the Pakistani electricity market has been characterised by insufficient generation capacity
to meet demand, there can be no assurance that this will continue to be the case going forward and
any adverse macroeconomic developments could result in decreased demand for electricity produced
by WAPDA's HPPs.
In particular, the ongoing outbreak of COVID-19 may have an adverse effect on GDP growth and
other macroeconomic indicators. See "—The Pakistani economy, and hence WAPDA's business, may
be adversely affected by the ongoing outbreak of COVID-19". The spread of COVID-19 has also
derailed the momentum in addressing the "circular debt" issue described in "—Risk factors related to
the Government—There can be no assurance that the Government will be able to manage effectively
the "circular debt" issue inherent in the Pakistani electricity sector". This was because the
Government needed to increase tariff subsidies to vulnerable segments of the population and the
billing, collection and timely revision of tariffs were negatively affected, resulting in the increase of
circular debt.
Furthermore, given the Government's ownership of WAPDA, NTDC and CPPAG, adverse
macroeconomic conditions in Pakistan may also adversely affect the creditworthiness of the Issuer
and exacerbate the "circular debt" issue.
See "—Risk factors related to the Government—WAPDA is subject to risks associated with adverse
macroeconomic developments in Pakistan and the wider region" for further detail regarding the
macroeconomic risks to which WAPDA is subject.
Certain inefficiencies in the Pakistani power market have given rise to a "circular debt"
phenomenon, which has led to arrears in the electricity sector and delays in WAPDA's tariff
collections.
In determining electricity tariffs (as described under "Business—Operations—Power Wing
(Hydroelectric Business)—Tariff Methodology"), the National Electric Power Regulatory Authority
(NEPRA) assumes 100 per cent. collection and 15.5 per cent. transmission and distribution losses,
which in reality represents a significant deviation from the actual performance of the DISCOs
operating in Pakistan's power sector. This results in the tariff being set at a level lower than cost
recovery, generating a structural shortfall in revenue in the system. This has led to the emergence of
arrears in the power sector, which is known as "circular debt".
Essentially, circular debt is the amount of cash shortfall within CPPAG, the state-owned agency
which purchases power from generators on behalf of the DISCOs and acts as Pakistan's power market
operator, which it cannot pay to power supply companies. The overdue amount is the result of the
following factors:

6
 the difference between the actual cost and the tariff determined by NEPRA, which represents
the distribution company's losses above and collections allowed by NEPRA;

 a delay in, or the non-payment of, subsidies by the Government; and

 delays in the determination and notification of tariffs.

WAPDA has experienced significant delays in collecting hydroelectric power tariffs due to the
significant cash shortfall at CPPAG resulting from the circular debt phenomenon.
In light of these challenges, the Government has prepared a comprehensive circular debt reduction
plan. According to the IMF Country Report issued in December 2019, Pakistan's circular debt
reduction plan was finalised on 8 November 2019. The electricity tariff adjustments, as determined by
NEPRA, were notified on 30 September 2019, although the tariff adjustment for the first quarter of
FY20 only took place on 29 November 2019. The Government has been adjusting tariffs gradually on
a quarterly basis to cost recovery levels, including on 30 September 2019 by around 5 per cent.,
largely to recover arrears accumulated over FY19, and on 29 November 2019, by around 2 per cent.
on account of capacity payments during the first quarter of FY20. All power sector subsidies are
eventually intended to be phased out in accordance with the benchmarks set forth in the extended fund
facility (the EFF) approved by the IMF in July 2019.
These measures had already contributed to a reduction in circular debt, with accumulation of new
arrears falling from approximately PKR 38 billion per month in the FY19 to PKR 26 billion per
month during the first half of FY20. However, the spread of COVID-19 derailed the momentum of
these phased tariff adjustments and subsidy reductions as the Government needed to increase tariff
subsidies to vulnerable segments of the population and the billing, collection and timely revision of
tariffs were negatively affected, resulting in the increase of circular debt. The monthly average
accumulation increased to approximately PKR 44.8 billion for FY20. See "Business—Operations—
Power Wing (Hydroelectric Business)—Circular Debt" for details of the circular debt reduction plan.
There can be no assurance, therefore, that Pakistan's circular debt reduction plan will be effective or
that it will eliminate the delays WAPDA has experienced in the collection of its tariffs. There can also
be no assurance that the deferment of payments of principal and interest, and non-charging of interest
on such deferred amounts, under the foreign re-lent loans and cash development loans of the Issuer
from the Government as a result of the circular debt issue, and resulting shortfall in payments to
WAPDA (see "Business—Debt Profile") will be permitted to continue. Any failure to address the
circular debt issue or decision by the Government not to continue to permit such deferment, could
have a material adverse effect on WAPDA's business, results of operations and financial condition.

The Pakistani economy, and hence WAPDA's business, may be adversely affected by the ongoing
outbreak of COVID-19.

The Pakistani economy may be affected by adverse developments in the global economy arising from
the outbreak of COVID-19. The outbreak, which originated in the city of Wuhan in Hubei province in
China in November 2019, has since spread globally. On 11 March 2020, the World Health
Organisation declared the COVID-19 outbreak to be a pandemic. It was reported, as of 23 May 2021,
that more than 166.8 million people had been infected globally and over 3.5 million deaths have
resulted from COVID-19 infection. As of the same date, Pakistan had recorded over 900,550 COVID-
19 cases and over 20,250 deaths resulting from COVID-19 infection.

Almost all countries have implemented travel restrictions and/or advised against travel and imposed
travel bans on visitors from a number of countries. Several vaccines have shown above 90 per cent.

7
trial effectiveness and moved to approval and production stages. On 2 December 2020, the UK
became the first country in the world to approve the Pfizer/BioNTech coronavirus vaccine for
widespread use. Pakistan has approved the AstraZeneca, Sinopharm, Sputnik-V and CanSinoBIO
vaccines and commenced vaccination in early February 2021. It is expected that the COVID-19
outbreak will have a severe impact on global macroeconomic conditions, with the International
Monetary Fund (the IMF) forecasting in October 2020 a 4.4 per cent. contraction of the global
economy in 2020. The extent to which 2021 will be affected will depend on the success of the
vaccines that have been developed as well as continued government efforts to manage the pandemic.

Pakistan was subject to a nationwide lockdown from 1 April 2020 until 9 May 2020 and the lockdown
was subsequently eased in phases. Pakistan's real GDP growth declined from 1.9 per cent. growth in
FY19 to a contraction of 0.4 per cent. in FY20 (provisional) largely due to the introduction of these
measures.

On 24 March 2020, the Government announced a relief package worth PKR 1.2 trillion. Key
measures included: (i) elimination of import duties on emergency health equipment; (ii) cash transfers
to 6.2 million daily wage workers (PKR 75 billion); (iii) cash transfers to more than 12 million low-
income families (PKR 150 billion); (iv) accelerated tax refunds to the export industry (PKR 100
billion); and (v) financial support to small- and medium-sized enterprises (SMEs) and the agricultural
sector (PKR 100 billion) in the form of power bill deferment (at the level of the DISCOs and funded
directly by the Government), bank lending, as well as subsidies and tax incentives. The economic
package also earmarked resources for an accelerated procurement of wheat (PKR 280 billion),
financial support to utility stores (PKR 50 billion), a reduction in regulated fuel prices (with a benefit
for end consumers estimated at PKR 70 billion), support for health and food supplies (PKR 15
billion), electricity bill payment relief (PKR 110 billion) (at the level of the DISCOs and funded
directly by the Government), an emergency contingency fund (PKR 100 billion), and a transfer to the
National Disaster Management Authority (the NDMA) for the purchase of COVID-19 related
equipment (PKR 25 billion). In addition, the budget for FY21 includes further increases in health and
social spending, tariff and custom duty reductions on food items, an allocation for "COVID-19
Responsive and Other Natural Calamities Control Program" (PKR 70 billion), a housing package to
subsidise mortgages (PKR 30 billion), as well as the provision of tax incentives to the construction
sector (retail and cement companies). Since the onset of the crisis, provincial governments have also
been implementing supportive fiscal measures, consisting of cash grants to low-income households,
tax relief, and additional health spending (including a salary increase for healthcare workers).

The SBP also responded to the crisis by cutting the policy rate to 7.0 per cent. in March 2020. It
expanded the scope of existing refinancing facilities and introduced new refinancing facilities. The
SBP further introduced temporary regulatory measures to maintain banking system soundness and
sustain economic activity. These include: (i) reducing the capital conservation buffer by 100 basis
points to 1.5 per cent.; (ii) increasing the regulatory limit on extension of credit to SMEs by 44 per
cent.; (iii) relaxing the debt burden ratio for consumer loans from 50 per cent. to 60 per cent.; (iv)
allowing banks to defer clients' payment of principal on loan obligations by one year; (v) relaxing
regulatory criteria for restructured loans for borrowers who require relief beyond the extension of
principal repayment for one year; and (vi) suspending bank dividends for the first two quarters of
2020 to shore up capital.

There can be no assurance, however, that the vaccines that have been and are being developed or
measures introduced by the Government will be effective in preventing the further spread of COVID-
19 or reducing the negative economic effects caused by the pandemic in Pakistan. More restrictive
measures may also be implemented, which could have a material adverse effect on macroeconomic

8
conditions and in turn, WAPDA's business. Furthermore, the measures introduced by the Government
have resulted in an increase in the fiscal deficit and the debt to GDP ratio, which could have adverse
consequences for the Pakistani economy. See "—Risk Factors Related to the Government—Pakistan's
fiscal deficit and its high levels of debt could have a material adverse effect on the Pakistani
economy".

Changes in regulated tariffs could have an adverse effect on WAPDA's results of operations and
financial condition.
WAPDA is subject to a substantial degree of regulation, particularly with respect to the tariffs it may
charge for its regulated activities. As a result, WAPDA is affected by the tariff pricing decisions of
NEPRA. WAPDA is party to a PPA with NTDC and CPPAG, which provides that the electricity
generated by WAPDA is to be purchased at the applicable tariff specified by the NEPRA. The tariff at
which WAPDA sells power generated by its hydropower stations to the CPPAG has been set at PKR
4.11 per kWh (including PKR 3.15 per kWh to cover business expenses and PKR 0.96 to cover hydel
levies which are pass-through payments to provinces) for FY21 compared to the tariff of PKR 5.67
per kWH (including PKR 2.12 per kWh to cover business expenses and PKR 3.55 to cover hydel
levies which are pass-through payments to provinces) for FY18. The Government has undertaken to
international lenders to increase the power tariff by approximately PKR 0.35 per kWh by June 2022.
The tariff is based on projected revenue which takes into account WAPDA's regulatory asset base
(RAB). The return on WAPDA's RAB is intended to capture the return on the actual incurred capital
cost of its projects at the actual weighted average cost of capital (WACC) such that the return on
equity (ROE) is 10 per cent. The application of this mechanism is then intended to result in the tariff
being directly proportional to WAPDA's investment programme. See "Business—Operations—Power
Wing (Hydroelectric Business)—Tariff Methodology" for further details of the tariff methodology.
WAPDA's water business and its administrative activities are unregulated businesses and are funded
by Government aid and grants.
As a result of the application of the above methodology, WAPDA has a degree of predictability in
relation to its revenue stream for its hydroelectric power generation business but this is compromised
by the "circular debt" issue described above under "—Certain inefficiencies in the Pakistani power
market have given rise to a "circular debt" phenomenon, which has led to arrears in the electricity
sector and delays in WAPDA's tariff collections". There can further be no assurance that the tariff it is
permitted to charge will not be adjusted in a manner that is adverse to WAPDA, although NEPRA is
expected to continue using the currently applicable methodology going forward. Furthermore, upon
demonstration of proper justification, NEPRA may in the future amend tariffs in a manner that could
be adverse to WAPDA, or may change the conditions of access to such regulated tariffs. Any adverse
changes in regulated tariffs could have a material adverse effect on WAPDA's business, results of
operations and financial condition.
WAPDA's PPA with the NTDC and CPPAG will be terminated upon the transition to a competitive
electricity market in Pakistan.
WAPDA is party to a PPA with the NTDC and the CPPAG, which provides that the electricity
generated by WAPDA is to be purchased at the applicable tariff specified by the NEPRA. The PPA
provides that it shall remain in force and effect until such time as it is terminated in accordance with
its terms or upon the date on which a competitive market structure takes effect in Pakistan's power
sector as envisaged by NEPRA (the Competitive Market Operating Date).
The transition to a competitive market has been a long process in Pakistan, beginning with the entry
of independent power producers (IPPs) into the power sector in 1994, followed by the establishment
of NEPRA under the Regulation of Generation, Transmission and Distribution of Electric Power Act,
1997 (the NEPRA Act) and the unbundling of WAPDA in 1998. One major distribution utility, K-

9
Electric, was privatised in 2005. Plans to privatise the remaining distribution utilities were shelved
following controversy surrounding the K-Electric transaction. A single buyer model has been in
operation since June 2015, with the separation of CPPAG from the transmission and distribution
company, NTDC. Despite this progress, Pakistan's power sector has continued to suffer from
inadequate capacity and other constraints, leading to large and frequent blackouts. The "circular debt"
phenomenon described above under "—Risk factors related to the Government—There can be no
assurance that the Government will be able to manage effectively the "circular debt" issue inherent in
the Pakistani electricity sector", has also been an issue.
In 2015, following the creation of the CPPAG, Market Rules and a Commercial Code were approved
by NEPRA directing CPPAG to transition towards a competitive market. In April 2018, certain
amendments were made to the NEPRA Act. The amendments contained several provisions and
directions related to the introduction of competitive wholesale market, such as the introduction of a
licensing scheme and the definition of the roles of market operator, supplier, and trader. In 2020,
NEPRA approved a detailed design and 18-month implementation plan for a competitive trading
bilateral contract market (a CTBCM) to make the wholesale electricity market competitive, with
multiple buyers and sellers. It is intended that the CTBCM will achieve its commercial operation date
in mid-2022, although this was delayed from a previously specified date of November 2021 and will
likely be delayed again, particularly in light of the challenges the Government is facing in connection
with the COVID-19 pandemic. The intention is that the CTBCM, which is focused on the wholesale
market, will eventually pave the way for a progressive opening up of the retail power sector as well as
trading with regional markets.
In a competitive market, generators of electricity such as WAPDA that hold generation licences
granted by NEPRA will be participants in the market, subject to registering with the market operator
and complying with admission requirements. Generation companies would be expected to enter into
bilateral contracts with the DISCOs and possibly K-Electric, thus moving away from the single buyer
model. It is unclear what impact the transition to a competitive market will have on WAPDA,
although WAPDA believes that it would be well positioned in a competitive market in light of its
lower cost of electricity production compared to other operators.
At the time of expiration of WAPDA's PPA, market prices may be volatile as a result of various
factors, including the cost of raw materials across the power sector, changes in weather patterns and
changes in user demand or prevailing economic conditions, which may lead to it being compensated
less for the electricity it generates. WAPDA may be unable to enter into bilateral contracts on terms
as favourable to it as its current PPA, including as a result of volatile market conditions. Any
reduction in the predictability of its revenue stream may also adversely affect WAPDA's ability to
undertake its investment programme and maintain its existing infrastructure, including financing the
necessary investment required. See "—WAPDA requires significant capital to finance its investment
programme and maintain existing infrastructure" below.
Finally, WAPDA cannot predict the regulatory requirements that might apply following the transition
to a competitive market and it could become subject to requirements such as shared
access/infrastructure and other requirements that result in additional costs and uncertainty from
dealing directly with the DISCOs. For these reasons, the transition to a competitive market could
have a material adverse effect on WAPDA's business, results of operations and financial condition.
WAPDA's PPA with the NTDC and CPPAG is subject to termination in certain circumstances.
In addition to the provisions relating to termination upon the transition to a competitive market,
WAPDA's PPA contains certain events of default which entitle NTDC to terminate the agreement.
These events include WAPDA's failure to operate, maintain, modify or repair its power stations in
accordance with prudent utility practices; the assignment or transfer of the agreement without the
consent of NTDC; misrepresentation by WAPDA; tampering by WAPDA with any interconnection
10
facilities or metering systems; and any payment default by WAPDA that is not remedied within 60
days of the due date. If WAPDA's PPA with NTDC and CPPAG is terminated, it may not be able to
enter into arrangements to sell the electricity it generates on attractive terms or at all. This could in
turn have a material adverse effect on WAPDA's business, results of operations and financial
condition.
WAPDA operates pursuant to a generation licence granted by NEPRA in 2004 which expires in
2034 and there can be no assurance that it will not be revoked prior to its expiration.
NEPRA granted the generation licence pursuant to which WAPDA operates on 3 November 2004.
The licence has a term of 30 years and expires on 2 November 2034. The licence was granted subject
to the Licensing (Generation) Rules, 2000, which provide that NEPRA may suspend or revoke a
generation licence upon the persistent failure of the licensee to comply with the terms and conditions
of its licence. The circumstances in which the licence may be revoked by NEPRA include the
following:
 failure to pay the licence fee when due;

 breach of, or failure in compliance by the licensee with prudent utility practices or any
applicable documents, any provision of the applicable documents, any instructions issued
pursuant to the applicable documents or any codes, programs or manuals required to be
prepared pursuant to the applicable documents which materially and adversely affect the
standards, safety, reliability, integrity, price and quality of services, the reliability and integrity
of a generation facility or the safe, reliable and efficient operation of the electric power industry
except where such breach or failure of compliance occurs without the wilful or negligent
default of the licensee;

 the occurrence of certain liquidation events;

 abandonment by the licensee of the construction of generation facilities or the operation or

management of the generation business or any part thereof;

 incurrence by the licensee of cumulative operating losses in an amount which materially and
adversely affects, or is likely to materially and adversely affect, the financial viability of the
licensee and which disables or is likely to disable the licensee from carrying out its generation
business;

 reduction in net capacity of the generation facilities for reasons other than a planned or
maintenance outage or supervening impossibility beyond the control of the licensee which is
not remedied within the time specified in this respect in the applicable documents;

 retirement or de-commissioning by the licensee of any unit or plant comprised in its generation
facilities at the time of grant of the generation licence, without prior permission of NEPRA;

 assignment or transfer of the generation licence or the transfer, conveyance, loss or

relinquishment by the licensee of the ownership or control or the right to own, manage, control
or operate the generation business;

 any statement or representation made or information provided by the licensee in the application
for the generation licence or subsequently on the directions of NEPRA or pursuant to any
applicable documents which is incorrect, inaccurate or misleading in any material aspect and
has a material adverse effect on the licensee's ability to perform its obligations under the
generation licence;

11
 the exercise by the lenders of the licensee of their remedies rendering the licensee incapable of
performing its obligations;

 any default by the licensee in making any payment, other than the licence fee, required to be
made by it under the applicable documents within 90 of the due date therefor; or

 failure of the licensee to comply with the terms and conditions of the generation licence due to
supervening impossibility notwithstanding the best efforts of the licensee to so comply, where
such non-compliance is material and continues for a period of 180 consecutive days or for a
cumulative period of 360 days in two calendar years.

If WAPDA's licence is terminated due to any of the above circumstances, this would have a material
adverse effect on its business, results of operations and financial condition.
WAPDA operates in a highly regulated environment and changes in laws, government policy and
regulations can significantly affect its operations and financial performance.
WAPDA's hydroelectric power generation business is subject to regulation by NEPRA. The primary
sources of the regulation to which this business is subject include the NEPRA Act and the Tariff
Standards and Procedure Rules, 1998, the Licensing Application & Modification Procedure
Regulations, 1999, the Licensing (Generation) Rules, 2000 and the Fees and Fines Rule, 2002.
WAPDA's water business and its administrative activities are unregulated businesses. The laws and
regulations to which WAPDA is subject affect many aspects of WAPDA's business and, in many
respects, determine the manner in which WAPDA conducts its business. WAPDA is subject to
extensive governmental and other regulations in Pakistan. Any new regulation or any changes in
existing regulations may require significant changes in WAPDA's business in ways that cannot be
predicted. Any new regulations or requirements that require WAPDA to restructure or otherwise
change its business in any way, or that affect electricity generation, could have a material adverse
effect on WAPDA's business, results of operations and financial condition.
Similarly, any non-compliance or breach of licence conditions or other regulatory requirements could
lead to financial sanctions and, in extreme cases, the revocation of licences. See "—WAPDA operates
pursuant to a generation licence granted by NEPRA in 2004 which expires in 2034 and there can be
no assurance that it will not be revoked prior to its expiration". In addition, WAPDA may fail to
respond swiftly and appropriately to changes in applicable laws and regulations or to changes in the
water supply and sanitation and renewable energy industries generally.
WAPDA currently complies in all material respects with the regulatory regimes applicable to it in
Pakistan and continues to allocate adequate resources to achieve and maintain compliance with such
regulations. However, the relevant authorities in Pakistan may enforce existing regulations more
strictly than they have in the past and may in the future impose stricter standards, or higher levels of
fines and penalties for violations, than those which are in effect at present. Any of the foregoing could
have a material adverse effect on WAPDA's business, results of operations and financial condition.
WAPDA is subject to environmental and health and safety laws and regulations and it may be
exposed to significant liabilities if it fails to comply with such laws and regulations.
WAPDA is subject to various environmental and health and safety laws and regulations governing,
among other things, pollution caused by WAPDA's operations and the health and safety of WAPDA's
employees. WAPDA is also required to obtain environmental and safety permits from various
governmental authorities for its operations. Certain permits require periodic renewal or review of their
conditions as well as continuous monitoring and compliance reporting. WAPDA may not always be
able to renew such permits or there may be material changes to its permits requiring significant
expenditure. Violations of these laws, regulations or permits could result in fines or legal proceedings

12
being commenced against WAPDA or other sanctions, in addition to negative publicity and
significant damage to WAPDA's reputation.
WAPDA has adopted environmental standards applicable to its operations. While as at the date of this
Offering Circular, WAPDA is in compliance with all applicable environmental and health and safety
regulations in force in Pakistan in all material respects, there can be no guarantee that it will continue
to be in compliance in the future. Should any WAPDA company fail to comply with any such
regulations, it may be liable for penalties and/or the consequences of default under any contractual
obligations requiring it to comply with applicable regulations.
WAPDA has established management arrangements for the purposes of delivering compliance with
applicable Pakistani environmental and health and safety regulations, however these arrangements are
not necessarily comparable to, or consistent with similar arrangements which have been established
by international power utility peers, in particular such arrangements which have been established to
deliver alignment with internationally-recognised environmental and social risk management
protocols. Consequently, the ability of WAPDA to mitigate environmental, health and safety and
related risks (see also "—The resettlement of relocated residents may cause significant cost increases
and/or construction delays for WAPDA's HPPs and other construction projects") may be less than
that which is achievable by international peers.
Any occurrence of environmental damage or loss of life or serious injury to its employees as a result
of any breach of applicable health and safety legislation may result in disruption to WAPDA's
services or cause reputational harm and significant liability could be imposed on WAPDA for
damages, clean-up costs and penalties and/or compensation as a result. The occurrence of any of these
events may also cause disruption to WAPDA's operations and result in additional costs to WAPDA.
As environmental laws and regulations have an increasing impact on WAPDA's activities, it is
impossible to predict accurately the effect of future developments in such laws and regulations on
WAPDA's business. While WAPDA has budgeted for future capital and operating expenditures to
comply with current environmental and health and safety laws, it is possible that any of these laws
may change or become more stringent in the future or that new laws may be adopted. Any of the
foregoing could have a material adverse effect on WAPDA's business, results of operations and
financial condition.
Climate conditions, the availability of water and natural hazards can affect WAPDA's ability to
generate electricity from its power plants as well as the dams it operates as part of its water
business.
Adverse weather conditions can affect WAPDA's hydroelectric power generation business. In drought
conditions, the level of electricity produced by WAPDA's HPPs for sale to NTDC may be lower,
which would result in lower revenue. Water availability is also seasonal for most of WAPDA's HPPs,
with most HPPs in the Indus River Basin being snow-fed. Water levels are at a minimum during the
winter months (December to February), with a rise in water levels in spring and early summer (March
to June), and floods occurring in the rainy season (July to September). Currently, since 95 per cent. of
WAPDA's revenues are fixed based on capacity payments regardless of electricity generation, the risk
of drought conditions resulting in lower revenue remains relatively limited. In the longer term,
however, in the event of prolonged drought conditions, there can be no assurance that this tariff
formula would continue to apply.
In addition, WAPDA's Water Wing is responsible for the planning, design and execution of water
resources development projects in the sectors of irrigation, drainage and hydropower. Inter-provincial
major surface water projects, including large dams, are also operated and maintained by the Water
Wing. Drought is a risk for these projects.

13
Furthermore, while WAPDA projects electricity generation on the basis of normal weather patterns
representing a long-term historical average and considers possible variations in normal weather
patterns, taking a conservative approach where necessary, and the potential impact on its operations,
there can be no assurance that such planning can address the impact of adverse weather conditions or
accurately predict future weather conditions. To the extent climate change causes changes in
temperature and variability in precipitation patterns or exacerbates the intensity or frequency of
extreme weather events, this could negatively impact WAPDA's business.
Any adverse weather conditions, whether as a result of climate change or otherwise, could have a
material adverse effect on WAPDA's business, results of operations and financial condition.
A significant percentage of WAPDA's installed capacity is concentrated at three of its power
plants, Tarbela, the Ghazi Barotha and Mangla HPPs, and any disruption in the operation of, or
crystallisation of any specific risks related to, any or all of these facilities could have a
disproportionate impact on WAPDA.
WAPDA's most significant projects include the Tarbela, Ghazi Barotha, Tarbela 4th extension and
Mangla HPPs, which have an installed capacity of 3,478 MW, 1,450 MW, 1,410 MW and 1,000 MW,
respectively, out of a total installed capacity of 9,389 MW (including the Neelum Jhelum HPP, which
was developed via a special purpose vehicle wholly owned by WAPDA and is not consolidated in the
Annual Financial Statements, and which has an installed capacity of 969 MW). Accordingly,
WAPDA's business is particularly sensitive to the performance and financial contributions of these
assets. Any disruption in the operation of these plants will have a significant impact on WAPDA's
results of operations. For instance, if any of these plants were to be damaged by natural or man-made
disasters (such as accidents, weather conditions, floods, earthquakes, hurricanes or terrorist attacks),
this could significantly reduce net electricity output (NEO) in the relevant period and could adversely
affect the tariff it receives since its fixed capacity charge, which accounts for 95 per cent. of the total
tariff, is derived from available capacity. For example, the Diamer Bhasha Dam is located in an area
that is subject to seismic activity, which WAPDA has sought to manage through the implementation
of various measures. Unexpected repairs or additional capital expenditure associated with
breakdowns or forced outages could also have a disproportionate impact on WAPDA. If any of these
risks to the Tarbela, Ghazi Barotha, Tarbela 4th extension or Mangla HPPs were to materialise or
recur, this could have a material adverse effect on WAPDA's business, results of operations and
financial condition.
WAPDA requires significant capital to finance its investment programme and maintain existing
infrastructure.
WAPDA plans to develop hydroelectric power projects in the Indus cascade basin on a fast track basis
to enhance the share of hydroelectric power in Pakistan, keep consumer end tariffs within affordable
limits and create a buffer for the water security of the country. It has a pipeline to increase installed
capacity by 9,359 MW, resulting in an increase of net electricity generation by 37,316 GWh annually.
This includes the addition of 800 MW of installed capacity in 2025 upon the completion of the
Mohmand Dam, the addition of 3,570 MW of installed capacity in 2026 upon completion of the Dasu
Stage-1 HPP and Tarbela 5th extension and the addition of 4,500 MW of installed capacity in 2029
upon the completion of the Diamer Bhasha Dam. These four projects account for approximately 95
per cent. of total capital expenditure requirements over the next nine years. See "Business—
Operations—Power Wing (Hydroelectric Business)—Projects in the Pipeline" for further detail of
these projects.
These projects are expected to be financed by a range of sources, including Government grants, loans
from international financial institutions, export credit agency (ECA) backed arrangements, Eurobonds
(including the Notes), local financing backed by the guarantee of the Government and asset-backed

14
loans and bonds. This includes funding raised by the Government for various hydroelectric projects
from international financial institutions on a re-lent basis (loans where the Government is the direct
borrower and the loan is then extended to WAPDA), including the World Bank, Asian Development
Bank, Exim Bank of China, Kuwait Fund, Saudi Fund, OPEC Fund and KFW Development Bank.
If WAPDA is unable to obtain adequate financing for its investment programme on acceptable terms,
or at all, it may be required to delay or cancel all or parts of its investment programme, fall behind in
its maintenance obligations or be unable to take advantage of opportunities for the development of its
business or operations.
Furthermore, without significant capital investment in its ageing facilities, it is possible that WAPDA
will not be able to maintain the levels of overall productivity that are required for it to remain
profitable. Even if WAPDA is able to attract the required financing to fund its investment programme,
there is no assurance that it will be able to buy new equipment or modernise its existing facilities due
to the demand for such equipment and services from other companies in the power industry, many of
which are also undergoing modernisation programmes. If WAPDA is unable to modernise its plants
and equipment, it may not be able to maintain its productivity, which could have a material adverse
effect on its business, results of operations and financial condition.
WAPDA's future business is subject to substantial development uncertainties. Development projects
may not be completed, be completed efficiently or perform as expected. WAPDA's development
activities may also increase its leverage, and if not successful, may reduce its profitability.
WAPDA's development plans include the Mohmand Dam, the Dasu Stage-1 HPP, Tarbela 5th
extension and the Diamer Bhasha Dam, which together account for approximately 95 per cent. of total
capital expenditure requirements over the next nine years. See "Business—Operations—Power Wing
(Hydroelectric Business)—Projects in the Pipeline" for further detail of these projects. These and any
future development projects WAPDA undertakes may be large and complex, and WAPDA may not
be able to complete them as planned or at all. WAPDA is subject to the risk of delays, cost over-runs
and projects not being delivered on time, at cost or otherwise in line with current expectations. It may
also face challenges to its projects resulting from their location and any interests of surrounding
countries, environmental factors, including flooding and seismic activity, as well as issues resulting
from the displacement of communities and the environmental impact of the relevant projects. For
instance, WAPDA has experienced certain issues in relation to the development of the Diamer Bhasha
Dam which have required proactive management. In July 2018, the Supreme Court of Pakistan
constituted an Implementation Committee for Diamer Bhasha and Mohmand Dam (the Committee)
headed by the Chairman of WAPDA. Progress is being monitored by the Supreme Court. The
Committee is responsible for managing the resettlement of communities displaced by the construction
of the dam, which is largely complete. It has also addressed issues regarding historical Buddhist
sculptures, inscriptions and petroglyphs in 50 villages located across the region, which will be
submerged by the dam, by incorporating a museum into the plan for the dam, among other measures.
In addition, in February 2021, a security incident occurred at the Dasu Stage-1 HPP. The incident
started when local residents blocked the entrance to the main tunnel as part of a protest relating to
ongoing disputes over employment opportunities at the project. As a result, 76 workers were stuck in
the tunnel and the local police and security personnel were called. There was a confrontation between
security personnel and the protesters. Although the situation was ultimately deescalated, there were
several injuries arising from the incident. As part of the root cause analysis following the incident,
certain security issues were identified. In particular, the tunnel entrance area was not properly secured
and there were inadequate arrangements in place to prevent unauthorised entry into work areas.
WAPDA has initiated certain corrective actions to address the security issues identified in connection
with this incident.

15
There can be no assurance that WAPDA will be able to negotiate the required agreements, overcome
any local or international opposition and obtain the necessary licences, permits and financing. Various
groups may also publicly oppose certain development projects. Any opposition to WAPDA's plans,
along with political developments, could hinder or prevent WAPDA's development of such projects.
In particular, political and economic circumstances may discourage support for, and investment in,
certain projects. As a result, financing for the construction and development of such projects may not
be available on favourable terms or at all.
Successful completion of these projects also depends upon overcoming other substantial risks,
including, but not limited to, risks relating to failures of siting, construction, permitting and
commissioning delays as a result of a failure to meet certain milestones. When WAPDA commits to
capital expenditures for projects under development, it expects these costs to be recoverable; however,
there can be no assurance that any individual project will be completed and reach commercial
operation. If these development efforts are not successful, WAPDA may abandon a project under
development and write off the costs incurred in connection with such project. At the time of
abandonment, WAPDA would expense all capitalised development costs incurred in connection with
the project and could incur additional losses associated with any related contingent liabilities.
Further, even if WAPDA is able to develop projects, inefficient project management and execution of
the development projects could result in delays or unanticipated cost overruns. Finally, the success of
these projects, and the performance under related agreements, will be subject to additional risks
including, but not limited to, risks relating to legal and regulatory developments. Any of the foregoing
could have a material adverse effect on WAPDA's business, results of operations and financial
condition.
The resettlement of relocated residents may cause significant cost increases and/or construction
delays for WAPDA's HPPs and other construction projects.
The construction of HPPs requires the construction of dams and reservoirs, typically increasing the
water level at the HPP site, and leaving part of the area submerged. This generally requires the
relocation and resettlement of residents in the area surrounding the project sites. The relevant local
government authorities are responsible for the relocation and resettlement of such residents, but the
HPP's owner is responsible for paying associated resettlement compensation. There is no assurance
that problems in relation to any such resettlements will not arise in the future. See also "—WAPDA's
future business is subject to substantial development uncertainties. Development projects may not be
completed, be completed efficiently or perform as expected. WAPDA's development activities may
also increase its leverage, and if not successful, may reduce its profitability" in relation to the Diamer
Bhasha project. In addition, the local government may dispute or request adjustment of the amount of
resettlement compensation WAPDA allocates for an HPP project, even after the HPP commences
operations. The Government and/or the local government may adopt more stringent standards and
impose more onerous obligations on hydropower companies regarding the resettlement of relocated
residents. Furthermore, WAPDA may also face opposition from local environmental and other
interest groups due to the perceived impact of its HPPs. Any of the above could cause significant cost
increases and/or construction delays for WAPDA's HPPs, which could in turn have a material adverse
effect on WAPDA's business, results of operations and financial condition.
Maintenance and refurbishment of power plants involve significant risks that could result in
unplanned power outages, reduced output and unanticipated capital expenditure.
The operation of WAPDA's power plants involves risks that include the breakdown or failure of
equipment or processes, performance below expected levels of output or efficiency and the inability to
transport electricity to customers in an efficient manner due to a lack of transmission capacity or
transmission infrastructure issues. Such failures and performance issues can stem from a number of
factors, including errors in operation, lack of maintenance and general wear over time. As a result,
16
WAPDA's facilities may require planned periodic major overhaul activities, which may also include
improvements. Unplanned outages of power plants may occur from time to time and are an inherent
risk of WAPDA's hydroelectric power generation business. Unplanned outages of WAPDA's power
plants will typically increase WAPDA's expenses which may not be recoverable under its PPA with
NTDC and CPPAG and may reduce WAPDA's revenue as a result of selling lower volumes of
electricity.
In addition, critical equipment or parts may not always be readily available when needed. WAPDA
also cannot be certain of the level of capital expenditure that will be required due to changing
environmental, health and safety laws and regulations (including changes in the interpretation or
enforcement thereof), necessary facility repairs and unexpected events (such as natural or man-made
disasters or terrorist attacks). Any unexpected failure, including failure associated with breakdowns,
forced outages or any unanticipated capital expenditure at WAPDA's power plants, could have a
material adverse effect on WAPDA's business, results of operations and financial condition.
Certain of the infrastructure comprising WAPDA's water business was built many years ago and
may require rehabilitation.
In addition to being responsible for the planning, design and execution of water resources
development projects, inter-provincial major surface water projects, including large dams, are also
operated and maintained by WAPDA's Water Wing. Many of WAPDA's dams, reservoirs and canals
were built a significant number of years ago, including the Tarbela Dam, which was completed in
1974, and the Mangla Dam, which was completed in 1965. Many components of these dams are at the
end of their design life and require rehabilitation, which is funded by Government grants.
Replacement of components can be expensive and WAPDA may be required to incur more capital
expenditure than it has budgeted to rehabilitate and make improvements to its infrastructure. In
addition, WAPDA has historically been required to undertake watershed management activities at the
Mangla Dam in order to manage the risk of erosion and high sediment inflow into the Mangla
Reservoir, which would deplete its water storage capacity. The measures that WAPDA has
undertaken are intended to control the rate of soil erosion and inflow of sediment into the reservoir to
prolong its useful life. If WAPDA is required to spend more than it has budgeted for the rehabilitation
and ongoing maintenance of the infrastructure of its Water Wing, this could have a material adverse
effect on its business, results of operations and financial condition.
WAPDA's business is reliant on its IT infrastructure, and delays or outages in, or any potential
cyber-attacks to, its IT systems and networks could have an adverse effect on the results of its
operations.
WAPDA's business relies on the efficient and uninterrupted operation of its information technology
(IT) infrastructure, which includes complex and sophisticated computer, telecommunications,
supervisory control, data processing, data acquisition and data monitoring systems. WAPDA may be
subject to IT failures in, and disruptions to, such systems and networks, which are used throughout its
business, including at its power plants and for the distribution and supply of power. These may be
caused by issues with system updates, natural disasters, malicious cyber-attacks, accidents, power
disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or
electronic breaches or similar events or disruptions.
Disruptions to WAPDA's IT systems, as well as those of participants in the Pakistani power sector,
could severely disrupt administrative and business operations, including a loss of operational capacity
and critical data. This could also result in a loss of service to customers and give rise to significant
expenses to repair security breaches or system damage. Further, as well as adversely impacting
business operations, a failure in its operations monitoring systems (which focus on plant availability,
activity and efficiency, operational oversight, health and safety, and compliance with environmental
laws and regulations) could lead to non-compliance with the requirements set forth in its generation
17
licence granted by NEPRA and the imposition of fines or penalties. Any of the foregoing could have a
material adverse effect on WAPDA's business, results of operations and financial condition.
Provisions in certain of WAPDA's financing arrangements as well as market and other conditions
could restrict WAPDA's financial and operational flexibility.
As at 30 June 2020, WAPDA Hydroelectric's total outstanding debt (comprising long-term financing -
interest bearing, short-term borrowings and current portion of long-term financing) was PKR 358.4
billion. As at the same date, WAPDA Hydroelectric's total outstanding debt (excluding short-term
borrowings) was comprised of foreign re-lent loans, which accounted for 38.3 per cent., cash
development loans - unsecured, which accounted for 31.6 per cent., foreign direct loans, which
accounted for 21.1 per cent., and local commercial financing, which accounted for 9.0 per cent. See
"Business—Debt Profile" for further detail regarding WAPDA Hydroelectric's financing. Certain of
the financing arrangements WAPDA has entered into contain restrictive covenants, including a
requirement to maintain a certain level of tangible net worth and a requirement not to exceed a
specified leverage ratio (net debt/EBITDA). The restrictions contained within its financing
arrangements could have important consequences for its business, including, but not limited to:
 increasing its vulnerability to, and reducing its flexibility to respond to, general adverse
economic and industry conditions;

 requiring the dedication of a substantial portion of cash flow provided by operations to the
payment of principal of, and interest on, indebtedness, thereby reducing the availability of such
cash flow to fund working capital, capital expenditures, dividends or other general corporate
purposes;

 limiting flexibility in planning for, or reacting to, changes in its business, the competitive
environment and the industry in which it operates; and

 limiting its ability to borrow additional funds and increasing the cost of any such borrowing.

In addition, WAPDA may encounter difficulty in refinancing its indebtedness as a result of market
conditions or otherwise. In particular, the disruptions that have been experienced from time to time in
the international capital markets over the past several years have led to reduced liquidity and
increased credit risk premiums. If WAPDA is unable to refinance its indebtedness on acceptable
terms, its business, results of operations and financial condition could be materially adversely
affected.
If the Rupee were to depreciate against the U.S. Dollar, the Euro or other major currencies, this
could have a material adverse effect on WAPDA's ability to service its debt denominated in
currencies other than the Rupee.
WAPDA generates substantially all of its income in Rupee pursuant to its PPA with the NTDC and
the CPPAG. However, it has substantial exposure to foreign currency fluctuations as a result of its
borrowings denominated in foreign currencies. As at 30 June 2020, 21.1 per cent. of WAPDA
Hydroelectric's total debt (excluding short-term borrowings) was denominated in U.S. Dollars. The
depreciation of the Rupee against the U.S. Dollar could have an adverse effect on WAPDA's ability to
repay its debt denominated in U.S. Dollars. In December 2017, after holding talks with the IMF, the
Government agreed to depreciate the Rupee and the SBP agreed to let the Rupee adjust to market
conditions. Thereafter, there was a sustained decrease in the value of the Pakistani Rupee against the
U.S. Dollar. The Rupee depreciated significantly in March 2020 at the onset of the COVID-19
pandemic but has since been recovering. See "Exchange Rates". If WAPDA is unable to manage the
foreign currency risk to which it is exposed, this could have a material adverse effect on its business,
results of operations and financial condition. In the event of a depreciation of the Rupee, WAPDA
18
could also be indirectly adversely affected due to the Government's borrowings in foreign currencies.
See "—Risk Factors Related to the Government—If the Rupee were to depreciate against the U.S.
Dollar, the Euro or other major currencies, this could have a material adverse effect on Pakistan's
ability to service its debt denominated in currencies other than the Rupee".
WAPDA's business will suffer if it fails to attract and retain key management, employees or other
qualified personnel.
The success of WAPDA's business depends, in part, on the continued service of its key management
and employees and its ability to continue to attract, retain and motivate qualified personnel. Given the
nature of its business, WAPDA requires highly trained employees, including engineers, and these
employees may be particularly difficult to recruit and retain. In addition, certain of WAPDA's key
management and other personnel have established important working relationships with regulators
and have detailed knowledge of WAPDA's business and the markets in which it operates. There can
be no assurance that WAPDA will be able to attract, recruit and retain sufficient qualified personnel.
Any failure to do so could have a material adverse effect on WAPDA's business, results of operations
and financial condition.
WAPDA is unable to or may not insure itself against all potential risks and/or may become subject
to higher insurance premiums.
WAPDA maintains comprehensive insurance coverage in respect of its businesses and properties
through the WAPDA Equipment Protection Scheme (WEPS), an in-house insurance scheme. This is
essentially a self insurance arrangement which involves the establishment and maintenance of a
reserve to pay for damage to property and equipment, rather than a formal insurance scheme. WEPS
was established in 1977 and its coverage extends to WAPDA, GENCOs, DISCOs and NTDC. The
insurance coverage is maintained in such amounts and with deductibles as are commensurate with
local best practice and industry standards.
WEPS covers the electrical and mechanical equipment set forth in "Business—Insurance". The
equipment and sites are insured in respect of machinery break-down and accidental fire, with other
claims such as atmospheric disturbance, flood, earthquake, fire and shock, explosion, riot strike
damage, rain, lightning, war, acts of terrorism and sabotage, not being covered.
The insurance coverage under WEPS covers, in the event the asset is repairable, the repair charges up
to the maximum book value of the asset. In the event that the asset is not repairable, the maximum
paid on any claim if the book value of the asset minus its salvage value.
WAPDA's operations may be affected by risks for which full insurance cover is either not available or
not available on commercially reasonable terms. In addition, the severity and frequency of various
insurance events, such as accidents and other mishaps, business interruptions or potential damage to
its facilities, property and equipment caused by inclement weather, human error, pollution, labour
disputes and natural catastrophes, may result in losses or expose WAPDA to liabilities in excess of its
insurance coverage. There can be no assurance that WAPDA's insurance coverage will be sufficient to
cover losses arising from any, or all, of such events, or that it will be able to renew existing insurance
cover on commercially reasonable terms, if at all.
In addition, WAPDA's insurance policies are subject to commercially negotiated deductibles,
exclusions and limitations, and WAPDA will only receive insurance proceeds in respect of a claim
made to the extent that its insurers have the funds to make payment. Therefore, insurance policies
may not cover all losses incurred by WAPDA and no assurance is given that WAPDA will not suffer
losses beyond the limits of, or outside the cover provided by, its insurance policies, or in excess of the
available funds of its insurers to make payment.

19
Should an incident occur in relation to which WAPDA has no insurance coverage or inadequate
insurance coverage, WAPDA could lose the capital invested in, and anticipated future revenue
relating to, any property that is damaged or destroyed and, in certain cases, WAPDA may remain
liable for financial obligations related to the impacted property. Any of these occurrences could have
a material adverse effect on WAPDA's business, results of operations and financial condition.
The SECP has granted an exemption from certain IFRS standards, including in relation to IFRS
16, and if these standards were to be applied in full, this could result in differences in amounts
reported in the Annual Financial Statements.
The Annual Financial Statements have been prepared in accordance with the accounting and reporting
standards as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan
comprise of IFRS issued by the IASB and notified under the Companies Act, 2017 by the SECP; and
IFAS issued by the ICAP as notified under the Companies Act, 2017. Where the provisions and
directive issued under the Companies Act, 2017, differ from IFRS, the provisions of and directives
issued under the Companies Act, 2017 have been followed. The SECP through its S.R.O.
no.24(I)/2012 dated 16 January 2012 and S.R.O 986(I)/2019, dated 2 September 2019, has granted an
exemption applicable to companies that have executed their PPAs prior to 1 January 2019 from
certain IFRS requirements. In addition, the SECP, through its S.R.O no. 985(I)/2019 dated 2
September 2019, promulgated an exemption from the requirements contained in IFRS 9 (Financial
Instruments) related to the application of the Expected Credit Losses method. This exemption is
applicable until 30 June 2021, in respect of financial assets due or ultimately due from the
Government of Pakistan, provided that companies shall follow the relevant requirements of IAS 39 –
Financial Instruments: Recognition and Measurement, in respect of such financial assets during the
exemption period.WAPDA has availed itself of these exemptions in the preparation of the Annual
Financial Statements. See "Presentation of Financial and Other Information" for further detail
regarding the basis of preparation of the Annual Financial Statements and the exemptions permitted
by the SECP.
One of the exemptions of which WAPDA Hydroelectric has availed itself is an exemption from IFRS
16 in relation to PPAs executed before the effective date of IFRS 16, which is 1 January 2019. IFRS
16 primarily changes lease accounting for lessees; lease agreements give rise to the recognition of an
asset representing the right to use the leased item, and a loan liability for future lease payables. Lease
costs are recognised in the form of depreciation of the right of use asset and interest on the lease
liability. WAPDA entered into its PPA with the NTDC on 24 January 2011 and the CPPAG
subsequently became a party to the PPA. Under the PPA, WAPDA is obligated to sell and deliver all
output of its power plants in accordance with the provisions of the PPA. The PPA would therefore fall
under the definition of a lease for purposes of IFRS 16. The application of IFRS 16 would require
WAPDA Hydroelectric to recognise right-of-use assets and lease liabilities on its statement of
financial position. This could also result in changes in depreciation on WAPDA Hydroelectric's
statement of profit or loss.
WAPDA Hydroelectric has also availed itself of the SECP exemptions in relation to IAS 21. See
"Presentation of Financial and Other Information" for further detail.
Management has assessed the impact of IFRS 16 on the Annual Financial Statements and believes
that there would be no significant impact. Nevertheless, there can no assurance that, if IFRS 16 were
to be applied in full (i.e., without the SECP exemption), this would not result in differences from the
amounts reported in the Annual Financial Statements.

20
RISK FACTORS RELATED TO THE GOVERNMENT

WAPDA is subject to risks associated with adverse macroeconomic developments in Pakistan and
the wider region.

WAPDA's operations are located in, and its revenue is sourced from, Pakistan. Accordingly, its results
of operations are, and are expected to continue to be, affected by political, financial and economic
developments in or affecting Pakistan and, in particular, by the level of economic activity in Pakistan
and the wider region. Factors such as GDP, inflation, interest and currency exchange rates, as well as
unemployment, personal income and corporate finance, can have a material impact on demand for
electricity in Pakistan. While historically, the Pakistani electricity market has been characterised by
insufficient generation capacity to meet demand, there can be no assurance that this will continue to
be the case going forward. Adverse macroeconomic conditions may also affect the creditworthiness of
the Government, which is WAPDA's sole customer via its ownership in NTDC and CPPAG, and may
exacerbate the "circular debt" issue described in "—Risks Relating to WAPDA—There can be no
assurance that the Government will be able to manage effectively the "circular debt" issue inherent in
the Pakistani electricity sector".
Pakistan's real GDP growth declined from 1.9 per cent. growth in FY19 to a contraction of 0.4 per
cent. in FY20 (provisional) largely due to the introduction of these measures. The contraction, which
was the first in decades, reflected the effects of COVID-19 containment measures, which followed
monetary and fiscal tightening prior to the outbreak. To curtail the spread of the pandemic, a partial
lockdown, including restrictions on air travel, inner-city public transport, religious/social gatherings
and the closure of all schools and non-essential businesses, was imposed in March 2020, and was
gradually eased from May 2020 onwards. This disrupted domestic supply and demand, as businesses
were unable to operate and consumers curbed their expenditures. The services sector is estimated to
have contracted by over 1 per cent., while industrial production is expected to have declined at an
even higher rate, due in part to the high policy rates prior to the pandemic and plunging domestic and
global demand thereafter. The agricultural sector, which was partially insulated from the effects of the
containment measures, is estimated to have expanded modestly over the year.
On the demand side, private consumption is estimated to have contracted in FY20, as households
reduced consumption amid the lockdown and dimmer employment prospects. Similarly, with
heightened uncertainty, disrupted supply chains and a global slowdown, investment is estimated to
have fallen drastically. Exports and imports also shrank in light of weaknesses in global trade and
domestic demand. By contrast, Government consumption grew, reflecting the rollout of the
Government's fiscal stimulus package to cushion the effects of the pandemic.
While domestic economic activity is expected to recover, as lockdown measures are lifted and base
effects materialise, Pakistan's near-term economic prospects remain subdued. Significant uncertainty
over the evolution of the pandemic and the availability of a vaccine, demand compression measures to
curb imbalances, along with unfavourable external conditions, all weigh on the outlook. The World
Bank estimates that GDP growth will average 1.3 per cent. over FY21 and 22, although this is
predicated on the absence of significant flare-ups in COVID-19 cases that would require further
widespread lockdowns.

Factors that could compromise the resumption of GDP growth in Pakistan include a resurgence of
COVID-19, triggering a new wave of global and/or domestic lockdowns and further delaying the
implementation of critical International Monetary Fund (IMF) structural reforms (which are expected
to resume during the second half of FY21). Locust attacks and heavy monsoon rains could lead to
widespread crop damage, food insecurity and inflationary pressures. Livelihoods for households
dependent primarily on agriculture could also be negatively impacted. Finally, external financing risks
could be compounded by difficulties in rolling over bilateral debt from non-traditional donors and
21
tighter international financing conditions. Any of the foregoing could have a material adverse effect
on Pakistan's economy and hence WAPDA's business, results of operations and financial condition.

Political instability, any change in Government and/or significant changes in Government policies
may negatively affect economic conditions in Pakistan.

Pakistan is a democratic parliamentary federal republic, with Islam as the state religion. Its first
constitution was adopted in 1956 but suspended in 1958 and replaced with a second constitution in
1962. A third constitution, which is currently operative, was adopted in 1973, suspended in 1977 and
reinstated in 1985. The Pakistani military has historically played a significant role in Pakistani
government and politics, with military coups that resulted in the imposition of martial law during the
periods 1958 to 1971, 1977 to 1988 and 1999 to 2008. During these periods, military commanders
governed Pakistan as de facto presidents. Due in part to these military interventions, Pakistan's
parliaments have tended to be short-lived and unstable. Even under civilian rule, the judiciary has
frequently encroached on parliamentary prerogatives and the executive branch has tended to dominate
the political agenda.
The 2013 general election marked Pakistan's first-ever civilian transfer of power following the
completion of a five-year term by a democratically elected government. On 5 June 2013, Nawaz
Sharif took office for a third non-consecutive term after winning a majority of parliamentary seats.
Nawaz Sharif was disqualified on 28 July 2017 by the Supreme Court of Pakistan. This followed a
leak of documents by the Panamanian law firm and corporate service provider, Mossack Fonseca, in
April 2016, which connected a number of prominent Pakistani individuals to that firm, including
Nawaz Sharif. On 1 August 2017, Parliament elected Shahid Khaqan Abbasi as Prime Minister after
the disqualification of Nawaz Sharif. Nawaz Sharif's wife, Kulsoom Nawaz, succeeded him, taking
his National Assembly seat following a by-election held in September 2017. Shahid Khaqan Abbasi's
term expired on 31 May 2018 alongside the dissolution of the National Assembly to facilitate a
caretaker government in place until the general election held on 25 July 2018, following which Imran
Khan, leader of the opposition party Pakistan Tehreek-e-Insaf, was elected the Prime Minister in a
coalition government including the Pakistan Tehreek-e-Insaf, Pakistan Muslim League (Q), Muttahida
Qaumi Movement, Balochistan Awami Party, Balochistan National Party (Mengal) and Jamhoori
Watan Party. Nawaz Sharif remains president of the Pakistan Muslim League (Nawaz), the second
largest party in Pakistan's governing coalition. The Pakistan National Accountability Court indicted
Nawaz Sharif on 8 November 2017 on corruption charges in relation to the matters which resulted in
his disqualification.
The National Accountability Court is also currently hearing the Supreme Court directed corruption
case against Finance Minister Ishaq Dar, who was indicted in September 2017 for possessing assets
beyond his means. He is currently in the United Kingdom on medical leave and has consequently not
attended the hearing. A warrant has been issued for his arrest in Pakistan as a result of his failure to
attend and a medical certificate has since been delivered to the National Accountability Court.
Political instability could negatively affect the Government's ability to continue to pursue economic
reforms, decrease international investor confidence and thereby affect the performance of the
Pakistani economy and therefore WAPDA's business, results of operations and financial condition.
See also "⸺Failure to adequately address actual and perceived risks of corruption may negatively
affect Pakistan's economy and ability to attract foreign direct investment".

22
Hostilities, terrorist attacks, civil unrest and other acts of violence could negatively affect
Pakistan's economy.

In the aftermath of the terrorist attacks on 11 September 2001, Pakistan assumed the role of a frontline
state in the global fight against terrorism. The onset of war in Afghanistan affected Pakistan's normal
trading activities, with the cost of trading increasing substantially due to higher insurance costs.
Consequently, economic growth slowed and demand for imports reduced, with a consequential
decline in tax collection, and inflows of foreign direct investment fell. Pakistan's economy has
remained under pressure as a result of the war on terrorism, which has cost over 62,500 lives, eroded
the investment climate and reduced economic activity in many parts of Pakistan.
In 2014, 2015 and 2016, Pakistan faced several terrorist attacks, including an attack on the Army
Public School in Peshawar, a public park in Lahore, a hospital in Quetta and on the shrine of Lal
Shahbaz Qalandar in Sehwan, each of which resulted in the loss of life. On 23 June 2017, 96 people
were killed and over 200 were injured in twin bombings in Parachinar in Kurram Agency of the
Federally Administered Tribal Areas, a suicide bombing in Quetta targeting policemen and the
targeted killing of four policemen in Karachi.
In June 2014, Pakistani armed forces commenced an operation against multiple terrorist groups
known as Zarb-e-Azab (meaning Sharp and Cutting Strike). The armed forces successfully destroyed
the command centres of these terrorist groups. Although there was a significant reduction in the
number of terrorist attacks in Pakistan following the operation, in February 2017, the terrorist group
Jamaat-ul-Ahrar launched several suicide attacks across Pakistan including in Lahore, Ghalanai in the
Mohmand Agency of the Federally Administered Tribal Areas, Peshawar and Tangi in the Charsadda
District of Khyber-Pakhtunkhwa. In response to these and other related terrorist attacks, in February
2017, Pakistani armed forces launched an operation known as Radd-ul-Fasaad (meaning Elimination
of Discord) aimed at eliminating the threat of terrorism and consolidating gains from previous
operations. Radd-ul-Fasaad was also aimed at ensuring the security of Pakistan's borders. Despite the
successes of these operations, terrorism remains a threat both regionally and in Pakistan. As a result of
successful military operations against terrorists, there has been a significant decline in the number of
terrorist attacks in Pakistan, although there can be no assurance that this trend continues.
Furthermore, Kashmir remains an ongoing source of tension between India and Pakistan. Most
recently, in June 2018, the state government there was upended when Narendra Modi's Bharatiya
Janata Party pulled out of a coalition government run by the People's Democratic Party. Since then,
Jammu and Kashmir have been under direct rule from Delhi, which has caused further tensions. On
14 February 2019, over 40 Indian soldiers were killed in a suicide attack, with India blaming
Pakistan-based militant groups for the violence. On 26 February 2019, India launched air strikes in
Pakistani territory which it said targeted militant bases. A day later, Pakistan claimed that it had shot
down two Indian Air Force jets in its airspace and had captured a fighter pilot, who was later returned
unharmed to India. On 5 August 2019, India revoked Article 370, a provision of its constitution which
had guaranteed a measure of autonomy for the state of Jammu and Kashmir, and imposed a security
lockdown pursuant to which thousands of citizens were detained. There have subsequently been
spikes of violence in the region. In addition to the direct negative impact of violent activity on the
economy, terrorist incidents and general terrorist activities could create an increased perception that
investments in Pakistan involve a high degree of risk and could have a negative impact on the
economy.
In addition, the Diamer Bhasha Dam, which WAPDA is developing, will be located in the northern
Gilgit Baltistan region, which is part of disputed Kashmir. Any escalation of tensions in Kashmir
could therefore directly affect WAPDA's operations and border disputes could results in delays to the
development of the Dam. See also "⸺Factors that May Affect the Issuer's Ability to Fulfil its
Obligations Under the Notes⸺WAPDA's future business is subject to substantial development
23
uncertainties. Development projects may not be completed, be completed efficiently or perform as
expected. WAPDA's development activities may also increase its leverage, and if not successful, may
reduce its profitability". Any of the foregoing could have a material adverse effect on WAPDA's
business, results of operations and financial condition.
The IMF programme approved in July 2019 remains critical for Pakistan's ability to ensure
sufficient funding for its external financing needs and the development of Pakistan's economy.
Given Pakistan's considerable external financing needs, unaddressed structural challenges and
financing needs for the implementation of its comprehensive economic recovery programme (in June
2019, the Government estimated that the financing needs related to the implementation of such
programme for the next 39 months are expected to amount to U.S.$38.6 billion), support from the
IMF through its 39-month extended arrangement under the Extended Fund Facility (the IMF EFF),
which was approved by the Executive Board of the IMF on 3 July 2019, is likely to remain critical in
the near- to medium-term.
On 19 December 2019, the IMF Board completed the first review of Pakistan's economic performance
under the IMF EFF. The completion of the review process allowed the Pakistani authorities to draw
SDR 328 million (approximately U.S.$452.4 million). The outbreak of the COVID-19 pandemic
temporarily suspended further funding under the IMF EFF, although Pakistan requested and received
financial assistance from the IMF under the Rapid Financing Instrument (RFI) in the amount of SDR
1,015.5 million (approximately U.S.$1,386 million) to help address its urgent fiscal and balance of
payments needs. With respect to the IMF EFF, the impact of the COVID-19 pandemic has required a
careful recalibration of the macroeconomic policy mix, the reforms calendar and the EFF review
schedule. In February 2021, an IMF team concluded virtual discussions with the Pakistani authorities
and reached a staff-level agreement on the second to fifth reviews of the Government's reform
programme supported by the U.S.$6 billion IMF EFF. On 24 March 2021, the IMF Board completed
the combined second through fifth reviews of the Extended Arrangement under the IMF EFF. The
approval by the IMF Board allows for an immediate release of approximately U.S.$500 million.
Pakistan's ability to ensure sufficient funding for its external financing needs and the development of
its economy are, to a large extent, dependent on disbursements under the IMF EFF, which may be
withheld upon any failure of Pakistan to comply with the quantitative performance criteria and
indicative targets set by the IMF EFF and/or any failure to meet the requirements set in the
programme's structural benchmarks. In addition to direct financing under the IMF EFF, this
programme also helps to obtain financing from other sources, such as the World Bank and the Asian
Development Bank, and could improve access to global capital markets. Therefore, Pakistan's ability
to raise future financing from international financial institutions and its international partners is, to a
large extent, dependent on its continued compliance with the targets and requirements set in the IMF
EFF, which remain subject to the discretion of the IMF.
Failure to successfully implement the Government's current comprehensive economic recovery
programme aligned with the IMF EFF programme may result in an inability to meet Pakistan's
external financing needs and have an adverse effect on macroeconomic stability.
Pakistan is highly reliant on external sources for meeting its external financing needs and financing its
budget deficit. By the time of the adoption of the IMF EFF programme, the Government had already
secured financing commitments from several bilateral and multilateral partners such as China, Saudi
Arabia, the United Arab Emirates, the World Bank, the Asian Development Bank and the Islamic
Development Bank. Some of these financial commitments, however, are now no longer available. For
example, the U.S.$3.2 billion credit facility provided by Saudi Arabia to Pakistan to cover oil imports
from Saudi Arabia has since expired without being fully drawn and deposits made by Saudi Arabia in
Pakistan in the total amount of U.S.$2.0 billion have matured and have not been rolled over. With the
adoption of the IMF EFF programme in July 2019, broader support from 18 multilateral and bilateral
24
creditors was expected to reach approximately U.S.$38 billion, which is crucial for Pakistan to meet
its large financing needs in the coming years.
Further external borrowings under the IMF EFF programme and from multilateral organisations and
other external sources may depend on the Government's success in implementing its comprehensive
economic recovery programme as modified by the Government following the outbreak of the
COVID-19 pandemic, which, among other things, includes:
 broadening the tax base through documentation of the economy, removal of tax exemptions and
concessions and strengthening tax administration;

 maintaining a flexible, market-determined exchange rate system;

 improving the business climate by creating an enabling environment for private sector
investment and job creation and in the process reducing the scope of Pakistan's large informal
economy. Specific measures include simplifying customs processes and business registration
and reviewing existing regulations to further facilitate private sector investment and encourage
private sector participation in the economy;

 improving cost recovery in the energy sector by rationalising subsidies, allowing regulators to
set electricity and gas tariffs in line with generation costs and gas purchase prices and
institutionalising regular and timely adjustments to improve energy sector efficiency;

 strengthening the SBP's autonomy and governance;

 ending deficit monetisation;

 improving the governance and efficiency of state-owned enterprises (SOEs) and facilitating
their privatisation; and

 strengthening the effectiveness of the anti-money laundering and countering financing of

terrorism (AML/CFT) regime, including fully implementing the action plan agreed with the
Financial Action Task Force (FATF) to facilitate an early exit from the FATF "Grey List".

Factors which may impede the implementation of these reforms include:

 adverse impact of the COVID-19 pandemic, particularly through depressed economic growth
and pressure on the public finances;

 deterioration of security situation in the country;

 potential social resistance to austerity measures;

 recovery in economic activity taking longer or proving more difficult than initially expected;

 real exchange rate shocks;

 a larger than expected fiscal burden emanating from the energy sector;

 political difficulties or delays in implementing structural and other reforms; and

 external factors, including any escalation of conflict around Kashmir.

25
If Pakistan is unable to successfully implement the comprehensive economic recovery programme
and meet the criteria set out in the IMF EFF and various other support programmes provided by
multilateral organisations and official creditors, these sources may withhold or suspend further
funding. See "—The IMF programme approved in July 2019 remains critical for Pakistan's ability to
ensure sufficient funding for its external financing needs and the development of Pakistan's economy".
This withdrawal or suspension of funding, combined with any inability of Pakistan to access the
international capital markets or syndicated loan markets, would put severe pressure on Pakistan's
foreign exchange reserves and budget and could have a material adverse effect on Pakistan, and
therefore WAPDA's ability to perform its payment obligations under the Notes.
Moreover, if the current comprehensive economic recovery programme is not successfully
implemented, Pakistan's significant deficit on the fiscal account may persist or even increase and the
current account balance may again turn negative, which may pose major risks to macroeconomic
stability, and Pakistan's current economic and structural problems may persist or even worsen, all
having an adverse effect on Pakistan's economy, which was already experiencing a period of muted
economic growth prior to the outbreak of the COVID-19 pandemic and negative economic growth of
0.4 per cent in FY20.

Failure to adequately address actual and perceived risks of corruption may negatively affect
Pakistan's economy and ability to attract foreign direct investment.

Although Pakistan has implemented and is pursuing major initiatives to prevent and fight corruption
and money laundering, Pakistan is ranked 124 out of 180 countries in Transparency International's
2020 Corruption Perceptions Index. Pakistan was ranked 120 in 2019 and 117 in each of 2018 and
2017 in that index. Pakistan also remains on the FATF's "Grey List" due to its relatively weak
framework for combating money laundering and the financing of terrorism.
Pakistan has implemented various measures to prevent and fight corruption and money laundering
since 1999. In particular, Pakistan created the National Accountability Bureau (the NAB) in 2000, a
body which is mandated to combat corruption and money laundering (using its powers of
investigation and prosecution) and, in 2007, the Financial Monitoring Unit (the FMU) was established
to detect and report financial information relating to criminal activity to the relevant law enforcement
agencies tasked with investigating and prosecuting money laundering. In addition, new legislation has
been adopted to enhance the prosecutorial powers of law enforcement agencies, including the Anti-
Money Laundering Act 2010, which was enacted to combat the financing of terrorism and to
criminalise money laundering. The Act provides for the forfeiture of property derived from money
laundering. There have been a number of high-profile prosecutions and convictions for corruption,
including high ranking political personalities who are facing legal charges for holding assets overseas
through illegal means. See also "⸺Political instability, any change in Government and/or significant
changes in Government policy may negatively affect economic conditions in Pakistan".
Despite such initiatives to fight corruption, corruption remains a material challenge in Pakistan and
further progress is required. Failure to address these issues in a timely manner, continued corruption
in the public sector and any future allegations of, or perceived risk of, corruption in Pakistan could
have a negative effect on the economy and may have a negative effect on Pakistan's ability to attract
foreign investment, which in turn could adversely affect WAPDA's business, results of operations and
financial condition.

26
The Pakistani economy has in the past experienced high inflation, which could adversely affect the
investment climate.

The Pakistani economy has in the past experienced periods of high inflation, as measured by the
consumer price index (CPI). Despite weak economic activity, CPI rose from an average of 6.8 per
cent. in FY19 to an average of 10.7 per cent. in FY20 due to surging food inflation, hikes in
administered energy prices, and a weaker Rupee, which depreciated 16.1 per cent. against the U.S.
Dollar in FY20. With elevated inflationary pressures, the SBP's policy rate was held at 13.25 per cent.
from July to March but was gradually lowered to 7.0 per cent. in June 2020 to support dwindling
activity and as inflationary expectations fell amid the COVID-19 pandemic. The level of inflation
may be affected by factors such as any future depreciation of the Rupee, rising food and energy
prices, volatility in global harvests and GDP growth rates. Any failure to control inflation could have
a material adverse effect on the investment climate in Pakistan and negatively affect the Pakistani
economy, which could in turn adversely affect WAPDA's business, results of operations and financial
condition.

Pakistan's fiscal deficit and debt levels could negatively impact Pakistan's credit rating and could
have a material adverse effect on the Pakistani economy.

Pakistan's fiscal deficits have led to increased levels of Government borrowing, which have, in turn,
increased Pakistan's gross public debt. Although Pakistan's overall fiscal deficit decreased from 9.1
per cent of GDP in FY19 to 8.1 per cent of GDP in FY20, the overall fiscal deficit remains high. If
Pakistan is unable to continue to reduce its overall fiscal deficit and the resulting effect on the public
debt, it could raise Pakistan's cost of funding its debt, negatively affect the economy, strain the general
resources of the Government and the Government's finances, increase its vulnerability to external
events, hinder the Government's structural reform efforts and materially impair Pakistan's capacity to
service its debt.

Over the past five fiscal years, gross public debt, as a percentage of GDP, has remained relatively
high. As at 30 June 2020, total gross public debt represented 87.2 per cent of GDP, as compared to
86.1 per cent of GDP as at 30 June 2019, 72.1 per cent of GDP as at 30 June 2018, 67.1 per cent of
GDP as at 30 June 2017 and 67.7 per cent of GDP as at 30 June 2016. Total external debt and
liabilities have also increased since FY16, from 26.5 per cent of GDP as at 30 June 2016 to 27.4 per
cent of GDP as at 30 June 2017, 30.2 per cent of GDP as at 30 June 2018, 38.1 per cent of GDP as at
30 June 2019 and 42.8 per cent of GDP as at 30 June 2020. Similarly, public external debt have also
increased since 2016-2017, from 20.5 per cent of GDP as at 30 June 2017 to 22.3 per cent of GDP as
at 30 June 2018, 26.3 per cent of GDP as at 30 June 2019 and 29.6 per cent of GDP as at 30 June
2020. As at 30 June 2020, 31.2 per cent of Pakistan's public external debt was derived from bilateral
loans. The availability of bilateral loans may be tied to, or influenced by, geopolitical interests and
developments.

Pakistan has obtained debt relief from bilateral creditors under the G20 Debt Service Suspension
Initiative (DSSI) in 2020. In November 2020, the G20 introduced the "Common Framework for Debt
Treatments beyond the Debt Service Suspension Initiative", a separate initiative under which eligible
countries (including Pakistan) may apply for further debt relief potentially including private creditors.
Although Pakistan has not yet applied under this framework, if the country decided to do so it may
adversely impact its ability to service its debt obligations.

Total expenditure on Pakistan's external public debt servicing amounted to U.S.$11,075 million in
FY20, of which U.S.$9,043 million was accounted for by principal repayments and U.S.$2,032
27
million by interest payments. Interest payments with respect to domestic and external public debt
accounted for 38.41 per cent of the federal government's current expenditure in FY20 and is expected
to increase to 46.4 per cent in the budget for FY21. This high share of interest in the federal
government's current expenditure, together with Pakistan's low tax revenues (Pakistan's tax-to-GDP
ratio decreased to 11.6 per cent in FY19 and then slightly further decreased to 11.4 per cent in FY20)
hinder its affordability of further borrowings and may impact debt sustainability.

High levels of indebtedness, which may increase as a result of continued borrowing, could negatively
impact Pakistan's credit rating and could have a material adverse effect on the Pakistani economy.

If the Rupee were to depreciate against the U.S. Dollar, the Euro or other major currencies, this
could have a material adverse effect on Pakistan's ability to service its debt denominated in
currencies other than the Rupee.

The Rupee depreciated 16.1 per cent. against the U.S. Dollar in FY20, due in part to the lowering of
the policy rate in the second half of the fiscal year. This compared to depreciation of 23.9 per cent. in
FY19. The depreciation of the Rupee against the U.S. Dollar, the Euro or other major foreign
currencies could have an effect on Pakistan's ability to repay its debt denominated in currencies other
than the Rupee. In addition, a significant depreciation of the Rupee against the U.S. Dollar, the Euro
or other foreign currencies may result in reduced Government and other revenues, which could have a
material adverse effect on Pakistan's economy. As at 30 June 2020, Pakistan's total public external
and liabilities were U.S.$112.86 billion, which represents 42.8 per cent. of the GDP, as compared to
U.S.$ 106.35 billion, which represented 38.1 per cent. of the GDP as at 30 June 2019. Depreciation
against foreign currencies could also increase the cost for Pakistan to repay its foreign currency
denominated external debt. Depreciation in the value of the Rupee could also lead to higher inflation,
which, in turn, could have an adverse effect on the Pakistani economy. See "—The Pakistani economy
has in the past experienced high inflation, which can adversely affect the investment climate".
Low levels of foreign exchange reserves may negatively affect Pakistan's ability to maintain
liquidity and meet its external obligations.
The SBP's net foreign exchange reserves were adversely affected by significant current account
deficits in recent years and declined to U.S.$7.3 billion as at 30 June 2019 (equating to 1.6 months'
worth of imports of goods and services) from U.S.$9.8 billion as at 30 June 2018 and U.S.$16.1
billion as at 30 June 2017. Total liquid foreign exchange reserves also decreased during this period to
U.S.$14.5 billion as at 30 June 2019 from U.S.$16.4 billion as at 30 June 2018 and U.S.$21.4 billion
as at 30 June 2017.
In addition, the SBP's forward/swap short position reached U.S.$8.0 billion as at 30 June 2019 (up
from U.S.$7.0 billion as at 30 June 2018). In May 2019, the SBP implemented a flexible market-
determined exchange rate system. The SBP now only intervenes in the foreign exchange market to
prevent disorderly market conditions, while at the same time not suppressing an underlying trend and
in a manner consistent with rebuilding reserves. The implementation of a flexible market-determined
exchange rate system along with other policy measures helped to initially reduce the current account
deficit and then turn it into a current account surplus in the first eight months of FY21. This has
enabled the SBP to build its foreign exchange reserves.
The SBP's net foreign exchange reserves increased to U.S.$12.1 billion as at 30 June 2020 and to
U.S.$13.0 billion as at 12 March 2021, while total liquid foreign exchange reserves increased to
U.S.$18.9 billion as at 30 June 2020 and to U.S.$20.2 billion as at 12 March 2021. The SBP's
forward/swap short position decreased from U.S.$8.0 billion as at 30 June 2019 to U.S.$5.8 billion as

28
at 30 June 2020 and further decreased to U.S.$4.6 billion as at 31 December 2020. Nevertheless,
foreign exchange reserves remain at a low level against large external debt repayments.
In the medium term, the market-determined exchange rate system and improved access to external
financing are expected to further strengthen foreign exchange reserves. However, if the current
account balance shifts from surplus to deficit again and/or projected external inflows do not
materialise, this may adversely affect the pace of accumulation of foreign exchange reserves.
Pakistani banks experience increases in non-performing loans and are heavily exposed to the
sovereign credit risk.
With the slowdown in advances caused by the impact of the COVID-19 pandemic and increases in
non-performing loans (NPLs), gross NPLs to loans ratio for Pakistani banks increased to 9.2 per cent
as at 31 December 2020 from 8.6 per cent as at 31 December 2019. Any further significant increases
in NPLs or other significant asset quality deterioration may cause certain banks to fail to be in
compliance with applicable regulatory requirements, including capital adequacy requirements. This
could, in turn, cause such banks to reduce lending activities. A severe deterioration of performance of
the Pakistani banking sector could adversely affect the Pakistani economy.
In addition, Pakistani banks are heavily exposed to the Pakistan sovereign through large holdings of
government securities and lending. This links their creditworthiness with that of the Government.
Pakistani banks held government securities worth Rupees 10.8 trillion, which was equivalent to 7.4x
their Tier 1 capital as at 31 December 2020. Including lending to the Government and to public-sector
entities, the exposure rose to around 9.0x their Tier 1 capital as at 31 December 2020. This exposure
makes the Pakistani banking system vulnerable in case of a crisis affecting the sovereign.

WAPDA is subject to risks associated with the failure of the Government to pursue or maintain the
pace of economic reforms.

In connection with the EFF approved in 2019, the IMF observed that structural weaknesses in
Pakistan remain largely unaddressed, including a chronically weak tax administration, a difficult
business environment, inefficient and loss making state-owned entities (SOEs) and a large informal
economy. Without urgent policy action, economic and financial stability could be at risk, and growth
prospects will be insufficient to meet the needs of a rapidly growing population.

Although the Government is pursuing an economic reform agenda to address these concerns and has
already achieved significant targets set in relation to macroeconomic performance, there remain
macroeconomic challenges to achieving sustained growth, including further fiscal consolidation,
structural reforms, improving infrastructure, enhancing tax revenues, reducing public debt levels,
strengthening the balance of payments and reserves (by increasing exports and foreign direct
investment, both of which remain lower than the Government has targeted), maintaining low inflation,
improving the social safety net, privatisation of SOEs and reducing shortfalls in energy through the
China Pakistan Economic Corridor and other projects.

The Government has undertaken certain initiatives aimed at increasing the number of taxpayers,
including issuing additional notices to potential taxpayers, reducing tax concessions and exemptions,
strengthening Pakistan's tax administration and implementing penal measures for the non-payment of
tax. Notwithstanding these initiatives, Pakistan's tax-to-GDP ratio remains relatively low compared to
other emerging markets and tax collection targets may not be met, which may impact budgeted
revenue receipts. In addition, efforts to increase the number of corporate taxpayers have continued to
be challenging and there can be no assurance such efforts will be successful. These efforts have also

29
been stymied by the COVID-19 pandemic, which caused Pakistan to miss a tax revenue target that
had recently been revised downward and agreed with the IMF in connection with the EFF.

In relation to SOEs, to date, a number of privatisations have not been completed due to various
internal and external factors. A failure to achieve the targeted privatisations due to negative conditions
in the international and/or domestic markets could have a material impact on Pakistan's budget
performance and put further pressure on the budget deficit. In 2019, the Government prepared an
updated action plan for the privatisation of 49 key SOEs in the power, oil and gas, banking, insurance,
infrastructure, telecommunications, real estate and industrial sectors over the following five years.
The privatisation plan is expected to be achieved primarily through domestic and international capital
markets transactions or strategic sales. Although the Government has stated that it is committed to its
privatisation policy, certain privatisations have been delayed and the Government has successfully
completed only four privatisations via the capital markets since April 2014 and one via a strategic
sale. In total, the Privatisation Commission has raised PKR 170.9 billion, including over U.S.$1.1
billion in foreign exchange, from these completed transactions. In January 2020, the Government
announced a plan to privatise 33 SOEs, including six public enterprises, by the end of 2021 but none
of these SOEs have been privatised as at the date of this Offering Circular.

See also "—Failure to successfully implement the Government's current comprehensive economic
recovery programme aligned with the IMF EFF programme may result in an inability to meet
Pakistan's external financing needs and have an adverse effect on macroeconomic stability".

Pakistan's current account deficit may negatively affect its ability to meet its external obligations.

In FY18, the current account deficit widened to 6.1 per cent of GDP, reflecting the fiscal stimulus and
an accommodative monetary policy. While Pakistan's exports of goods increased and reached
U.S.$24.8 billion in FY18 showing growth of 12.6 per cent over the previous financial year, imports
of goods increased by 16.0 per cent as compared to 2016-17 and reached the highest ever level of
U.S.$55.7 billion. As a result, the trade deficit widened to U.S.$30.9 billion, which was the highest in
the last decade. Historically, workers' remittances have been providing support to sustain current
account deficit as a buffer against trade deficit, but in FY18 workers' remittances grew by only 2.9 per
cent as compared to FY17, while the trade deficit recorded an 18.9 per cent increase in the same year.

The Government has taken various corrective measures including moving to a market-determined
flexible exchange rate system since May 2019, monetary tightening, fiscal consolidation and
imposition of regulatory duties to contain the current account deficit. To support its home-grown
stabilisation measures, Pakistan also entered into the IMF EFF programme on 3 July 2019. Under this
programme, the IMF is expected to extend approximately U.S.$6.0 billion over a period of 39 months
from July 2019. As a result of stabilisation measures, Pakistan's current account deficit decreased to
4.8 per cent of GDP in FY19 and then further decreased to 1.1 per cent of GDP in FY20. Lower
imports of goods and higher remittances contributed to the narrower deficit. Imports of goods
decreased by 6.8 per cent in FY19 as compared to FY18 to U.S.$51.9 billion and then further
decreased by 18.2 per cent in FY20 to U.S.$42.4 billion. This was largely due to the impact of policy
measures ranging from exchange rate depreciation and policy rate hikes (prior to the outbreak of the
COVID-19 pandemic) to higher import duties on non-essential items, a benign import prices
environment and COVID-19-related demand compression. Workers' remittances increased by 9.2 per
cent to U.S.$21.7 billion in 2018-19 and then further increased by 6.4 per cent to U.S.$23.1 billion in
FY20. However, the largely positive dynamics in the current account has not been supported by
higher exports, the value of which decreased by 2.1 per cent in 2018-19 as compared to 2017-18 and
then further decreased by 7.2 per cent in FY20.

30
The current account deficit has narrowed significantly in FY20 and turned into a surplus in the first
eight months of FY21. However, the pick-up in the domestic economic activity and a recovery in the
global economy resulting in higher commodity prices may put significant pressure on the current
account balance. This, in turn, may increase external financing needs for Pakistan and may further
increase external indebtedness, putting additional pressure on Pakistan and therefore WAPDA's
ability to service its payment obligations under the Notes.

Natural calamities could have a negative impact on the Pakistani economy.

Pakistan has experienced natural calamities such as floods, earthquakes, landslides, droughts and
severe heat waves in recent years, including severe flooding along the Indus River in 2010 and 2011
and extensive flooding in 2014, 2015 and 2020. Such developments can have a particularly negative
impact on Pakistan's economy given its significant dependence on the agricultural sector and
infrastructure constraints. The floods resulted from unusually heavy monsoon rains in various areas of
Pakistan and affected about 20 million people. The affected regions suffered extensive damage to
economic assets and infrastructure, and millions of people were displaced, resulting in disruptions to
the delivery of social services, commerce and communications. Floods in 2015 resulted in the deaths
of 238 people whilst nearly 10,700 homes were damaged in 411 villages, and over 1.5 million people
were displaced, according to the National Disaster Management Authority. The 2015 floods also
significantly affected Pakistan's agricultural sector (particularly the cotton industry), which had been
predicted to grow by 3.9 per cent. in FY16 but, principally as a result of floods and a pest attack, grew
by only 0.27 per cent. Floods in Karachi in August 2020 resulted in the deaths of around 41 people,
according to the National Disaster Management Authority. In addition, certain of WAPDA's projects
may be subject to heightened risk of natural calamities. For example, the Diamer Bhasha Dam is
located in an area that is subject to seismic activity, which WAPDA has sought to manage through the
implementation of various measures. The occurrence of natural disasters or severe climatic
conditions, such as earthquakes or prolonged spells of abnormal rainfall or drought, could have a
negative impact on Pakistan's economy. Moreover, efforts to mitigate extreme climatic conditions,
such as floods, would require very significant funding, which could have a negative impact on
Pakistan's fiscal situation, which in turn could have a material adverse effect on WAPDA's business,
results of operations and financial condition.

Pakistan's foreign currency credit rating is sub-investment grade.

Pakistan's long-term foreign currency debt is currently assigned a rating of "B-" with a stable outlook
by S&P, a rating of "B3" with a stable outlook by Moody's and a rating of "B-" with a stable outlook
by Fitch. These ratings are sub-investment grade, and past rating downgrades have negatively
affected, and may continue to negatively affect, investor confidence in Pakistan, which could, in turn,
have a material adverse effect on WAPDA's business, results of operations and financial condition. A
rating is not a recommendation to buy, sell or hold securities, and there can be no assurance that a
credit rating will remain for any given period of time or that a credit rating will not be subject to
revision, suspension, downgraded or withdrawn entirely by the relevant rating agency if, in its
judgment, circumstances in the future so warrant. A suspension, downgrade or withdrawal at any time
of the credit rating assigned to Pakistan may adversely affect the market price of the Notes. Any
decrease in the rating of Pakistan could raise the cost of financing required by WAPDA so as to
adversely affect the price that a purchaser will be willing to pay for the Notes, cause trading in the
Notes to be volatile, adversely affect the trading price of the Notes and limit WAPDA's access to the
debt capital markets.

31
The statistics published by Pakistan may differ from those produced by other sources

A range of Ministries, public statistic agencies (including the Pakistan Bureau of Statistics) and the
SBP produce statistics relating to Pakistan and its economy, including statistics in relation to GDP,
balance of payments, revenues and expenditure of the Government and indebtedness of Pakistan. The
statistical data appearing in this Offering Circular has been obtained from public sources and
documents. Investors may be able to obtain similar statistics from other sources, but the underlying
assumptions, methodology and, consequently, the resulting data may vary from source to source.
Additionally, the statistics produced by Pakistan may have certain weaknesses that could impede an
analysis of the Pakistani economy. Pakistan subscribed to the e-GDDS with NSDP of the International
IMF in January 2019, but data improvements in certain areas are still required and the Government is
also in the process of drafting a fiscal responsibility law covering guidance on reporting and data
quality obligations of the Government. As a result of the foregoing, financial and economic
information may differ from previously published figures and may subsequently be adjusted or
revised. No assurance can be given that material changes will not be made. Consequently, the
statistical data contained in this Offering Circular should be treated with caution by prospective
investors.

Emerging markets such as Pakistan are subject to greater risks than more developed markets, and
financial turmoil in the global markets could disrupt the economy.

Emerging markets, such as Pakistan, are subject to increased political, economic and legal risks.
Generally, investments in emerging markets are only suitable for sophisticated investors who fully
appreciate, and are familiar with, the significance of the risks involved in investing in emerging
markets. Investors should also note that emerging markets such as Pakistan are subject to rapid
change and that the information set forth in this Offering Circular may become outdated relatively
quickly. Moreover, financial turmoil in any emerging market country tends to negatively affect prices
in the financial markets of all emerging market countries as investors move their money to more
stable, developed markets. Significant changes in global macroeconomic conditions such as global
monetary policies (notably in the U.S. and EU), global commodity prices and economic conditions in
major international markets including China, can impact capital and financing flows and have a
significant impact. Even if Pakistan's economy is stable, financial turmoil in the global financial
markets could negatively affect the economy and WAPDA's ability to make payments of principal
and interest on the Notes.

Pakistan has in the past and continues to trade with certain sanctioned countries or entities.

Pakistan has had, and continues to have, trade relations with certain countries or entities subject to
sanctions administered by the Office of Foreign Assets Control (OFAC) of the U.S. Department of
the Treasury, the EU and other member states of the EU and the U.N. Security Council (collectively,
Sanctions). Pakistan also maintains diplomatic relations with, and has embassies in, certain countries
subject to Sanctions. Pakistan believes that these trade relations and diplomatic activities have not
violated, and do not violate, any Sanctions. If such trade transactions were engaged in by U.S. persons
(as such term is defined in 31 C.F.R. § 538.315 (2018)) and/or transacted in U.S. Dollars, such
transactions could potentially be subject to sanctions administered by OFAC. The application of
Sanctions, in particular in circumstances in respect of sovereigns (such as, Pakistan), is to a degree
situational and discretionary, and likely to be related to foreign policy considerations. The existence
of Sanctions, however, leaves open the possibility of interpretations or actions that could adversely
affect Pakistan's trade flows or other activities with such sanctioned countries or entities and/or
Pakistan's ability to attract third-party financing.

32
FACTORS WHICH ARE MATERIAL FOR THE PURPOSE OF ASSESSING THE MARKET
RISKS ASSOCIATED WITH THE NOTES
Risks related to the "green" nature of the Notes

The Notes may not be a suitable investment for all investors seeking exposure to green assets.
Pursuant to the recommendation in the voluntary process guidelines for issuing green bonds published
by the International Capital Market Association (ICMA) (the Green Bond Principles) that issuers
use external review to confirm their alignment with the key features of the Green Bond Principles, at
WAPDA's request, Sustainalytics issued a Second Party Opinion dated 12 February 2021 (the Second
Party Opinion) in relation to WAPDA's published green bond framework (the Green Bond
Framework). WAPDA also intends to commission a compliance review within one year of the date
of this Offering Circular confirming that the proceeds of the Notes have been allocated in accordance
with the use of proceeds specified in the Green Bond Framework.
The Second Party Opinion is not incorporated into, and does not form part of, this Offering Circular.
None of the Issuer or the Joint Bookrunners makes any representation as to the suitability of the
Second Party Opinion. The Second Party Opinion is not subject to any specific regulatory or other
regime or oversight and is not a recommendation to buy, sell or hold securities and is only current as
of the date it was initially issued. Furthermore, the Second Party Opinion is for information purposes
only and Sustainalytics does not accept any form of liability for the substance of its Second Party
Opinion and/or any liability for loss arising from the use of its Second Party Opinion and/or the
information provided therein. Prospective investors must determine for themselves the relevance of
the Second Party Opinion and/or the information contained therein and/or the Second Party Opinion
provider for the purposes of any investment in the Notes. A withdrawal of the Second Party Opinion
or of any report, assessment or certification attesting that WAPDA is not complying in whole or in
part with the use of proceeds specified in the Green Bond Framework may affect the value of the
Notes and/or may have consequences for certain investors with portfolio mandates to invest in green
assets. No assurance or representation is given as to the suitability or reliability for any purpose
whatsoever of the Second Party Opinion.
WAPDA has committed to certain use of proceeds and reporting obligations as described in "Use of
Proceeds". Prospective investors should have regard to the information regarding the use of proceeds
and must determine for themselves the relevance of such information for the purpose of any
investment in the Notes together with any other investigation such investor deems necessary. In
particular, no assurance is given by WAPDA, the Green Structuring Agent, or the Managers that the
use of such proceeds for any Eligible Green Projects (as defined herein) will satisfy, whether in whole
or in part, any present or future investor expectations or requirements as regards any investment
criteria or guidelines with which such investor or its investments are required to comply, whether by
any present or future applicable law or regulations or by its own by-laws or other governing rules or
investment portfolio mandates, in particular with regard to any direct or indirect environmental,
sustainability or social impact of any projects or uses, the subject of or related to, any Eligible Green
Projects. Furthermore, it should be noted that there is currently no clear definition (legal, regulatory or
otherwise) of, nor market consensus as to what constitutes, a "green" or "sustainable" or an
equivalently-labelled project or as to what precise attributes are required for a particular project to be
defined as "green" or "sustainable" or such other equivalent label nor can any assurance be given that
such a clear definition or consensus will develop over time. However, on 18 December 2019, the
Council of the EU and European Parliament reached a political agreement on the proposed regulation
for the establishment of a framework to facilitate sustainable investment (the Taxonomy Regulation)
which would create an EU-wide classification system (or "taxonomy") and a common framework for
determining the extent to which economic activities are "environmentally sustainable". On 20
November 2020, the European Commission published a draft delegated regulation, containing the
33
applicable technical screening criteria for climate change mitigation and climate change adaptation
under the Taxonomy Regulation, for consultation. The consultation period closed on 18 December
2020. However, the full scope and applicability of this taxonomy, as well as exactly when it will take
effect, remains uncertain. Accordingly, no assurance is or can be given to investors that any projects
or uses the subject of, or related to, any Eligible Green Projects will meet any or all investor
expectations regarding such "green", "sustainable" or other equivalently-labelled performance
objectives or that any adverse environmental, social and/or other impacts will not occur during the
implementation of any projects or uses the subject of, or related to, any Eligible Green Projects.
In the event that the Notes are listed or admitted to trading on any dedicated "green", "environmental"
or "sustainable" or other equivalently-labelled segment of any stock exchange or securities market
(whether or not regulated), no representation or assurance is given by WAPDA, the Green Structuring
Agent, the Managers or any other person that such listing or admission satisfies, whether in whole or
in part, any present or future investor expectations or requirements as regards any investment criteria
or guidelines with which such investor or its investments are required to comply, whether by any
present or future applicable law or regulations or by its own by-laws or other governing rules or
investment portfolio mandates, in particular with regard to any direct or indirect environmental,
sustainability or social impact of any projects or uses, the subject of or related to, any Eligible Green
Projects. Furthermore, it should be noted that the criteria for any such listings or admission to trading
may vary from one stock exchange or securities market to another. No representation or assurance can
be given or made by WAPDA, the Green Structuring Agent, the Managers or any other person that
any such listing or admission to trading will be obtained in respect of any such Notes or, if obtained,
that any such listing or admission to trading will be maintained during the life of the Notes.
Furthermore, there can be no assurance that the Eligible Green Projects will be capable of being
implemented in or substantially in the manner described in "Use of Proceeds" and/or in accordance
with any timing schedule and that accordingly such proceeds will be totally or partially disbursed for
such Eligible Green Projects. There can also be no assurance that such Eligible Green Projects will be
completed within any specified period or at all or with the results or outcome (whether or not related
to the environment) as originally expected or anticipated by the Issuer. In addition, there is no
contractual obligation to investors to allocate the proceeds of the Certificates to finance and/or
refinance any Eligible Green Projects or to provide the review as described in "Use of Proceeds".
WAPDA's failure to so allocate the proceeds of the Notes or to conduct such review or any failure of
any of the projects funded with the proceeds from the Notes to constitute an Eligible Green Project
under WAPDA's Green Bond Framework will not constitute an Event of Default under the Conditions
with respect to the Notes but may affect the value and/or the trading price of the Notes and/or have
adverse consequences for certain investors with portfolio mandates to invest in green assets.

The Notes may not be a suitable investment for all investors seeking exposure to "development
finance" assets.
There is currently no market consensus on what precise attributes are required for a particular project
or financing to be defined as "development," and therefore no assurance can be provided to investors
that the Notes and the use of proceeds by the Issuer or any development impact projects, will satisfy,
whether in whole or in part, any expectations or requirements of any investor or any present or future
expectations or requirements with respect to development finance. Neither the Issuer nor the
Development Finance Structuring Agent makes any representations or assurances as to whether (and
are not responsible for ensuring that) (a) the characterization of the Notes as development finance or
the level of its expected development intensity rating impact will (i) comport with any investor's
definition of development finance, (ii) meet any investor's criteria and expectations with regard to
developmental impact, or (iii) comport with the characterization or definitions used by any other
development finance institution in the public or private sectors or (b) the proceeds of the Notes, will

34
in fact be used for eligible development finance projects. The Notes do not constitute Social Bonds for
ICMA purposes. Each potential purchaser of Notes should determine for itself the relevance of the
information contained in this Offering Circular regarding the use of proceeds and its purchase of
Notes should be based upon such investigation as it deems necessary.
In addition, although the proceeds from the issue of the Notes are expected to enable the development
finance initiatives described under "Development Impact" below, it will not be an Event of Default
under the Conditions if the Issuer fails to comply with such development finance initiatives.
Furthermore, there can be no assurance that the projects or financings defined as "development" will
be capable of being implemented in or substantially in such a manner and/or accordance with any
timing schedule and that accordingly such proceeds will be totally or partially disbursed for such
projects. Nor can there be any assurance that such projects will be completed within any specified
period or at all or with the results or outcome (whether or not related to the environment) as originally
expected or anticipated by the Issuer. Any such event or failure by the Issuer will not constitute an
Event of Default under the Conditions

Risks related to the market generally

Absence of secondary market or limited liquidity.
There is no assurance that a secondary market for the Notes will develop or, if it does develop, that it
will provide the Noteholders with liquidity of investment or that it will continue for the life of the
Notes. In addition, liquidity may be limited if large allocations of the Notes are made. Accordingly, a
Noteholder may not be able to find a buyer to buy its Notes readily or at prices that will enable the
Noteholder to realise a desired yield. The market value of the Notes may fluctuate and a lack of
liquidity, in particular, can have a material adverse effect on the market value of the Notes.
Accordingly, the purchase of the Notes is suitable only for investors who can bear the risks associated
with a lack of liquidity in the Notes and the financial and other risks associated with an investment in
the Notes. An investor in the Notes must be prepared to hold the Notes for an indefinite period of time
or until the Maturity Date. Application has been made to the London Stock Exchange for the Notes to
be admitted to trading on the ISM but there can be no assurance that such listing will occur on or prior
to the Closing Date or at all.
The Notes may be subject to early redemption.
The Issuer may redeem the Notes at its option at any time and without specifying any reason. The
Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on
the Notes. Any such optional redemption by the Issuer would require the Issuer to redeem the Notes at
the Make-Whole Redemption Price (unless the redemption is to occur during the period commencing
90 days prior to the Maturity Date of the Notes in which case the Issuer may redeem the Notes at their
principal amount together with accrued interest to the applicable redemption date). Notwithstanding
this, investors in the Notes might not be able to reinvest the amounts received on the applicable
redemption date at a rate that will provide an equivalent rate of return as their investment in the Notes
and potential investors should consider reinvestment risk in light of other investments available at that
time.
Furthermore, in the event that the Issuer satisfies the Noteholders' Representative that it would be
obliged to increase the amounts payable in respect of any Notes due to any withholding or deduction
for or on account of, any present or future taxes, duties, assessments or governmental charges of
whatever nature imposed, levied, collected, withheld or assessed by or on behalf of Pakistan or any
political subdivision thereof or any authority therein or thereof having power to tax, the Issuer may
redeem all outstanding Notes at their principal amount together with accrued interest to the applicable

35
redemption date in accordance with the Conditions. This redemption feature is likely to limit the
market value of the Notes at any time when the Issuer has the right to redeem them as provided above
in this paragraph, as the market price at such time will generally not rise substantially above the price
at which they can be redeemed. This may similarly be true in any prior period when any relevant
change in law or regulation is yet to become effective
The Noteholders may face foreign exchange risks or adverse tax consequences by investing in the
Notes. In addition, the imposition of exchange controls in relation to any Notes could result in a
Noteholder not receiving payments on those Notes.
The Issuer will pay amounts due on the Notes in U.S. dollars. If the Noteholders measure their
investment returns by reference to a currency other than U.S. dollars (the Noteholder's Currency), an
investment in the Notes will entail foreign exchange-related risks due to, among other factors,
possible significant changes in the value of the U.S. dollar, as applicable, relative to the Noteholder's
Currency because of economic, political and other factors over which the Issuer has no control and the
risk that authorities with jurisdiction over the Noteholder's Currency may impose or modify exchange
controls. An appreciation in the value of the Noteholder's Currency relative to U.S. dollars would
decrease (1) the Noteholder's Currency-equivalent yield on the Notes, (2) the Noteholder's Currency
equivalent value of the principal payable on the Notes and (3) the Noteholder's Currency equivalent
market value of the Notes.
Government and monetary authorities may impose (as some have done in the past) exchange controls
that could adversely affect an applicable exchange rate or the ability of the Issuer to pay amounts due
on the Notes. As a result, investors may receive less amounts under the Notes than expected, or no
such amounts.
The value of the Notes may be adversely affected by movements in market interest rates.
Investment in the Notes involves the risk that if market interest rates subsequently increase above the
rate paid on the Notes, this will adversely affect the value of the Notes.
Credit ratings assigned to the Issuer or the Notes may not reflect all the risks associated with an
investment in those Notes.
One or more independent credit rating agencies may assign credit ratings to the Issuer or the Notes.
The ratings may not reflect the potential impact of all risks related to structure, market, additional
factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not
a recommendation to buy, sell or hold securities and may be revised, suspended or withdrawn by the
rating agency at any time.
In general, European regulated investors are restricted under the CRA Regulation from using credit
ratings for regulatory purposes in the EU, unless such ratings are issued by a credit rating agency
established in the EU and registered under the CRA Regulation (and such registration has not been
withdrawn or suspended, subject to transitional provisions that apply in certain circumstances). Such
general restriction will also apply in the case of credit ratings issued by third country non-EU credit
rating agencies, unless the relevant credit ratings are endorsed by an EU-registered credit rating
agency or the relevant third country rating agency is certified in accordance with the CRA Regulation
(and such endorsement action or certification, as the case may be, has not been withdrawn or
suspended, subject to transitional provisions that apply in certain circumstances).
Investors regulated in the UK are subject to similar restrictions under the UK CRA Regulation. As
such, UK regulated investors are required to use for UK regulatory purposes ratings issued by a credit
rating agency established in the UK and registered under the UK CRA Regulation. In the case of
ratings issued by third country non-UK credit rating agencies, third country credit ratings can either
be: (a) endorsed by a UK registered credit rating agency; or (b) issued by a third country credit rating

36
agency that is certified in accordance with the UK CRA Regulation. Note this is subject, in each case,
to (a) the relevant UK registration, certification or endorsement, as the case may be, not having been
withdrawn or suspended, and (b) transitional provisions that apply in certain circumstances. In the
case of third country ratings, for a certain limited period of time, transitional relief accommodates
continued use for regulatory purposes in the UK, of existing pre-2021 ratings, provided the relevant
conditions are satisfied.
If the status of the rating agency rating the Notes changes for the purposes of the CRA Regulation or
the UK CRA Regulation, relevant regulated investors may no longer be able to use the rating for
regulatory purposes in the EU or the UK, as applicable, and the Notes may have a different regulatory
treatment. This may result in the relevant regulated investors selling the Notes which may impact the
value of the Notes and any secondary market.

Risks related to Notes generally

The procedure for enforcing WAPDA's obligations under the Notes against the Government is
untested.
Section 24 of the WAPDA Act provides that the Government's liability to WAPDA's creditors shall
be limited to the extent of grant made by the Government and loans passed by WAPDA with the
sanction of the Government. As the Government has specifically sanctioned the issue of the Notes at
WAPDA's request, it has thereby assumed certain obligations to the creditors of WAPDA in the event
of a default by WAPDA in the performance of its obligations. If WAPDA were to default on the
Notes, the Noteholders' Representative (as defined herein) on behalf of the Noteholders could seek to
enforce WAPDA's obligations under the Notes against the Government pursuant to Section 24 of the
WAPDA Act. However, to date, this procedure has not been tested in Pakistan or abroad. There could
be delays in obtaining a judgment against the Government pursuant to Section 24 of the WAPDA Act.
In addition, there is a risk that a claimant might not be able to enforce a judgment against the assets of
Pakistan in any foreign jurisdiction unless the Government specifically consents to such enforcement
at the time when the enforcement is sought. For these reasons, Noteholders should carefully consider
whether to rely on their ability to seek payment from the Government in the event of a default under
the Notes by WAPDA.
Modification of the Conditions and other matters.
The Conditions contain provisions for calling meetings of Noteholders to consider matters affecting
their interests generally. These provisions permit defined majorities to bind all Noteholders including
Noteholders who did not attend and vote at the relevant meeting or, as the case may be, did not sign
the written resolution or give their consent electronically, and including Noteholders who voted in a
manner contrary to the majority.
The value of the Notes could be adversely affected by a sanctioned Restructuring Plan under the
Companies Act 2006 in the event the Issuer encounters, or is likely to encounter, financial difficulties
that are affecting, or will or may affect, its ability to carry on business as a going concern.
Where the Issuer encounters, or is likely to encounter, financial difficulties that are affecting, or will
or may affect, its ability to carry on business as a going concern, it may propose a Restructuring Plan
(a Plan) with its creditors under Part 26A of the Companies Act 2006 (introduced by the Corporate
Insolvency and Governance Act 2020) to eliminate, reduce, prevent or mitigate the effect of any of
those financial difficulties. Should this happen, creditors whose rights are affected are organised into
creditor classes and can vote on any such Plan (subject to being excluded from the vote by the English
courts for having no genuine economic interest in the Issuer and certain exclusions where the Plan is
proposed within the 12 week period following the end of a moratorium). Providing that one class of
creditors (who would receive a payment, or have a genuine economic interest in the Issuer) has

37
approved the Plan, and in the view of the English courts any dissenting class(es) who did not approve
the Plan are no worse off under the Plan than they would be in the event of the "relevant alternative"
(such as, broadly, liquidation or administration), then the English court can sanction the Plan where it
would be a proper exercise of its discretion. A sanctioned Plan is binding on all creditors and
members, regardless of whether they approved it. Any such sanctioned Plan in relation to the Issuer
may, therefore, adversely affect the rights of Noteholders and the price or value of their investment in
the Notes, as it may have the effect of modifying or disapplying certain terms of the Notes (by, for
example, writing down the principal amount of the Notes, modifying the interest payable on the
Notes, the maturity date or dates on which any payments are due or substituting the Issuer).
The value of the Notes could be adversely affected by a change in English law or administrative
practice.
The Conditions are based on English law in effect as at the date of this Offering Circular. No
assurance can be given as to the impact of any possible judicial decision or change to English law or
administrative practice after the date of this Offering Circular and any such change could materially
adversely impact the value of the Notes.
Reliance on Euroclear and Clearstream, Luxembourg procedures.
The Notes will be represented on issue by a Global Certificate that will be deposited with a common
depositary for Euroclear and Clearstream, Luxembourg. Except in the circumstances described in the
Global Certificate, investors will not be entitled to receive Notes in definitive form. Euroclear and
Clearstream, Luxembourg and their respective direct and indirect participants will maintain records of
the beneficial interests in the Global Certificate. While the Notes are represented by the Global
Certificate, investors will be able to trade their beneficial interests only through Euroclear and
Clearstream, Luxembourg and their respective participants.
While the Notes are represented by the Global Certificate, the Issuer will discharge its payment
obligation under the Notes by making payments through the relevant clearing systems. A holder of a
beneficial interest in the Global Certificate must rely on the procedures of the relevant clearing system
and its participants to receive payments under the relevant Notes. The Issuer has no responsibility or
liability for the records relating to, or payments made in respect of, beneficial interests in the Global
Certificate.
Holders of beneficial interests in the Global Certificate will not have a direct right to vote in respect of
the relevant Notes. Instead, such holders will be permitted to act only to the extent that they are
enabled by the relevant clearing system and its participants to appoint appropriate proxies.

Notes which have a denomination that is not an integral multiple of U.S.$200,000 may be illiquid
and difficult to trade.
The denomination of the Notes is U.S.$200,000 and integral multiples of U.S.$1,000 in excess
thereof. Therefore, it is possible that the Notes may be traded in amounts in excess of U.S.$200,000
that are not integral multiples of U.S.$200,000. In such a case, a Noteholder who, as a result of
trading such amounts, holds a face amount of less than U.S.$200,000 would need to purchase a face
amount of Notes such that it holds an amount equal to at least U.S.$200,000 to be able to trade such
Notes. Noteholders should be aware that Notes which have a denomination that is not an integral
multiple of U.S.$200,000 may be illiquid and difficult to trade.

Indirect exposure to sanctions targets.

As Pakistan is not a Sanctions Target, OFAC regulations do not prohibit U.S. persons from investing
in, or otherwise engaging in business, with Pakistan. However, to the extent that Pakistan invests in,
or otherwise engages in business with, Sanctions Targets, directly or indirectly, U.S. persons investing

38
in Pakistan may incur the risk of indirect contact with Sanctions Targets. Non-U.S. persons from
jurisdictions with similar sanctions may similarly incur the risk of indirect contact with Sanctions
Targets. See also "Risk factors related to the Government—Pakistan has in the past and continues to
trade with certain sanctioned countries or entities" above.
Enforcement of legal rights.
The Pakistani legal system is a common law system that requires modernisation and law reform,
particularly in civil and commercial law. In circumstances where no precedents of the Pakistan courts
are available, decided cases of other common law jurisdictions, primarily India and England and
Wales, are generally recognised as persuasive authority in the Pakistan courts. Many of the judicial
remedies for enforcement and protection of legal rights typically found in more developed
jurisdictions may not be available in Pakistan unless adopted in future by the superior courts of
Pakistan in reliance on such foreign precedents. Even after a judgment has been finally pronounced,
execution of the relevant decree may give rise to additional litigation and objections to such
execution.
Shari'ah law position on the payment of Interest.
Presently, there are no laws or regulations or binding judgments of any superior court in Pakistan
which expressly bar a lender's right to receive interest, including interest on late payments, from a
borrower under a debt obligation such as the Notes. The following constitutional and legal provisions
and the interpretation thereof by the superior courts of Pakistan could, however, negatively affect such
right:
(a) The Constitution: Under the Constitution of Pakistan 1973 (the Constitution), Islam is the
state religion and Article 38(f) of the Constitution provides that Pakistan, as one of its
"Principles of Policy", shall eliminate riba as early as possible. The Constitution also requires
all existing laws to be brought into conformity with the Injunctions of Islam and provides that
no law can be enacted that is repugnant to the Injunctions of Islam (Article 227). However,
the Constitution, while requiring the elimination of riba, does not define the term. The
meaning of this term also cannot be found in any legislative enactment. As a result, there is
some controversy over the exact meaning of the Islamic term riba. Some consider it as being
analogous to interest while others equate it with usury.
By the Revival of the Constitution Order 1985, a new Article 2A was incorporated in the
Constitution whereby the principles and provisions set out in the Objectives Resolution (the
Resolution) were made a substantive part of the Constitution. The Resolution was passed by
Pakistan's first Constituent Assembly and sets out basic principles to guide the framing of a
constitution. Certain references in the Resolution gave rise to an argument that the Injunctions
of Islam provided a touchstone for testing the repugnancy of all laws and that by virtue of
Article 2A of the Constitution, the Resolution now has a supra-constitutional position above
the Constitution itself. Since 1985, the point has been discussed and considered by the
superior courts of Pakistan on a number of occasions leading to a number of conflicting
decisions. The position that Article 2A has no effect on other constitutional provisions can
now be regarded as settled on the basis of a Supreme Court judgment. The Supreme Court has
also held in another judgment that Article 2A is not available for declaring void sub-
constitutional laws, on the basis of repugnancy to the Injunctions of Islam. Therefore, unless
these Supreme Court judgments are reversed or unless legislative action is taken to similar
effect, Article 2A of the Constitution does not provide any basis for rendering void an
obligation for the payment of interest. In a judgment delivered on 16 December 2009 by a
bench comprising all 17 judges of the Supreme Court, Article 2A was mentioned in passing
along with various other substantive provisions of the Constitution on the touchstone of which
the statute in question was held to be unconstitutional. Since there was no real discussion in
39
 that judgment about Article 2A, nor were the earlier judgements on the topic overruled, the
status of Article 2A likely remains unchanged.
(b) The Enforcement of Shari'ah Act 1991 (the Shariat Act): The Shariat Act provides that the
Injunctions of Islam as laid down in the Holy Quran (the Holy Book of Muslims) and Sunnah
(traditions of the Holy Prophet) shall be the supreme law of Pakistan. Pursuant to the Shariat
Act, the Government has appointed a commission with terms of reference including, inter
alia, the following:
- to recommend measures and steps, including suitable alternatives, by which the
economic system enunciated by Islam could be established in Pakistan;
- to undertake the examination of any fiscal law or any banking or insurance law or
practice and procedure to determine whether these are repugnant to the Shari'ah (the
code of law derived from the Holy Quran) and to make recommendations to bring
such laws, practices and procedures into conformity with the Shari'ah; and
- to oversee the process of elimination of riba from every sphere of economic activity
in the shortest possible time and also to recommend such measures to the
Government as would ensure the total elimination of riba from the economy.
Until such time as an alternative system is introduced, the Shariat Act protects financial
obligations incurred and contracts made, inter alia, involving a foreign lender. However, such
protection can be removed by an act of parliament or if the courts hold that such protection is
unlawful because it is repugnant to the supreme law of the land, namely the Injunctions of
Islam as laid down in the Holy Quran and Sunnah, as declared by the Shariat Act itself.
(c) The Federal Shariat Court: The Federal Shariat Court is a constitutionally established body
which has jurisdiction to determine whether any law or any provision of any law, including
any custom or usage having the force of law, in Pakistan violates the principles of Islam, the
official State religion.
In November 1991, the Federal Shariat Court ruled that a number of statutory provisions in
Pakistan violated Islamic principles relating to riba and held them to be void on that basis and
instructed the Government to conform these provisions to Islamic principles.
The ruling of the Federal Shariat Court was appealed to the Shariat Appellate Bench of the
Supreme Court of Pakistan (the Appellate Bench). The Appellate Bench dismissed the appeal
and upheld the decision of the Federal Shariat Court (the Appellate Bench Judgment).
Against this Appellate Bench Judgment a Review Petition was filed, which was allowed by
the Order dated 24 June 2002 (the Review Order). Pursuant to the Review Order, a
differently constituted Appellate Bench set aside the judgment of the Federal Shariat Court
and the Appellate Bench Judgment and remanded the case to the Federal Shariat Court for de
novo determination of this issue after taking into consideration various aspects noted therein.
The Federal Shariat Court began its de novo determination with a hearing on 21 October 2013
and the case is on-going at this time.
To summarise the position in Pakistan regarding the payment of interest:
- presently, the law in Pakistan does not prohibit the payment of interest pursuant to a
contract to borrow money such as the Notes;
- an obligation to pay interest may be held to be unenforceable by the ordinary civil
courts if:
• the Supreme Court reverses itself on its findings in respect of Article 2A of
the Constitution (subsection (a) above); or

40
 • the protection to financial obligations incurred and contracts made inter alia
involving a foreign lender is removed (subsection (b) above); or
• the Federal Shariat Court de novo determines the issue afresh but holds to the
same effect as previously decided and the Shariat Appellate Bench of the
Supreme Court substantially upholds the judgment of the Federal Shariat
Court (subsection (c) above);
- any decision of a civil court declaring interest unenforceable will only operate
between the parties to it;
- any such decision will not form a binding precedent until upheld by the provincial
High Court to which such civil court is subordinate or the decision is delivered by
such High Court itself, in which case the High Court's decision will be binding only
on all civil courts subordinate to it;
- a single judge of a High Court is not bound by the decision of another single judge of
the same High Court but is bound by a division bench (a bench of two judges)
decision of that High Court. One division bench is not bound by the decision of
another division bench but all judges of that High Court are bound by the full bench
decisions (a bench of three or more judges) of that High Court. In the event that a
single judge finds that he cannot agree with a previous decision of another single
judge, then the matter must be referred to the Chief Justice of that High Court for the
constitution of a larger bench to settle the issue (subject to the outcome of any appeal
to the Supreme Court). A similar procedure applies where one division bench is in
disagreement with another division bench;
- the decision of one High Court will not bind any other High Courts but will have
persuasive value for High Courts and subordinate courts in other provinces and the
Islamabad Capital Territory;
- any such decision will operate as a precedent binding on all courts in Pakistan only if
the Supreme Court of Pakistan upholds such a decision and to the extent that it
decides a question of law or is based upon or enunciates a principle of law; and
- any decision of any court in Pakistan (including the Appellate Bench or the Federal
Shariat Court) in relation to the unenforceability of an obligation to pay interest will
have no effect whatsoever on any obligation to pay the original sum borrowed or
advanced.
The Government is, as a matter of policy, committed to eliminating riba and to promoting Islamic
banking in Pakistan, while keeping in view its linkages with the global economy and existing
commitments to local and foreign investors. Despite the fact that the Supreme Court remanded the
"riba case" to the Federal Shariat Court (see subsection (c) above), the Government took various
measures in line with the guidelines and directions of the Supreme Court, including the introduction
by the SBP of Islamic banking in Pakistan, in parallel with conventional banking.

Enforcement of foreign judgments in Pakistan.

In Pakistan, statutory recognition is given to foreign judgments under section 13 of the Code. This
provides that a foreign judgment shall be conclusive as to any matter thereby directly adjudicated
upon except (i) where it has not been pronounced by a court of competent jurisdiction; (ii) where it
has not been given on the merits of the case; (iii) where it appears on the face of the proceedings to be
founded on an incorrect view of international law or a refusal to recognise the law of Pakistan in cases
where such law is applicable; (iv) where the proceedings in which the judgment was obtained were

41
opposed to natural justice; (v) where it has been obtained by fraud; or (vi) where it sustains a claim
founded on a breach of any law in force in Pakistan.
Section 44A of the Code provides that where a foreign judgment has been rendered by a court in any
country or territory outside Pakistan which the Government has, by notification, declared to be a
reciprocating territory, it may be enforced in Pakistan as if the judgment has been rendered by the
relevant court in Pakistan. The High Court of Justice in England is a court in a reciprocating territory
for the purposes of section 44A and, accordingly, a money judgment of that court would, subject to
the exceptions contained in section 13 of the Code, be enforceable as if the judgment were the
judgment of a district court in Pakistan. Accordingly, upon obtaining a foreign judgment, three
possible courses are open to the holder:
(a) obtaining execution of the judgment by proceedings under section 44A, where these
provisions are applicable, as they are in the case of a judgment of the High Court of Justice in
England, for which the limitation period for initiating proceedings in Pakistan is three years
from the date of the English judgment;
(b) filing a suit in Pakistan on the basis of the foreign judgment treating it as the cause of action,
for which the limitation period is six years from the date of the foreign judgment; and
(c) filing a suit in Pakistan on the original cause of action, for which the limitation period is three
years from when the cause of action arises.
In the case of proceedings described in paragraph (c) above, where the Pakistan court will have the
power to assess the damages, it is possible that a Pakistani court will not award damages on the same
basis as a foreign court, especially if it viewed the award of such damages as being contrary to
Pakistani public policy.
Section 82 of the Code requires a decree against the Issuer to specify a period within which it is to be
satisfied. If it remains unsatisfied at the expiry of such period, the Court issuing such decree is
required to issue a report for the Orders of the Provincial Government within which such Court is
situated. Execution proceedings can only be initiated against the Issuer three months after the date of
such report.

42
 CAPITALISATION AND INDEBTEDNESS
The table below sets out the capitalisation and indebtedness of WAPDA Hydroelectric as at 30 June
2020:

As at 30 June 2020
(PKR thousands)
Indebtedness
Short-term borrowings ................................................................................ 79,591,320
Current portion of long-term financing ................................................................ 174,364,818
Long-term financing - interest bearing ................................................................ 104,429,275
Total indebtedness ............................................................................................. 358,385,413
Equity
Government of Pakistan's investment ................................................................ 63,000,716
Accumulated profits ............................................................................................. 159,595,304
Total equity ......................................................................................................... 222,596,020
Total capitalisation(1).......................................................................................... 580,981,433

_________

Note:
(1) Capitalisation represents the sum of total indebtedness plus total equity.

Since 30 June 2020, there has been no material change in WAPDA Hydroelectric's capitalisation and
indebtedness other than the issuance of the Notes and the application of the proceeds as described in
this Offering Circular.

43
 SELECTED FINANCIAL AND OPERATING INFORMATION
The selected financial information for WAPDA Hydroelectric set out below has been extracted
without material adjustment from the Annual Financial Statements.

Statement of Profit or Loss Data

Year ended 30 June

2020 2019
(PKR thousands)
Revenue from contract with customer - net ...................... 62,763,536 66,143,533
Cost of electricity ............................................................. (26,361,457) (23,672,748)
Gross profit ..................................................................... 36,402,079 42,470,785
Operating expenses........................................................... (1,739,243) (1,444,415)
Operating profit .............................................................. 34,662,836 41,026,370
Finance and other costs .................................................... (32,421,494) (38,294,563)
Other income .................................................................... 3,229,363 5,216,886
Profit for the year before net movements in regulatory
deferral account debit balances ..................................... 5,470,705 7,948,693
Net movement in regulatory deferral account debit
balances related to profit or loss ....................................... 9,779,364 (2,055,498)
Profit for the year and net movements in regulatory
deferral account debit balances ..................................... 15,250,069 5,893,195

44
 Statement of Financial Position Data

As at 30 June
2020 2019
(PKR thousands)
Assets
Non-current assets
Property, plant and equipment ............................................... 525,594,973 439,720,613
Long term loans, advances and deposits ............................... 2,359,986 702,725
Total non-current assets...................................................... 527,954,959 440,423,338
Current assets
Stores, spares and loose tools ................................................ 6,173,164 5,520,631
Receivable from the customer ............................................... 219,548,184 192,282,954
Short term investments .......................................................... – 3,000,000
Other receivables ................................................................ 8,900,694 4,572,935
Advances ............................................................................... 5,579,185 5,890,521
Prepayments .......................................................................... 1,019 7,939
Bank balances ........................................................................ 58,507,159 71,677,455
Total current assets ............................................................. 298,709,405 282,952,435
Regulatory deferral account debit balances ........................... 21,084,356 11,304,992
Total assets and regulatory deferral account debit
balances ................................................................................ 847,748,720 734,680,765
Equity and liabilities
Equity
Government of Pakistan's investment................................ 63,000,716 63,000,716
Accumulated profits .............................................................. 159,595,304 148,230,732
Total equity .......................................................................... 222,596,020 211,231,448
Liabilities
Non-current liabilities
Long term financing – interest bearing................................ 104,429,275 135,038,956
Deferred grants ................................................................ 103,726,730 32,232,720
Employees retirement and other benefits .............................. 63,653,213 53,984,321
Retention money payables ..................................................... 2,737,397 3,272,683
Total non-current liabilities ................................................ 274,546,615 224,528,680
Current liabilities
Trade and other payables ....................................................... 7,795,886 7,269,846
Short-term borrowings .......................................................... 79,591,320 41,052,907
Payable against hydel levies .................................................. 85,778,156 62,957,267
Current portion of long term financing................................ 174,364,818 185,974,206
Current portion of deferred grants ......................................... 246,283 246,283
Current portion of retention money payables ........................ 1,968,236 258,805
Accrued interest ................................................................ 861,386 1,161,323

45
Total current liabilities........................................................ 350,606,085 298,920,637
Total liabilities ................................................................ 625,152,700 523,449,317
Total equity and liabilities .................................................. 847,748,720 734,680,765

Statement of Cash Flows Data

Year ended 30 June

2020 2019
(PKR thousands)

Net cash flows from operating activities ..................................... 36,955,201 20,797,310

Net cash flows (used in)/from investing activities....................... (13,884,474) 12,132,013
Net cash flows used in financing activities.................................. (37,198,732) (43,528,003)
Effects of exchange rate changes on bank balances .................... 957,709 12,589,529

Net (decrease)/increase in bank balances during the year ..... (13,170,296) 1,990,849
Bank balances at the beginning of year ....................................... 71,677,455 69,686,606
Bank balances at the end of year .............................................. 58,507,159 71,677,455

Non-IFRS Measures
In this Offering Circular, EBITDA, total debt, Net debt, total debt/EBITDA and Net debt/EBITDA
are presented. These measures are not uniformly or legally defined measures and are not recognised
under IFRS or any other generally accepted accounting principles. See "Presentation of Financial and
Other Information—Non-IFRS Measures".
EBITDA

Year ended 30 June

2020 2019
(PKR thousands)
Profit for the year and net movements in regulatory deferred
account debit balances ................................................................... 15,250,069 5,893,195
Add: Finance costs ........................................................................ 30,305,277 36,063,545
Add: Depreciation ......................................................................... 7,642,768 7,655,469
EBITDA........................................................................................ 53,198,114 49,612,209

Net Debt

As at 30 June
2020 2019
(PKR thousands)

Long term financing – interest bearing .......................................... 104,429,275 135,038,956

Current portion of long term financing........................................... 174,364,818 185,974,206
Short-term borrowings (1)
................................................................ 79,591,320 41,052,907
Total debt ...................................................................................... 358,385,413 362,066,069

46
Less: Bank balances ....................................................................... 58,507,159 71,677,455
Net debt ......................................................................................... 299,878,254 290,388,614
Total debt/EBITDA ...................................................................... 6.7x 7.3x
Net debt/EBITDA ......................................................................... 5.6x 5.9x

_________

Note:
(1) Short-term borrowings represent accrued but unpaid debt servicing to the Government and public sector enterprises (which are
not pursuant to loan agreements) and are non-interest bearing and payable on demand by nature.

47
 USE OF PROCEEDS
The net proceeds to be received by WAPDA from the issuance of the Notes, after the deduction of
commissions, fees and estimated expenses are expected to be approximately U.S.$499.0 million. An
amount equal to the net proceeds will be used to finance and/or refinance Eligible Green Projects.
In this Offering Circular, the "Eligible Green Projects" mean projects for financing and/or refinancing
of renewable energy and climate change adaptation which meet the Eligibility Criteria.
"Eligibility Criteria" means the criteria prepared by WAPDA as set out in the Green Bond
Framework (available on WAPDA's website at: http://www.wapda.gov.pk/index.php/investor-s-
corner/wapda-green-eurobond).
Allocations of funds to Eligible Green Projects will be reviewed by an external provider in accordance
with the recommendations of the Green Bond Principles, and reported by WAPDA on an annual
basis.
WAPDA intends to allocate to Eligible Green Projects an amount equal to the net proceeds raised by
the issuance of the Notes within two years of the date of issuance. No assurance is given by WAPDA,
the Green Structuring Agent, the Development Finance Structuring Agent, or the Joint Bookrunners
that investing in the securities or the use of proceeds by WAPDA will satisfy, whether in whole or in
part, any present or future investor expectations or requirements with respect to green bonds,
sustainability or development impact.
Pending the use of the net proceeds to finance or refinance Eligible Green Projects, WAPDA shall
maintain net proceeds in cash or cash equivalents, bank deposits and/or use them for repayment of
short-term indebtedness. WAPDA shall not hold or use the net proceeds in any way that is directly
linked to the financing of activities which may conflict with the environmental objectives of the
Notes.
WAPDA also intends to commission a compliance review within one year of the date of this Offering
Circular confirming that the proceeds of the Notes have been allocated in accordance with the use of
proceeds specified in the Green Bond Framework.

48
 GREEN BOND FRAMEWORK
WAPDA has developed the Green Bond Framework which follows the guidelines specified in the
2018 edition of the Green Bond Principles published by the Executive Committee of the Green Bond
Principles with the support of the International Capital Market Association (ICMA). The Green Bond
Framework has been published at WAPDA's website http://www.wapda.gov.pk/index.php/investor-s-
corner/wapda-green-eurobond?download=5127:wapda-green-bond-framework.
Sustainalytics provided a Second Party Opinion available at
http://www.wapda.gov.pk/images/phocadownloadapp/InverstorCorner-greenBond-
2021/wapda_green%20bond%20framework_second%20party%20opinion_vf.pdf.
WAPDA also intends to commission a "Compliance Review" within one year of this Offering
Circular and annually thereafter, until proceeds of the Notes are fully allocated in accordance with the
use of proceeds.
None of the Green Bond Framework or the Second Party Opinion is incorporated in or forms part of,
this Offering Circular or is a recommendation to buy, sell or hold the Notes. See "Risk Factors—Risks
Factors which are Material For the Purpose of Assessing the Market Risks Associated with the
Notes—The Notes may not be a suitable investment for all investors seeking exposure to green
assets".

49
 DEVELOPMENT IMPACT
WAPDA is responsible for the operation, maintenance, upgrade and expansion of HPPs, large water
reservoirs and the construction of new projects for power generation and water storage. Pakistan, a
country which ranks 154th out of 189 countries on the Human Development Index, faces a number of
development challenges in water and power sectors. According to the World Bank World
Development Indicators, in 2017 only 35.3 per cent. of people in Pakistan were using safely managed
drinking water services and in 2018 only 71.1 per cent. of the population of Pakistan had access to
electricity.
The net proceeds of the issue of the Notes are expected to partially fund the following projects, and
therefore are anticipated to address these development challenges and enable the subsequent
development outputs:
 Dasu Stage-1 HPP: this project is expected to add 2,160 MW to WAPDA's installed capacity
while creating employment for individuals living in the community. The project is anticipated
to employ approximately 5,000 new unskilled labourers in the area during peak construction
and approximately 400 engineers will be trained at the site. In addition to the dam project, 81
kilometres of new roadway is expected to be constructed, which will provide access from the
region through to Tangir. The project is expected to be completed in 2026.
 Tarbela 5th extension: construction of this dam is anticipated to add 1,410 MW of installed
capacity without affecting irrigation releases. During the construction phase, this project is
expected to employ approximately 320 skilled labourers per year and approximately 1,600
unskilled labourers per year. Following the estimated date of completion in 2026, the project
is expected to permanently employ approximately 380 people per year.
 Mohmand Dam: once completed, the dam is expected to add 800 MW to WAPDA's installed
capacity and generate approximately 2,862 GWh annually. The increased capacity is expected
to help the National Power Policy achieve the goals of meeting Pakistan's energy needs in a
sustainable fashion. Upon completion, the project will form an active storage reservoir with
approximately 1,594 million m3 of capacity. This is expected to provide the country with an
assured and sustained supply of irrigation water, power supply needs, and fisheries. Finally,
the Mohmand Dam Reservoir is expected to provide approximately 13.32 m3/second of water
to Peshawar city, which will help to augment the city's antiquated existing water supply
system and meet the city's future water supply needs. The project is expected to be completed
in 2026.
 Diamer Bhasha Dam: The construction of the Diamer Bhasha Dam is expected to add 4,500
MW of installed capacity and increase the country's current water storage capacity by 6.4
million acre-feet (MAF) upon completion in 2029. The dam will act as a renewable source of
clean and affordable energy, which will ultimately result in a U.S.$300 million carbon credit
and save Pakistan approximately U.S.$2.85 billion in foreign exchange of equivalent
electricity generated on imported oil. The project will add 35 years to the useful life of the
Tarbela Dam, the largest reservoir project in Pakistan, through sedimentation control and will
directly benefit the region from Kalabagh to Gudu as it will alleviate flood damage from the
Indus River. The construction of the project is expected to significantly boost the cement and
steel industry in the region as approximately 2.8 million tons of cement are estimated to be
used throughout the life of the project and over 300,000 tons of reinforcement and structural
steel are also expected to be used during construction.
WAPDA plans to report progress on the development outputs of the projects referred to above
through an annual report published on the investor relations section of its website. The anticipated

50
impact of the development outputs above align with the United Nations Sustainable Development
Goals (UN SDGs) #6, #7, #8, #9 and #13 in particular with the targets below:
 SDG Target 6.1: By 2030, achieve universal and equitable access to safe and affordable
drinking water for all;
 SDG Target 6.2: By 2030, achieve access to adequate and equitable sanitation and hygiene
for all and end open defecation, paying special attention to the needs of women and girls and
those in vulnerable situations;
 SDG Target 6.b: Support and strengthen the participation of local communities in improving
water and sanitation management;
 SDG Target 7.1: By 2030, ensure universal access to affordable, reliable and modern energy
services;
 SDG Target 8.3: Promote development-oriented policies that support productive activities,
decent job creation, entrepreneurship, creativity and innovation, and encourage the
formalisation and growth of micro-, small- and medium-sized enterprises, including through
access to financial services;
 SDG Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure, including
regional and transborder infrastructure, to support economic development and human well-
being, with a focus on affordable and equitable access for all; and
 SDG Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards and
natural disasters in all countries.

51
 BUSINESS
Overview
WAPDA was established in 1958 through the WAPDA Act, an Act of Parliament for the integrated
development of water and power resources in the Indus Basin. It is an autonomous and statutory body
under the administrative control of the Government and is wholly owned by the Government.
WAPDA is responsible for the operation, maintenance, upgrade and expansion of HPPs, large water
reservoirs and the construction of new projects for power generation and water storage in Pakistan.
WAPDA currently operates under a generation license granted in 2004 by NEPRA for the operation,
maintenance and development of hydroelectric power resources in Pakistan.
WAPDA is managed by a Chairman and three Members for each of its separate wings: the Water
Wing, the Power Wing and the Finance Wing. In 2007, the functions of the Power Wing were
redefined as Hydroelectric Power Generation and Operations and Maintenance (O&M). Hydroelectric
power generation is its core commercial business, contributing over 95 per cent. of WAPDA's
revenues in the year ended 30 June 2020. Specifically, WAPDA constructs, operates and maintain
hydroelectric power generation assets to generate affordable and clean electricity. WAPDA also
builds water storage facilities to help address Pakistan's acute water challenges.
WAPDA is party to a power purchase agreement (PPA) with the National Transmission and Dispatch
Company (the NTDC) and the Central Power Purchasing Agency (the CPPAG), which provides that
the electricity generated by WAPDA is to be purchased at the applicable tariff specified by the
NEPRA. The tariff is based on projected revenue which takes into account WAPDA's RAB. The
return on WAPDA's RAB is intended to capture the return on the actual incurred capital cost of its
projects at the actual WACC such that the ROE is 10 per cent. The application of this mechanism is
then intended to result in the tariff being directly proportional to WAPDA's investment programme.
However, WAPDA has experienced significant delays in collecting hydroelectric power tariffs due to
the significant cash shortfall at CPPAG. WAPDA's water business and its administrative activities are
unregulated businesses and are funded by Government aid and grants.
As of the date of this Offering Circular, WAPDA's total installed hydropower capacity amounted to
9,389 MW (including the Neelum Jhelum HPP, which was developed via a special purpose vehicle
wholly owned by WAPDA and is not consolidated in the Annual Financial Statements, and which has
an installed capacity of 969 MW), comprising 22 HPPs, which represented 96 per cent. of Pakistan's
hydroelectric power generation capacity as at 30 June 2020. The electricity generated by WAPDA
represented approximately 95.4 per cent. of hydroelectric power produced in Pakistan in FY20.
WAPDA has four major projects under construction, which will add approximately 8,870 MW of
installed capacity (out of 9,359 MW of installed capacity which will be added on completion of all of
WAPDA's outstanding construction projects) and are expected to be completed during the period from
2025 to 2029, approximately doubling WAPDA's current installed capacity.
As at 30 June 2020, WAPDA Hydroelectric had total assets and regulatory deferral account debit
balances of PKR 847.7 billion. It had net revenue and EBITDA of PKR 62,763.5 million and PKR
53,198.1 million, respectively, for the year ended 30 June 2020. As at 30 June 2020, WAPDA had
17,383 active employees, including 8,026 active employees assigned to its Power Wing, 5,419 active
employees assigned to its Water Wing and 3,938 active employees assigned to its Finance Wing and
Administration & Services Division.
Recent Trading
The tariff at which WAPDA sells power generated by its hydropower stations to the CPPAG has been
set at PKR 4.11 per kWh (including PKR 3.15 per kWh to cover business expenses and PKR 0.96 to
cover hydel levies which are pass-through payments to provinces) for FY21 compared to the tariff of

52
PKR 5.66 per kWH (including PKR 2.11 per kWh to cover business expenses and PKR 3.55 to cover
hydel levies which are pass-through payments to provinces) for FY18. The Government has
undertaken to international lenders to increase the power tariff by approximately PKR 0.35 per kWh
by June 2022. The decrease in the pass-through portion of the tariff has no bearing on WAPDA's
business since WAPDA serves as a collection agent and passes this amount on to the provinces when
received from CPPAG. This portion of the tariff is also not included in revenue figures for WAPDA.
Revenues for the first six months of FY21 have remained in line with revenues for the comparable
period in FY20. Profit for the period increased due to lower finance costs.
Total outstanding debt (comprising long-term financing - interest bearing, short-term borrowings and
current portion of long-term financing) remained stable during the first six months of FY21.
History
WAPDA was established through an Act of Parliament in 1958 for the integrated development of
water and power resources in the Indus Basin. This included controlling soil salinity and water
logging to rehabilitate the affected land in order to strengthen Pakistan's predominantly agricultural
economy. Pursuant to its Charter, which was amended in March 1959, WAPDA was assigned
responsibility for planning and executing projects in the following areas:
 generation, transmission and distribution of power;

 irrigation, water supply and drainage;

 prevention of water logging and reclamation of saline land;

 flood control; and

 inland navigation.
In 1960, Pakistan and India entered into the Indus Basin Treaty under the auspices of the World Bank.
They subsequently agreed upon the Indus Basin Settlement Plan (the IBSP) in accordance with the
Indus Basin Treaty. The IBSP acknowledges the proprietary rights of Pakistan over water of the three
Western Rivers, namely, Chenab, Jhelum and Indus and the rights of India over the three Eastern
Rivers, namely Sutlej, Beas and Ravi. In order to further develop Pakistan 's irrigation network
following this agreement, an elaborate civil works programme, the Indus Basin Project (the IBP), was
devised. As part of this programme, two large dams (Tarbela and Mangla), five barrages, one gated
siphon and eight inter river link canals were constructed. WAPDA completed all sixteen of these
projects within the stipulated period except for the Tarbela Dam, which was completed in 1974. Upon
completion, all of the projects were handed over to the relevant Provincial Irrigation Departments
except for the Tarbela and Mangla Dams, the Chashma Barrage and the Chashma-Jhelum Link Canal,
which remain with WAPDA for the purpose of WAPDA conducting O&M on them.
In 1998, WAPDA was unbundled to create nine DISCOs, four GENCOs and the NTDC. In October
2007, WAPDA was bifurcated into two distinct entities, WAPDA as it currently operates and the
Pakistan Electric Power Company (PEPCO). Following this reorganisation, WAPDA has become
responsible for water and hydroelectric power development, whereas PEPCO has been vested with
responsibility for thermal power generation, transmission, distribution and billing. PEPCO is
responsible for the management of the affairs of the DISCOs, four GENCOs and the NTDC. CPPAG
was also established under the coverage of NTDC. NTDC is the national transmission company,
which transmits power between generators and the state-owned distribution companies. CPPAG
purchases power from generators on behalf of the distribution companies and acts as Pakistan's power
market operator. WAPDA is party to a PPA with the NTDC and the CPPAG for the purchase of

53
hydroelectric power generated by WAPDA at the tariff specified by NEPRA. NTDC and the CPPAG
purchase this hydroelectric power on behalf of the DISCOs.
In 2001, WAPDA prepared and received Government approval for the Vision 2025 Programme, a 25
year programme for the development of water and power resources in Pakistan. The key objectives of
this programme are to develop water resources optimally to meet the future water requirements of
Pakistan and to meet its power needs.
Competitive Strengths
Management believes that WAPDA has the following competitive strengths:
Ownership by the Government
WAPDA was established through an Act of Parliament in 1958 and is wholly owned by the
Government through the Ministry of Water Resources. Pursuant to the WAPDA Act, WAPDA is
responsible for irrigation, water supply, power generation, flood control and prevention of water
logging in Pakistan. Projects undertaken by WAPDA are of national importance and benefit from the
full backing of the Government regardless of the regime in place. Each project undertaken by
WAPDA is submitted for approval by the Government and a majority of WAPDA's ongoing projects
are partially funded by the Government in the form of re-lent loans (loans where the Government is
the direct borrower and the loan is then extended to WAPDA) and grants. Through the Ministry of
Water Resources, WAPDA coordinates with federal, provincial and local governments for the
execution of its projects. Any changes to the WAPDA Act must be routed through Parliament.
Recently, the Government provided a comfort letter (the Comfort Letter) confirming that WAPDA
has close operational and administrative linkages to the Government, including an explicit and well
recognised mandate to carry out the Government's responsibility in relation to the development of the
water and power sector in Pakistan.
In addition, in accordance with Section 24 of the WAPDA Act, the Government has assumed certain
obligations to the creditors of WAPDA in the event of a default by WAPDA in the performance of its
obligations.
Low carbon footprint through involvement in the hydroelectric power sector in Pakistan
WAPDA has a low carbon footprint through its involvement in the hydroelectric power sector in
Pakistan, comprising 22 HPPs with an aggregate installed capacity of 9,389 MW (including the
Neelum Jhelum HPP, which was developed via a special purpose vehicle wholly owned by WAPDA
and is not consolidated in the Annual Financial Statements, and which has an installed capacity of 969
MW). WAPDA is the largest supplier of hydroelectric power in the country, accounting for 96 per
cent. of Pakistan's hydroelectric power generation capacity as at 30 June 2020.
Significant importance for Pakistan in light of its status as the largest supplier of hydroelectric
power
WAPDA's importance for Pakistan is reinforced by its significant role in the power industry, which
was confirmed in the recently issued Comfort Letter. WAPDA is the largest supplier of hydroelectric
power in the country, accounting for 96 per cent. of Pakistan's hydroelectric power generation
capacity as at 30 June 2020. The electricity generated by WAPDA represented approximately 95.4 per
cent. of hydroelectric power produced in Pakistan in FY20.
Hydroelectric power is critical for Pakistan's national power supply and is essential for meeting the
country's supply-demand gap. Pakistan's electricity system has historically been characterised by
insufficient generation capacity to meet demand, with acute power shortages which have materially
impacted economic output and high technical and commercial losses that contribute to the "circular
debt" issue described under "—Operations—Power Wing (Hydroelectric Business)—Circular Debt".

54
More recently, capacity expansions have reversed this situation, with capacity exceeding demand in
FY20 for the first time. The following table sets forth the gap between demand and dependable
supply, based on NEPRA's 2020 report:

The supply-demand gap has resulted in one of the lowest levels of electricity consumption per capita
of any country worldwide. The following table sets forth consumption per capita for 2018 by country,
based on data from the World Bank:

Over the past four years, total generation capacity has started to rise significantly as Pakistan
endeavours to address these issues. According to NEPRA's 2017 report, Pakistan's objectives for the
power generation sector include reduced dependence on imported fossil fuels, increased use of
renewable energy, diversification of fuel resources, and security of fuel supply. This is particularly
important in light of Pakistan's historical reliance on expensive imported oil to fuel its thermal power
plants. For example, NEPRA noted in its 2017 report that every PKR 1 depreciation of the Rupee
against the U.S. dollar results in an approximate U.S.$30 million annual increase in Pakistan's fossil
fuel import bill for its planned thermal power plants. Furthermore, while the Government has brought
large-scale efficient renewable liquid natural gas (RLNG) and low-cost coal based power projects to
address the supply-demand gap, these sources will not be sustainable in the longer run. For these
reasons, hydroelectric power will play an increasingly important role in Pakistan's energy sector.
Hydroelectric power accounted for approximately 25 per cent. of Pakistan's total installed capacity in
2020. This is expected to expand to approximately 33 per cent. and 50 per cent. of total installed
capacity by 2025 and 2030, respectively, based on the Indicative Generation Capacity Expansion Plan
(2018-2040) of NTDC, which has connections to over 90 per cent. of Pakistan's power generation

55
capacity. In absolute terms, NTDC projects that total installed hydropower capacity in its coverage
area will increase from approximately 9.8 GW in 2020 to approximately 28.9 GW in 2030,
representing a 11.4 per cent. compound annual growth rate. WAPDA is expected to take a leading
role in developing the new hydropower projects that will facilitate this increase.
Growth potential supported by favourable demographics and economic trends in Pakistan
WAPDA has significant potential for growth due to the structural need for electricity in Pakistan in
light of rising demand supported by growing income levels, population levels and the urbanisation
rate. Demand is also supported by Pakistan's growing industrial sector, which is receiving strong
support from China as a result of the China Pakistan Economic Corridor.
Pakistan's GDP growth has been resilient in recent years, although growth has been adversely affected
by the impact of the ongoing COVID-19 pandemic. GDP grew by 5.6 per cent., 5.8 per cent. and 3.3
per cent. in 2017, 2018 and 2019, respectively, according to the Economist Intelligence Unit (the
EIU). In 2020, Pakistan's GDP declined by 0.4 per cent. (provisional). Pakistan's population has been
growing steadily, from 207.9 million in 2017 to 212.2 million in 2018 and to 216.6 million in 2019,
reflecting a compound annual growth rate of 2.1 per cent. The EIU is forecasting that Pakistan's
population will grow at a compound annual growth rate of 1.9 per cent. from 2019 to 2023.
Furthermore, urbanisation is expected by the EIU to grow from approximately 35 per cent. to
approximately 50 per cent. over the next 20 years. Population growth, urbanisation and the expected
eventual resumption of GDP growth in the aftermath of the COVID-19 pandemic are all expected to
contribute to growth in demand for electricity.
Favourable financial profile to support future expansion plans
WAPDA Hydroelectric has recorded stable revenue and EBITDA over the past several years. Its net
revenue was PKR 62,763.5 million and PKR 66,143.5 million for the years ended 30 June 2020 and
2019, respectively. For the same periods, its EBITDA was PKR 53,198.1 million and PKR 49,612.2
million, respectively. Revenue and EBITDA reflected robust growth on the back of strong demand for
electricity as well as the ability to reclaim the revenue gap pursuant to the tariff notification update
permitted by NEPRA. WAPDA Hydroelectric has steady margins due to the maintenance costs it
incurs being relatively fixed in nature as well as its regulated business model. Finance costs and
foreign exchange losses are recoverable through the tariff process.
WAPDA Hydroelectric's capital expenditure incurred on capital work in progress was PKR 92,151.3
million and PKR 44,057.5 million for the years ended 30 June 2020 and 2019, respectively.
WAPDA's stable financial profile provides a base for its future growth in capacity to support growing
demand for electricity in Pakistan. WAPDA has unparalleled institutional capacity in the region to
identify, design and implement hydroelectric power projects and has been leveraging the Indus
cascade basin for multiple projects. The Indus River enters Pakistan at an altitude of 8,430 feet, which
declines to an altitude of 1,400 feet. WAPDA has several projects along a 750 km stretch of the Indus
as it declines in altitude. It plans to develop hydroelectric power projects in this area on a fast track
basis to enhance the share of hydroelectric power in Pakistan, keep consumer end tariffs within
affordable limits and create a buffer for the water security of the country. It has a pipeline to increase
installed capacity by 9,359 MW, resulting in an increase of net electricity generation by
approximately 37,316 GWh annually. This includes four major projects under construction, which
will add approximately 8,870 MW of installed capacity (out of 9,359 MW of installed capacity which
will be added under all construction projects) and are expected to be completed during the period
from 2025 to 2029. The four major projects are the Mohmand Dam, which will add 800 MW of
installed capacity upon completion in 2025, the Dasu Stage-1 HPP and Tarbela 5th extension, which
will add 3,570 MW of installed capacity in 2026 upon completion and the Diamer Bhasha Dam,

56
which will add 4,500 MW of installed capacity in 2029 upon completion. These four projects account
for approximately 95 per cent. of total capital expenditure requirements over the next ten years.
Secure revenue stream driven by regulatory and contractual model
WAPDA has a secure revenue stream which is based on a tariff set by NEPRA. Under Section 25 of
the WAPDA Act, WAPDA is required to sell power in bulk. The price at which WAPDA sells power
is fixed to meet its operation costs, interest charges, depreciation of assets, redemption of loans other
than those covered by depreciation, payment of taxes and a reasonable return on investment. The tariff
is based on projected revenue which takes into account WAPDA's RAB. The return on WAPDA's
RAB is intended to capture the return on the actual incurred capital cost of its projects at the actual
WACC such that the ROE is 10 per cent. The application of this mechanism is then intended to result
in the tariff being directly proportional to WAPDA's investment programme. The average tariff
increases gradually during the construction period, which avoids steep increases in tariffs upon the
completion of a particular hydroelectric power project. This tariff mechanism allows WAPDA to
attract adequate funding from local as well as foreign financial markets and to make payment of
interest on loans during construction as per the agreed schedule because the cost of debt can be
recovered through the WACC. 95 per cent. of WAPDA's revenues are fixed based on capacity
payments regardless of electricity generation, whereas only 5 per cent. of annual revenue is dependent
on electricity generation.
WAPDA has a PPA with the NTDC and the CPPAG, which provides that the electricity generated by
WAPDA is to be purchased at the applicable tariff specified by the NEPRA. In 2013, the parties to the
PPA signed an escrow agreement (the Escrow Agreement) to ensure timely power sales payments
between WAPDA and NTDC/CPPAG, although this has not eliminated the circular debt issue.
WAPDA is entitled to involve the Government through the Ministry of Water Resources in the event
of any disputes under these agreements. While WAPDA has nonetheless experienced significant
delays in collecting hydroelectric power tariffs due to the significant cash shortfall at CPPAG, the
Government is working to address these issues through improving collection and reducing losses,
frequent tariff updates and the rationalisation of subsidies. See "—Operations—Power Wing
(Hydroelectric Business)—Circular Debt" for further detail of these measures. Furthermore,
WAPDA's debt service with external creditors has never been impacted by delays from the NTDC or
the CPPAG. Both WAPDA and the power purchaser are Government entities and so any dispute
would be expected to be mediated and resolved by the Government.
Financial flexibility due to multiple sources of funding
WAPDA has a well-diversified funding plan for its future capital expenditure requirements, which are
primarily associated with its Dasu Stage-1 HPP, Tarbela 5th extension, Mohmand Dam and Diamer
Bhasha Dam projects. These projects together account for over 95 per cent. of WAPDA's total capital
expenditure requirements over the next ten years. The total capital expenditure for all four projects is
estimated to be approximately U.S.$12.97 billion. The projects are expected to be financed by a range
of sources, including Government grants, loans from international financial institutions, ECA backed
arrangements, Eurobonds (including the Notes), local financing backed by the guarantee of the
Government and asset backed loans and bonds. This includes funding raised by the Government for
various hydroelectric projects from international financial institutions on a re-lent basis (loans where
the Government is the direct borrower and the loan is then extended to WAPDA), including the World
Bank, Asian Development Bank, Exim Bank of China, Kuwait Fund, Saudi Fund, OPEC Fund and
KFW Development Bank. WAPDA is liable to service re-lent loans from the Government in local
currency at a fixed rate agreed in subsidiary loan agreements with the Government and hence
WAPDA is not exposed to foreign exchange risk. Approximately 15.62 per cent. of WAPDA's
financing over the next nine years is expected to be funded by the Government. See "—Debt Profile".

57
WAPDA has demonstrated a strong financing track record in both the domestic and international
markets and has made all payments of principal and interest on a timely basis. For further details of
WAPDA's financing arrangements, see "—Operations—Power Wing (Hydroelectric Business)—
Projects in the Pipeline".
Operations
WAPDA was established through an Act of Parliament in 1958 for the integrated development of
water and power resources in the Indus Basin. It is an autonomous and statutory body under the
administrative control of the Government and is wholly owned by the Government. WAPDA is
responsible for the operation, maintenance, upgrade and expansion of HPPs, large water reservoirs
and the construction of new projects for power generation and water storage in Pakistan.
WAPDA is core to Pakistan's electricity framework, which is set forth in the chart below:

The Ministry of Water Resources and the Power Division of the Ministry of Energy are responsible
for supervision and coordination among national power organisations and power operators as well as
for policy formulation. NEPRA was established in 1997 as an autonomous regulatory body to
improve the efficiency and availability of electric power services in Pakistan. NEPRA grants licences,
determines tariffs, sets performance standards and approves investments by national power
organisations and power operators.
Generation is carried out by the following entities: (i) PEPCO, a management company with oversight
over distribution and transmission which mainly manages thermal units; (ii) WAPDA, which manages
HPPs; and (iii) IPPs, which are private utility companies that own facilities for the generation of

58
electric power for sales to utility end users. There are currently over 30 major IPPs operating in
Pakistan.
Transmission is carried out by the following entities: (i) NTDC, which is the national transmission
company which transmits power between generators and state-owned DISCOs which serve end
customers; and (ii) CPPAG, which purchases power from generators on behalf of the DISCOs and
acts as Pakistan's power market operator.
Distribution to end customers is carried out by PEPCO and nine DISCOs.
Operating alongside these entities, K-Electric was privatised in 2005 and is a vertically integrated
company that provides power generation, transmission and distribution to the Karachi metropolitan
area.
WAPDA is managed by a Chairman and three Members for each of its separate wings: the Water
Wing, the Power Wing and the Finance Wing. In 2007, the functions of the Power Wing were
redefined as Hydroelectric Power Generation and O&M. Hydroelectric power generation is its core
commercial business, contributing over 95 per cent. of WAPDA's revenues in the year ended 30 June
2020. Specifically, WAPDA constructs, operates and maintain hydroelectric power generation assets
to generate affordable and clean electricity. WAPDA also builds water storage facilities to help
address Pakistan's acute water challenges.
Power Wing (Hydroelectric Business)
In 1998, WAPDA's Power Wing was unbundled into nine DISCOs, four GENCOs and the NTDC.
WAPDA is responsible for the operation, maintenance, upgrade and expansion of HPPs, large water
reservoirs and the construction of new projects for power generation and water storage in Pakistan.
WAPDA currently operates under a generation license granted in 2004 by NEPRA for the operation,
maintenance and development of hydroelectric power resources in Pakistan. Being the largest bona
fide supplier of hydroelectric power in Pakistan, WAPDA's Power Wing holds significant strategic
importance for Pakistan, having accounted for 96 per cent. of Pakistan's hydroelectric power
generation capacity as at 30 June 2020. The electricity generated by WAPDA represented
approximately 95.4 per cent. of hydroelectric power produced in Pakistan in FY20. The electricity
generated by WAPDA's HPPs is delivered to either NTDC or CPPAG. as set forth in the chart above
under "—Operations".
WAPDA has 22 HPPs with an aggregate installed capacity of 9,389 MW (including the Neelum
Jhelum HPP, which was developed via a special purpose vehicle wholly owned by WAPDA and is
not consolidated in the Annual Financial Statements, and which has an installed capacity of 969 MW).
Among these, its most significant projects include the Tarbela, Ghazi Barotha, Tarbela 4th extension
and Mangla HPPs, which have an installed capacity of 3,478 MW, 1,450 MW, 1,410 MW and 1,000
MW, respectively. See "—Completed Projects" below for further detail. WAPDA has four major
projects under construction, which will add 8,870 MW of installed capacity (out of 9,359 MW of
installed capacity which will be added under all construction projects) and are expected to be
completed during the period from 2025 to 2029, more than doubling WAPDA's current installed
capacity. See "—Projects in the Pipeline" for further detail of these projects.
Hydroelectric power generation produced by WAPDA's HPPs is directly dependent on the extent of
water available. The following table sets forth the hydroelectric power generated by WAPDA during
the periods indicated (for the fiscal year ended 30 June):

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
(TWh)

59
Hydroelectric
power generated ................................
27.6 31.7 28.2 29.3 31.3 31.8 33.2 30.8 26.8 27.2 32.3

A significant increase in hydroelectric generation in the amount of 2,864 GWh is expected in FY25
upon completion of the Mohmand Dam HPP and 14,441 GWh is expected in FY26 upon completion
of Dasu Stage-1 HPP, Tarbela 5th extension and Keyal Khwar HPP. A further increase of 18,027
GWh is expected in 2029 when the Diamer Bhasha Dam commences operations. The replacement and
refurbishment of machinery and equipment of existing HPPs is also expected to generate
approximately 2,000 GWh per annum of additional energy from 2026 onwards.
The following chart depicts WAPDA's key completed projects and projects in the pipeline, which are
discussed in further detail below:

Power Sale Tariff

Section 25 of the WAPDA Act provides that WAPDA shall ordinarily sell power in bulk. The price at
which WAPDA sells power is fixed to meet its operation costs, interest charges, depreciation of
assets, redemption of loans other than those covered by depreciation, payment of taxes and a
reasonable return on investment.
Tariff Methodology
Pursuant to the NEPRA Act, each licensee is required to sell its power services at a tariff determined
by NEPRA. Once determined by NEPRA and notified to the Government, the tariff remains valid
until it is revised by NEPRA. The determination process entails a series of discussions, hearings and
meetings.
The tariff at which WAPDA sells power generated by its hydropower stations to the CPPAG has been
set at PKR 4.11 per kWh (including PKR 3.15 per kWh to cover business expenses and PKR 0.96 to
cover hydel levies which are pass-through payments to provinces) for FY21 compared to the tariff of
PKR 5.67 per kWH (including PKR 2.12 per kWh to cover business expenses and PKR 3.55 to cover
hydel levies which are pass-through payments to provinces) for FY18. The Government has

60
undertaken to international lenders to increase the power tariff by approximately PKR 0.35 per kWh
by June 2022.
The tariff determination methodology adopted by NEPRA for WAPDA's hydropower business is
based on the annual revenue requirement (the Annual Revenue Requirement), which is defined as
follows: (i) the return on WAPDA's RAB; plus (ii) depreciation expense; plus (iii) O&M expense;
plus (iv) Ijara rental; plus (v) other charges (hydroelectric levies); less (vi) other income; plus/less
(vii) prior period adjustments. For purposes of the tariff, WAPDA's RAB includes the average net
value of operating assets at historical cost and average work-in-progress capital. O&M expense
includes repair and maintenance, staff expenses and wages, administrative and general expenses and
retirement benefits.
NEPRA determines WAPDA's bulk supply tariff for its power services based on two components for
the recovery of annual revenue requirements: (i) a fixed capacity charge derived from available
capacity, which accounts for 95 per cent. of the total tariff; and (ii) variable charges based on the NEO
generated, which accounts for 5 per cent. of the total tariff. Variable charges are calculated as follows:
(Actual NEO/Anticipated NEO) x 5 per cent. x the Annual Revenue Requirement. For each period,
Actual NEO is measured by the power purchaser while Anticipated NEO is provided by WAPDA.
WAPDA's return varies based on its WACC and the average level of its RAB. Under this mechanism,
the tariff is intended to be directly proportionate to WAPDA's investment programme. The average
tariff increases gradually during the construction period, which avoids steep increases in tariffs upon
the completion of a particular hydroelectric power project. This tariff mechanism allows WAPDA to
attract adequate funding from local as well as foreign capital markets and to make payment of interest
on loans during construction as per the agreed schedule because the cost of debt can be recovered
through the WACC.
NEPRA allows WAPDA to realise a return on its incurred capital costs only on projects which are
included in its generation licence. Therefore, instead of executing projects through a separate project
company, WAPDA executes projects through the modification of its generation licence. All power
projects, including Dasu Stage-1 HPP, Tarbela 5th extension and Diamer Bhasha Dam are included in
WAPDA's generation licence.
The following chart depicts the tariff methodology applicable to power sales by WAPDA:

61
 The following table sets forth details regarding WAPDA's RAB and WACC for its development block
hydel projects for the years indicated:

FY21 FY20 FY19 FY18 FY17

(PKR millions, unless otherwise indicated)
RAB for return purpose ................................
202,906 126,551 92,494 164,746 123,124

Debt: Equity ................................................................

80:20 80:20 80:20 80:20 80:20

Cost of Debt ................................................................

10.182% 9.928% 9.198% 12.648% 12.769%
Cost of Equity................................................................
11.09% 17.00% 17.00% 17.00% 17.00%
WACC ................................................................
10.364% 11.342% 10.758% 13.518% 13.615%
Return on Investment (ROI) ................................
21,034 14,354 9,951 22,271 16,764

The following table sets forth details regarding WAPDA's RAB and WACC for its generation block
hydel projects for the years indicated:

FY21 FY20 FY19 FY18 FY17

(PKR millions, unless otherwise indicated)
RAB for return purpose ................................
234,263 238,690 204,427 165,192 167,779
Debt: Equity ................................................................
70:30 70:30 70:30 70:30 70:30
Cost of Debt ................................................................
12.52% 11.89% 12.93% 12.56% 12.71%
Cost of Equity................................................................
11.09% 17.00% 17.00% 17.00% 17.00%
WACC ................................................................
12.09% 13.42% 14.15% 13.89% 13.99%
Return on Investment (ROI) ................................
28,330 32,033 28,643 22,945 23,480

Power Purchase Agreement

The Power Wing's key source of revenue is proceeds from sale of electricity at the tariff described
above under "—Tariff Methodology" to the NTDC/CPPAG. For this purpose, WAPDA entered into a
PPA with NTDC on 24 January 2011 for the sale of electricity. If there is an event of default under the
PPA, the prior written consent of the Government or NEPRA must be sought before the contract may
be terminated by either party. To date, neither NTDC nor CPPAG has defaulted on its payments to
WAPDA under the PPA. However, if this were to occur, it is expected that the Government would
mediate and resolve the conflict since both WAPDA and NTDC/CPPAG are wholly owned by the
Government. The PPA will remain effective until such time as a competitive market structure takes
effect in the Pakistani power sector. Pursuant to the PPA, there is a defined hierarchy applicable to the
purchase of electricity, with the lowest price energy being purchased first. Since hydroelectric power
is the cheapest source of energy, it has preference over energy generated through other more
expensive sources.
The Escrow Agreement was signed in 2013 to ensure the timely payment for power sales between
WAPDA and NTDC/CPPAG.
Circular Debt
In determining electricity tariffs (as described above under "—Tariff Methodology"), NEPRA assumes
100 per cent. collection and 15.5 per cent. transmission and distribution losses, which in reality
represents a significant deviation from the actual performance of the DISCOs. This implies that the
tariff is set at a level lower than cost recovery, generating a structural shortfall in revenue in the
62
system. This has led to the emergence of arrears in the power sector, which is known as "circular
debt".
Essentially, circular debt is the amount of cash shortfall within CPPAG, the state-owned agency
which purchases power from generators on behalf of the DISCOs and acts as Pakistan's power market
operator, which it cannot pay to power supply companies. The overdue amount is the result of the
following factors:
 the difference between the actual cost and the tariff determined by NEPRA, which represents
the distribution company's losses above and collections allowed by NEPRA;

 a delay in, or the non-payment of, subsidies by the Government; and

 delays in the determination and notification of tariffs.

In light of these challenges, the Government has prepared a comprehensive circular debt reduction
plan. The plan, prepared in consultation with IMF staff and other international partners, aims to
reduce the annual flow of circular debt from the current level (for example, for FY19, PKR 465
billion of new circular debt was created) to approximately PKR 50 to 75 billion by FY23 through
improving collection and reducing losses, streamlining tariff updates, and rationalising subsidies.
Monitoring of the plan will take place through implementation reports published by the Ministry of
Energy. Key measures of the plan include the following:
 streamlining the tariff procedure and reintroducing surcharges: to achieve this, the NEPRA
Act will be amended to (i) give NEPRA the power to determine and notify quarterly tariffs;
(ii) ensure the timely submission of tariff petitions by the DISCOs; (iii) streamline the
notification of annual tariffs by the Government; and (iv) reintroduce the power of the
Government to introduce tariff surcharges to stem the accumulation of arrears;

 timely updating of tariffs: until the process of adjusting quarterly tariffs referred to above
becomes fully automatic, the Government will continue to notify tariffs for capacity payments
on a quarterly basis shortly after the end of the preceding quarter;

 improving efficiency and collection: the Government signed performance-based contracts

with all DISCOs by the end of January 2020, with key performance indicators for
improvements in collections and reductions in losses. The authorities will also enforce
existing legal procedures to initiate disconnections of non-paying customers (historically,
customers have still received service even in instances where they have not paid their
electricity bills in over two years). Finally, regulatory benchmarks will be reassessed against
NEPRA's assumption of 100 per cent. recoveries to address the structural accumulation of
circular debt embedded in the system;

 anti-theft drive: the theft of electricity is one of the main reasons for non-recovery from
customers. The anti-theft drive is run by the Government with assistance from law
enforcement agencies. The drive includes measures to physically secure electricity feeders in
high-loss areas as well as awareness campaigns of the negative effects imposed by electricity
theft;

 rightsizing of subsidies: energy sector subsidies are very poorly targeted, requiring significant
cross-subsidisation of the tariff. Recognising these costs, the Government plans to revisit all
Government-provided power sector subsidies such that the budget for FY21 is targeted more
accurately; and

63
  strengthening the governance of DISCOs: all DISCOs will appoint an independent Board of
Directors on the basis of merit and without any political interference. Similarly, all senior
management will be appointed through a competitive process.

According to the IMF Country Report issued in December 2019, Pakistan's circular debt reduction
plan was finalised on 8 November 2019. The electricity tariff adjustments, as determined by NEPRA,
were notified on 30 September 2019, although the tariff adjustment for the first quarter of FY20 only
took place on 29 November 2019. The Government has been adjusting tariffs gradually on a quarterly
basis to cost recovery levels, including on 30 September 2019 by around 5 per cent., largely to
recover arrears accumulated over FY19, and on 29 November 2019, by around 2 per cent. on account
of capacity payments during the first quarter of FY20. All power sector subsidies are also being
phased out. These efforts had already contributed to a reduction in circular debt, with accumulation of
new arrears falling from approximately PKR 38 billion per month in the FY19 to PKR 26 billion per
month during the first half of FY20. However, the spread of COVID-19 derailed the momentum as
the Government needed to increase tariff subsidies to vulnerable segments of the population and the
billing, collection and timely revision of tariffs were negatively affected, resulting in the increase of
circular debt. The monthly average accumulation of the FY19 arrears increased to approximately PKR
44.8 billion for the full year of FY19.
Completed Projects
Through the Ministry of Water Resources, WAPDA coordinates with other ministries and with
federal, provincial and local governments to achieve the smooth execution of its ground works,
including the acquisition of land and the security of installations. WAPDA is responsible for
construction and O&M of the projects and the ownership of all projects post completion remains with
WAPDA. Operational risks are minimised by ensuring regular repair and maintenance of power
generation facilities and maintaining sufficient inventory of spare parts and maintenance tools.
The total installed generating capacity of WAPDA's 22 HPPs is 9,389 MW (including the Neelum
Jhelum HPP, which was developed via a special purpose vehicle wholly owned by WAPDA and is
not consolidated in the Annual Financial Statements, and which has an installed capacity of 969 MW).
These HPPs produced 32,295 GWh, 27,196 GWh and 26,775 GWh of net electrical energy during
FY20, FY19 and FY18 (excluding the Neelum Jhelum HPP). The following table sets forth certain
information regarding WAPDA's completed hydroelectric power projects:

Date of latest
commissionin Installed capacity NEO for 2020 NEO for 2019 NEO for 2018
g (MW) (GWh) (GWh) (GWh)

Tarbela ................................ February 1993 3,478 11,858 10,589 13,112

Ghazi Barotha ................................

March 2004 1,450 6,482 6,476 6,364

Mangla ................................ 1994 1,000 4,589 3,803 4,073

Warshak ................................ March 1981 243 1,095 1,000 913

Chashma ................................ May 2011 184 747 762 751

Duber Khwar ................................

March 2014 130 609 592 511

Allai Khwar ................................March 2013 121 469 461 275

Jinnah Hydel ................................March 2013 96 177 219 224

64
Tarbela 4th Extension ................................
March 2018 1,410 5,486 2,489 –

Khan Khwar ................................ July 2012 72 274 233 167

Golen Gol ................................January 2018 108 86 116 –

Rasul ................................................................
July 1952 22 34 69 63

Dargai ................................................................
December 20 98 109 95
1952

Nandipur ................................ March 1963 14 34 35 43

Shadiwal ................................ January 1961 14 14 28 25

Chichoki ................................ August 1959 13 30 28 31

K/Garhi ................................ February 1958 4 15 14 17

Renala Khurd ................................

March 1925 1 2 2 2

Chitral ................................................................
1982 1 3 4 3

Jabban ................................................................
December 22 138 135 104
2013

Gomal Zam Dam ................................

June 2013 17 54 32 –

Neelum Jhelum HPP

(Off-Balance Sheet
2018 969 4,843 3,967 –
Project) ................................
1

The following table sets forth the financing arrangements in respect of WAPDA's completed projects:

Outstanding
amount as at
Rate of 30 June 2020
interest per Repayment Loan (U.S.$
Project Project Status annum commencement Maturity millions)

Foreign Re-lent
Loans(1)

ADB-1424-PAK (0- Ghazi Completed 14.0 per cent. 2001 2021 U.S.$2.8
GB) ................................ Barotha million

KfW-9566316 (0-GB)................................
Ghazi Completed 14.0 per cent. 2003 2023 U.S.$5.3
Barotha million

1
WAPDA to provide.

65
CITI Bank of Japan Chashma Completed 11.0 per cent. 2005 2025 U.S.$3.1
(13 billion) (O-CH) ................................ million

AFD Credit Facility Jabban Completed 15.0 per cent. 2014 2028 U.S.$9.4
(0-JAB) ................................
Rehabilitatio million
n

IDB-PAK-0117 ................................
Allai, Duber Completed 17.0 per cent. 2014 2023 U.S.$4.0
and Khan million
Khwar

Kuwait Fund Loan Golen Gol Completed 17.0 per cent. 2014 2025 U.S.$13.2
No. 742 ................................ million

Saudi Fund Loan No. Golen Gol Completed 17.0 per cent. 2014 2025 U.S.$10.7
10/479 ................................ million

Saudi Fund Loan No. Golen Gol Completed 15.0 per cent. 2019 2034 U.S.$29.6
14/609 ................................ and others million

OPEC Fund Loan No. Golen Gol Completed 17.0 per cent. 2018 2028 U.S.$6.7
1205-P................................ million

OPEC Fund Loan No. Golen Gol Completed 17.0 per cent. 2019 2028 U.S.$8.2
1206-PB ................................ million

IDA CREDIT No. Tarbela T4 Completed 15.0 per cent. 2017 2037 U.S.$104.9
5079-PK ................................ million

IBRD 8144-PK ................................

Tarbela T4 Completed 15.0 per cent. 2020 2031 U.S.$231.6
million

Keyal In pipeline 15.0 per cent. U.S.$3.0

KFW-320517 ................................ 2019 2059
Khwar million

Keyal In pipeline 15.0 per cent. U.S.$0.8

KFW-3003374 ................................ 2019 2049
Khwar million

Warshak In pipeline 15.0 per cent.

Rehabilitatio 2022 2036 U.S.$6.0
AFD Credit Facility ................................
n million

Warshak In pipeline 15.0 per cent.

Rehabilitatio 2027 2056 U.S.$0.2
KFW-15568024 ................................
n million

Mangla In pipeline 12.0 per cent.

Refurbishme 2023 2037 U.S.$21.8
AFD Credit Facility ................................
nt million

Tarbela 5th In pipeline 12.0 per cent. U.S.$7.9

IBRD 8646-PK ................................ 2023 2036
Extension million

66
 Tarbela 5th In pipeline 12.0 per cent. U.S.$2.6
AIIB LN 0005-PK ................................ 2023 2036
Extension million

IDA CREDIT No. Dasu In pipeline 15.0 per cent. U.S.$157.6

2020 2039
5498-PK ................................ million

Foreign Direct
Loans

Pakistan Water and Dasu In pipeline 3.2 per cent. 2023 2027 U.S.$350
Power (06/17) million

Cash Development
Loans/Local Loan
Projects

1997-98 (O-T-HPS) ................................

Tarbela Completed 17.5 per cent. 2004 2023 U.S.$2.5
million

1998-99 (O-T-HPS) ................................

Tarbela Completed 17.5 per cent. 2005 2024 U.S.$1.6
million

2005-06 (O-GB)................................
Ghazi Completed 9.8 per cent. 2012 2031 U.S.$29.7
Barotha million

2007-08 (O-JAB) ................................

Jabban Completed 10.1 per cent. 2014 2033 U.S.$0.2
Rehabilitatio million
n

2009-10 (O-JAB) ................................

Jabban Completed 12.6 per cent. 2016 2035 U.S.$0.5
Rehabilitatio million
n

Local Commercial
Loan

Syndicated term Dasu In pipeline 1) 6-month 2022 2032 U.S.$148.5

finance facility ................................ KIBOR + million
margin of
1.45% for
GoP
Guarantee
Backed
Financing
(GBF)
Facilities

2) 6 month
KIBOR +
margin of
2.00% for
Assets
Backed

67
 Financing
(ABF)
Facilities

CPK 1028-01-W ................................

Mohmand 15.0 per cent. 2019 2028 U.S.$5.2
million

Development
projects loans

Government of Harpo In 12.6 per cent. 2016 2035 U.S.$0.2

Pakistan................................ pipeline/Feasibi million
lity study

Government of Bashoo In 10.1 per cent. 2014 2033 U.S.$0.1

Pakistan................................ pipeline/Feasibi million
lity study

Government of Bashoo In 12.6 per cent. 2016 2035 U.S.$0.1

Pakistan................................ pipeline/Feasibi million
lity study

Government of Diamer In pipeline 10.1 per cent. 2014 2033 U.S.$1.5

Pakistan................................ Bhasha million

Government of Diamer In pipeline 12.6 per cent. 2016 2035 U.S.$5.4

Pakistan................................ Bhasha million

Government of Diamer In pipeline 12.6 per cent. 2018 2037 U.S.$66.5

Pakistan................................ Bhasha million

Government of Diamer In pipeline 10.7 per cent. 2019 2038 U.S.$21.7

Pakistan................................ Bhasha million

Government of Diamer In pipeline 11.8 per cent. 2020 2039 U.S.$161.0

Pakistan................................ Bhasha million

Government of Diamer In pipeline 10.5 per cent. 2021 2040 U.S.$89.1

Pakistan................................ Bhasha million

Government of Diamer In pipeline 7.4 per cent. 2022 2041 U.S.$59.4

Pakistan................................ Bhasha million

Government of Diamer In pipeline 6.5 per cent. 2023 2042 U.S.$83.2

Pakistan................................ Bhasha million

Total ................................ U.S.$1,656

million

_________

Note:

68
(2) Foreign re-lent loans represent loans taken out by the Government and re-lent to WAPDA where WAPDA's liability for the
servicing of these loans is in local currency only at a fixed rate agreed in a subsidiary loan agreement with the Government and
the Government assumes all of the foreign exchange rate risk involved in these loans.

Projects in the Pipeline

WAPDA currently has the following projects under construction, which would add 9,359 MW to its
installed capacity up to the year 2029:
 Dasu Stage-1 HPP (2,160 MW), which is expected to be completed in 2026;

 Mohmand Dam Hydropower (800 MW), which is expected to be completed by 2025;

 Diamer Bhasha Dam (4,500 MW), which is expected to be completed by 2029;

 Tarbela 5th extension (1,410 MW), which is expected to be completed by 2026;

 Keyal Khwar (122 MW), which is expected to be completed by 2026;

 Mangla Rehabilitation (310 MW), which is expected to be completed by 2026; and

 Warshak Rehabilitation (57 MW), which is expected to be completed by 2023.

The following table provides details regarding the financing of the first three projects set forth above,
in the total amount of U.S.$13.73 billion (FDL and FRL stand for foreign direct loans and foreign re-
lent loans, respectively):

Details Funding plan Status

Dasu Stage-1 HPP................................................................

Installed capacity: World Bank IDA Credit Operative (FRL)
2,160 MW (U.S.$573 million)) Operative

Generation
capacity:12,203 GWh

Completion year:
2026

Credit Suisse Loan Operative (FDL)

(U.S.$350 million)

ECA Backed Export Credit Negotiations underway

(U.S.$244 million) with Sinosure (FDL)

World Bank Partial Credit World Bank's PCG of

Guarantee (U.S.$415 U.S.$240 million
million) available with WAPDA,
which will be utilised as
a loan in the amount of
U.S.$415 million

World Bank IDA Credit Available (FRL)

(U.S.$156 million)

69
 Local financing (U.S.$853 Operative - PKR 144
million) billion has been secured
from commercial banks,
with the remaining
amount to be raised as
per the project
requirement

WAPDA self-financing Operative

(U.S.$264 million)

Mohmand Dam Hydropower ................................

Installed capacity: Federal Government Grant Operative
800 MW (U.S.$677 million)

Generation capacity:
2,864 GWh

Completion year:
2025

Foreign financing (U.S.$716 SFD (U.S.$80 million)

million) (FRL); Commercial loan
(U.S.$60 million) (FDL);
AIIB (U.S.$350 million)
(FRL); remainder
through Middle Eastern
donor agencies (FRL)

Local financing (U.S.$207 Through Government

million) guarantee and asset-
backed loans/bonds

WAPDA self-financing Operative

(U.S.$178 million)

Diamer Bhasha Dam ................................ Installed capacity: Federal Government Grant Operative
4,500 MW & Loan (U.S.$2,426 million)

Generation capacity:
18,027 GWh

Completion year:
2029

Foreign Financing – Dam SFD (U.S.$100 million)

Part (U.S.$1,440 million) (FRL); Proceeds from
Eurobond (FDL) with
two issues of U.S.$500
million each;
Commercial loan
(U.S.$80 million) (FDL);
remainder through
Middle Eastern donor

70
 agencies (FRL)

Foreign Financing - Power Export Credit U.S.$1.5

Generation (U.S.$3,128 billion (FDL); Eurobond
million) with two issues of
U.S.$500 million each
(FDL); remainder
through Middle Eastern
donor agencies (FRL)

Local financing (U.S.$899 Through Government

million) guarantee and asset-
backed loans/bonds

WAPDA self-financing Operative

(U.S.$1,200 million)

The following table provides details regarding the financing of the remaining projects set forth above:

Estimated cost of
Installed capacity project (U.S.$
(MW) Expected completion millions) Funding agency
Warshak Rehabilitation................................ 57 2023 U.S.$132 million KfW, AFD, EIB,
EU
Tarbela 5th Extension ................................ 1,410 2026 U.S.$651 million WB IBRD, AIIB
Mangla Rehabilitation................................ 310 2026 U.S.$335 million USAID, AFD
Keyal Khwar ................................ 122 2026 U.S.$215 KFW, AFD, EIB

The following table sets forth a breakdown of capital expenditure and funding source by year:

FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29

(U.S.$ millions)
Capital
Expenditure
Keyal Khwar ................................
2 56 53 40 32 12 – – –
Dasu Stage 1 HPP................................
214 442 493 484 462 347 – – –
Diamer Bhasha Dam ................................
237 609 968 1,143 1,054 1,243 1,122 1,046 811
Mohmand Dam
174
Hydropower ................................ 397 416 390 268 – – – –
Mangla
Rehabilitation ................................
17 57 60 54 50 31 – – –
Warshak
Rehabilitation ................................
16 40 68 – – – – – –

71
Tarbela 5th
Extension ................................ – 19 190 207 117 119 – – –
Total Capital
Expenditure ................................
660 1,620 2,249 2,318 1,982 1,751 1,122 1,046 811
Financing Mix
Government of
Pakistan Funding ................................
166 360 347 355 258 213 208 210 –
Foreign Commercial
215
Financing ................................ 616 1,414 1,356 985 859 745 709 682
Local Commercial
Financing ................................
263 504 286 360 308 270 100 70 73
WAPDA Self
Financing ................................16 141 201 246 431 410 69 57 56
Total financing ................................
660 1,620 2,249 2,318 1,982 1,751 1,122 1,046 811

Through these new projects and rehabilitations/refurbishments, the pipeline is expected to increase
NEO by approximately 37,316 GWh annually by 2029.
Water Wing
The Water Wing of WAPDA is responsible for planning, designing and execution of water resources
development projects in the sector of irrigation, drainage and hydropower. Inter-provincial major
surface water projects, including large dams, are also operated and maintained by the Water Wing.
Completed Projects
The following table sets forth the completed projects of the Water Wing:

Date of Project cost

Completion (U.S.$ millions) Details

Simly Dam ................................................................

1982 U.S.$4.2 million Earthen embankment dam with 28,750 acre
foot reservoir capacity

Pehur High Level Canal ................................ 2002 U.S.$163.0 20.64 km canal for irrigation of 101,000
million acres of District Swabi, Khyber
Pakhtunkhwa

Chashma Right Bank Canal ................................ 2003 U.S.$110.8 274 km canal for irrigation of 606,000 acres
million in Khyber Pakhtunkhwa and Punjab

Ghazi Barotha Hydropower Project ................................

2004 U.S.$628.4 Installed capacity: 1,450 MW
million
Reservoir capacity: 50,300 acre foot

Mirani Dam................................................................
2007 U.S.$37.7 Concrete face rock fill dam with reservoir
million capacity of 32,700 acre feet

Sabakzai Dam ................................................................

2009 U.S.$12.7 Rock and earth fill dam with reservoir
million capacity of 32,700 acre feet

72
Greater Thal Canal (Phase 1) ................................2009 U.S.$44.3 35 km main canal with 105 km in branches
million for irrigation of 355,000 acres of land in
Punjab

Mangla Dam Raising ................................ 2011 U.S.$662.6 Additional storage: 2.83 million acre feet
million
Additional power: 644 GWh

Satpara Dam ................................................................

2013 U.S.$42.4 Earth fill dam with reservoir capacity of
million 93,000 acre feet

Rainee Cahal ................................................................

2014 U.S.$114.3 110 km canal with 128 km in branches to
million irrigate 113,690 acres of land in District
Ghotki of Sindh

Gomal Zam Dam ................................................................

2013 U.S.$133.7 Installed capacity: 17.4 MW
million
Reservoir capacity: 1.14 million acre feet

Darawat Dam ................................................................

2014 U.S.$76.3 Concrete gravity dam with reservoir capacity
million of 0.12 million acre feet

Kachhi Canal Project (Phase 1) ................................

2017 U.S.$520.8 Canal capacity: 6,000
million
Cusecs common area: 72,000 acres for
irrigation of land in Balochistan

Balochistan Effluent Disposal................................2020 U.S.$70 million Effluent disposal facilities for existing and
proposed drainage projects; the work would
increase crop production of agricultural land
wasted due to ponds of water

Lower Indus Right Bank Irrigation 2020 U.S.$113.4 Rehabilitation of existing drainage network
and Drainage ................................................................ million to improve environmental conditions in
Manchar and Hamal Lakes

Projects in the Pipeline

The Water Wing has the following projects in the pipeline:

Date of Completion Project cost (U.S.$ millions) Details

Muzaffargh & T.P. Link Canals................................

December 2021 U.S.$55.5 million Remedial measures to
control water logging,
63 km canal lining

Nar Gaj Dam ................................................................June 2021 U.S.$170 million Earth core rock fill
dam with live storage

73
 capacity of 160,000
acre feet

Debt Profile
As at 30 June 2020, WAPDA Hydroelectric's total outstanding debt (comprising long-term financing -
interest bearing, current portion of long-term financing and short term borrowings) was PKR 358.4
billion. As at the same date, WAPDA Hydroelectric's total outstanding debt (excluding short-term
borrowings) was comprised of foreign re-lent loans, which accounted for 38.3 per cent., cash
development loans - unsecured, which accounted for 31.6 per cent., foreign direct loans, which
accounted for 21.1 per cent., and local commercial financing, which accounted for 9.0 per cent.
Foreign re-lent loans includes funding raised by the Government for various hydroelectric projects
from international financial institutions on a re-lent basis (loans where the Government is the direct
borrower and the loan is then extended to WAPDA), including the World Bank, Asian Development
Bank, Exim Bank of China, Kuwait Fund, Saudi Fund, OPEC Fund and KFW Development Bank.
WAPDA is liable to service re-lent loans from the Government in local currency at a fixed rate agreed
in subsidiary loan agreements with the Government and hence WAPDA is not exposed to foreign
exchange risk.
Cash development loans – unsecured, are direct unsecured loans from the Government to finance the
construction and/or development of specified projects or projects, or payments to be made by
WAPDA to any regional or provincial government of Pakistan in connection with any such projects.
Cash development loans are denominated and payable in Rupees.
Foreign direct loans are loans for which WAPDA is the borrower and is directly exposed to the risk of
foreign exchange rate fluctuations, which are recoverable through the tariff (see "—Operations—
Power Wing (Hydropower Business)—Tariff Methodology".
Although WAPDA is liable to service its foreign re-lent loans and cash development loans from the
Government, it has been permitted to defer payments of principal and interest whenever there is a
delay in payment by CPPAG for the purchase of electricity produced by WAPDA and dispatched to
the national grid (see "—Operations—Power Wing (Hydropower Business)—Circular Debt"). No
interest is charged on the outstanding amounts payable to the Government after the due date. While
such deferment and non-charging or interest is not a contractual term of such loans (resulting in the
classification of such loans under current portion of long term financing in the Annual Financial
Statements), in practice, this enables WAPDA to service its foreign direct loans and local commercial
loans before receivables from the Government are netted off against Government debt. This
arrangement assists WAPDA to manage its liquidity and working capital.
The following table sets forth certain information regarding WAPDA's debt maturity profile and its
debt capacity:

FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29

(U.S.$ millions)
Foreign loans ................................
48.6 40.9 40.9 113.9 113.9 182.5 322.5 217.5 214.5
8.7
Local loans ................................ 10.4 4.0 3.3 2.9 59.4 188.6 188.6 188.6
Total Principal
57.3
Repayment ................................ 51.3 44.9 117.2 116.8 241.9 511.2 406.2 403.1

74
The ratio of Net Debt to EBITDA of WAPDA Hydroelectric as at 30 June 2020 was 5.6x. For the
purposes of any determination of the Consolidated Leverage Ratio (as defined in the Conditions)
under the Conditions, foreign relent loans and cash developments loans are excluded from the Net
Financial Indebtedness (as defined in the Conditions) calculation.
Finance Wing and Administration
The Finance Wing of WAPDA, headed by the Member Finance, is responsible for all budgetary,
financial and accounting matters. The Member Finance supervises and is responsible for revenue
generation and financing needs of all the Wings of WAPDA. The financial matters of all three Wings
are technically under overall control of the Member Finance. The functions of the Finance Wing
include the following:
 Budgeting and Management Information System: formulation of public sector development
programmes; preparation of the foreign economic assistance budget and the budget
chargeable to the current expenditure of the Ministry of Water Resources; determination of
funding requirements; managing the budgetary needs of WAPDA; and monitoring various
development programmes;

 Accounts and Financial Reporting: arranging fund releases and allocations, remittances of
funds to projects, management and maintenance of foreign loans, grants and credits; audit
reports; inspection of project accounts; preparation of annual accounts and financial reporting;
managing the proceeds of WAPDA bonds, sukuks and other instruments and compilation of
financial statements; and

 Internal Audit: the Internal Audit division is charged with providing WAPDA's management
with systematic assurance, analysis, appraisals, recommendations, advice and information,
with a view to assisting management on the effective discharge of their liabilities and the
achievement of WAPDA's mission and goals.
The Finance Wing is also responsible for monitoring compliance with NEPRA rules for the
implementation of WAPDA's tariff for the sale of its hydroelectric power, obtaining generation
licences and modifications to those licences and monitoring costing and corporate planning.
The Administration & Services Division is headed by a General Manager and is responsible for
human resources management, provision of general services to employees and social, welfare and
corporate social responsibility activities, including sports.
Historically, WAPDA has benefited from financing support from the Government. In parallel,
WAPDA has also been successful in raising commercial and Islamic financing from domestic
financial institutions, local commercial banks and the sukuk market. WAPDA has maintained a strong
track record in servicing these financings through the timely payment of interest and principal.

Interests in Other Companies

WAPDA holds stakes in certain companies, including Kot Addu Power Company (KAPCO) (40.25
per cent. stake), First Credit and Investment Bank (30.77 per cent. stake) and Lakhra Coal
Development Company (24.96 per cent. ownership). WAPDA does not exert any significant control
on the operations or financial policy of these companies.

75
KAPCO

KAPCO is a listed company in Pakistan. Its principal activities include the ownership, operation and
maintenance of the 1600 MW nameplate capacity multi-fuel fired power plant (gas, furnace oil and
diesel) located in Kot Addu, Punjab. KAPCO sells the electrical energy produced from its power plant
to WAPDA, which is its sole customer. The PPA in relation to these sales will expire in June 2021.

The power plant is the largest combined cycle power plant in Pakistan comprising 10 multi fuel fired
gas turbines and five steam turbines installed in five phases between 1985 and 1997. These turbines
are divided into three energy blocks with each block having a combination of gas and steam turbines.
The plant combined cycle technology enables it to use the waste heat from the gas turbine exhaust to
produce steam in the heat recovery steam generator, which in turn is used to run the steam turbines
thereby resulting in fuel cost efficiency and minimum wastage.

The power plant is a multi-fuel gas-turbine power plant with the capability of using three different
fuels to generate electricity, namely gas, light sulfur furnace oil and high speed diesel. It also has the
ability to generate electricity for itself in the event of a country wide blackout.

For the year ended 30 June 2020, KAPCO had sales of PKR 71.5 billion and profit for the year of
PKR 23.6 billion. As at 30 June 2020, it had assets of PKR 134.5 billion.

First Credit and Investment Bank

First Credit and Investment Bank Limited was incorporated in Pakistan on 31 August 1989. It is a
joint venture company of the National Bank of Pakistan and WAPDA structured under the Companies
Ordinance, 1984 as a private limited company.

In November 2003, First Credit and Investment Bank was converted into a public limited company.
Subsequently, in 2004, it was granted an investment banking services licence from the Securities and
Exchange Commission of Pakistan. It is active in the capital markets and corporate debt instrument
markets of Pakistan. The registered office of the company is in Karachi. The shares of the company
are quoted on the Karachi Stock Exchange.

First Credit and Investment Bank is engaged in providing both fund- and non-fund based facilities and
advisory services to its customers. The company is also licensed to undertake investment finance
services as a non-banking finance company under the Non-Banking Finance Companies rules 2003
issued by the Securities and Exchange Commission of Pakistan.

For the year ended 30 June 2020, First Credit and Investment Bank had income of PKR 154.8 million
and profit for the year of PKR 28.7 million. As at 30 June 2020, it had assets of PKR 1,667.2 million.

Lakhra Coal Development Company

Lakhra Coal Development Company Limited was incorporated as a public limited company on 6
February 1990 under the Companies Ordinance, 1984. It is a joint venture between Pakistan Mineral
Development Corporation, the Government of Sindh and WAPDA with equity capital of PKR 50
million shared in the ratio of 50:25:25, respectively.

76
Its operations comprise coal mines situated in the Lakhra Coalfield located approximately 70
kilometres northwest of Hyderabad city on the Indus Highway along the right bank of the Indus River.
and 200 kilometres northeast of Karachi.

For the year ended 30 June 2019, Lakhra Coal Development Company had profit for the year of PKR
1.955 billion.

Employees

As at 30 June 2020, WAPDA had 17,383 active employees, including 8,026 active employees
assigned to its Power Wing, 5,419 active employees assigned to its Water Wing and 3,938 active
employees assigned to its Finance Wing and Administration & Services Division. The following table
sets forth a breakdown of employees as at 30 June 2020 and 2019:

As at 30 June

2020 2019
Power Wing ................................................................................................. 8,026 8,888
Water Wing ................................................................................................. 5,419 5,131
Finance Wing and Administration & Services Division .............................. 3,938 4,000

Total ........................................................................................................... 17,383 18,019

Health, Safety and Environmental Matters

Health, safety and environmental issues are governed by a number of laws and guidelines that affect
businesses operating in Pakistan, including the Environmental Protection Act 1997 and National
Environmental Quality Standards. WAPDA is required to comply with a number of health, safety and
environmental requirements in each of the sectors in which it operates.

The realisation of environmental and social objectives is part of WAPDA's strategy, and in addition to
complying with national laws and guidelines, WAPDA's commitment to health, safety and
environmental issues is demonstrated through its adoption of international industry best-practice
standards, health and safety guidelines and environmental codes of practice, including the World
Bank's Environmental and Social Standards, International Finance Corporation (IFC) performance
standards and the Equator Principles.

WAPDA has a long history of being at the forefront of the promotion and utilisation of health, safety
and environmental standards in the region. During the construction of Mangla Dam and Tarbela Dam
in the 1960s, WAPDA incorporated environmental and social considerations during the projects'
implementation. This was followed in the 1980s and 1990s with the adoption by WAPDA of
environmental management techniques during the project development stage of the Ghazi Barotha
Hydropower Project. The Ghazi Barotha Hydropower Project was the first of its kind in the region
where environmental and social issues were addressed both at design level and operation and
maintenance level, which resulted in a positive environmental and social ranking from international
funding agencies.

To facilitate the furtherance of its health, safety and environmental objectives, WAPDA established
the WAPDA Environment Cell (WEC) in 1987. The purpose of WEC is to incorporate environmental

77
and social considerations during the implementation of WAPDA projects. WEC is also responsible
for ensuring project compliance with national regulatory requirements through the use of standard
environmental mitigation measures, to ensure the awarding of 'No Objection' certificates in respect of
positive environmental mitigation and management measures, from national regulators prior to project
implementation.

WAPDA is committed to improving its environmental and social risk management practice and
aligning it with good international industry practice. WAPDA is in the process of instructing an
internationally recognised third party consultant to support it in the preparation of an environmental
and social management system consisting of, inter alia, management, monitoring and reporting
policies, plans and procedures; key performance metrics; resettlement and livelihood restoration
frameworks; and a corporate grievance redress mechanism. WAPDA anticipates that the reference
framework for this consulting assignment will be the International Hydropower Associations (IHA)
Hydropower Sustainability Guidelines and the IFC Performance Standards. WAPDA's objective is to
become a gold member of the IHA.

Information Technology

WAPDA relies on its IT systems to perform a variety of functions within the organisation. WAPDA's
IT systems include:

 Enterprise Resources Planning software (implemented in phases from 2009 to 2016)

consisting of three modules which are used to assist with the accounting, inventory and
payroll functions in WAPDA's Power Wing (expanding to the Finance Wing and Water Wing
in respect of accounting); and

 WAPDA Online Pension System (WOPS), a web-based application designed and developed
to assist the Pension Directorate within WAPDA by recording information and allowing for
automated updates when employee's reach pension age. WOPS currently consists of five
modules, (i) Pension Authorisation Module, (ii) Pension Reimbursement Module, (iii) Online
Pension Disbursement System, (iv) WOPS Biometric Pension Attendance System, and (v)
WOPS SMS Module. The system is currently utilised to monitor, track, record and pay
employee's on WAPDA pension plans from 1977 to date.

Insurance

WAPDA maintains comprehensive insurance coverage in respect of its businesses and properties
through the WAPDA Equipment Protection Scheme (WEPS), an in-house insurance scheme. This is
essentially a self insurance arrangement which involves the establishment and maintenance of a
reserve to pay for damage to property and equipment, rather than a formal insurance scheme. WEPS
was established in 1977 and its coverage extends to WAPDA, GENCOs, DISCOs and NTDC. The
insurance coverage is maintained in such amounts and with deductibles as are commensurate with
local best practice and industry standards.
WEPS covers the electrical and mechanical equipment at and/or including the below facilities:
 all grid stations of DISCOs and NTDC;
 all power houses;
 WAPDA House (alternating current plant and building only);
 WAPDA printing press;
78
  reclamation workshops at Shalimar, Kot-lakhpat and Noshera;
 High Voltage and Short Circuit Laboratory, Faisalabad and the Central Material Testing
Laboratory, Lahore;
 Research and Test Laboratory Faisalabad; and
 Neelum Jhelum Hydropower Company (Private) Limited (NJHPC).
The aforementioned equipment and sites are insured in respect of machinery break-down and
accidental fire, with other claims such as atmospheric disturbance, flood, earthquake, fire and shock,
explosion, riot strike damage, rain, lightning, war, acts of terrorism and sabotage, not being covered.
The insurance coverage under WEPS covers, in the event the asset is repairable, the repair charges up
to the maximum book value of the asset. In the event that the asset is not repairable, the maximum
paid on any claim is the book value of the asset minus its salvage value.

Litigation and Other Proceedings

There are no governmental, legal or arbitration proceedings (including any such proceedings which
are pending or threatened of which WAPDA is aware), during the 12 months preceding the date of
this Offering Circular which may have, or have had in the recent past, significant effects on WAPDA
and/or WAPDA's financial position or profitability.

79
 MANAGEMENT AND EMPLOYEES
Overview

WAPDA is an autonomous, statutory body that is wholly owned by the Government through the
Ministry of Water Resources. WAPDA was established pursuant to the WAPDA Act. WAPDA is
directly monitored and supervised by the Government.

The WAPDA Act provides that the control and management of WAPDA is delegated to a Chairman
and no more than three Members, each of whom is appointed by the Government, which, together
with such officers and servants as the Chairman considers necessary for the performance of
WAPDA's functions, are in charge of the day-to-day management and representation of WAPDA.

Meeting of the Authority

As of the date of this Offering Circular, WAPDA is wholly owned by the Government. The
Government exercises strong influence over the corporate governance of WAPDA, and each activity
proposed to be undertaken by WAPDA is submitted by the Chairman and Members for approval from
the Government.

Pursuant to the WAPDA Act, the Chairman and Members are authorised to pass resolutions, inter
alia, on the following issues at WAPDA meetings:

 approval of the reports of WAPDA;

 approval of the annual accounts of WAPDA;

 election and/or dismissal of an external auditor;

 approval of schemes sanctioned by the WAPDA Act for submission to the Government;

 approval of regulations for the necessary or expedient implementation of WAPDA's functions,

for submission to the Government;

 prescribing the procedure for appointment and terms and conditions of service of WAPDA's
officers and servants; and

 other matters provided by the WAPDA Act, including, inter alia:

o recommendations to the Government for prescribing standards for the operations and
maintenance of all irrigation works and maintenance of power houses and grids;

o recommendations to the Government for promoting the simplification of methods of charge

for supplies of electricity and standardisation of the system of supply;

o incurrence by WAPDA of any expenditure, including the procurement of plant, machinery

and materials required for works use and the entering into and performance of all such
contracts as may be considered necessary or expedient;

o acquisition by purchase, lease, exchange or otherwise and disposal by sale, lease, exchange or
otherwise of any land or any interest in land;

80
 o approval of the placing of wires, poles, wall brackets, stays, apparatus and appliances for the
transmission of electricity or for the transmission of telegraphic or telephonic
communications necessary for the proper execution of a scheme;

o directing the owners of private lands to:

o carry out measures for training of streams;

o undertake anti-erosion operations, including conservation of forests;

o restricting or prohibiting the cleaning and breaking up of land in the catchment area of any
river; and

o seeking and obtaining advice and assistance in the preparation or execution of a scheme from
any local body or agency of the Government.

WAPDA is managed in accordance with the WAPDA Act.

Key management personnel

The WAPDA Act provides that the management of WAPDA be delegated to a Chairman and no more
than three Members, each appointed by the Government. The three Members are responsible for
managing WAPDA's separate wings: the Water Wing, the Power Wing and the Finance Wing. The
governance structure of WAPDA currently comprises a Chairman and three Members (one Member
heading each business wing) acting through a Secretary. The Chairman and Members are required to
act in the best interests of WAPDA and its business when performing their duties.

The responsibilities of the Chairman and Members, as outlined in the Charter of Duties, inter alia,
include:

 investigating, planning and executing schemes for the following fields:

o generation, transmission and distribution of power;

o irrigation, water supply and drainage;

o prevention of water logging and reclamation of waterlogged and saline lands;

o flood management; and

o inland navigation;

 approving and amending WAPDA's policies and other regulatory documentation;

 inspecting WAPDA's accounts and property, personally or with the help of invited experts;

 requesting reports of WAPDA's activities internally (including information concerning related

companies and subsidiaries) and reviewing the information provided by internal audit or
external inspections;

 convening WAPDA meetings, if necessary;

 reviewing annual reports;

81
 adopting general principles of business strategy and the business plan of WAPDA and
approving the annual budget and long-term obligations;

 taking and securing obligations (whether through a single transaction or a series of related
transactions);

 acquisition, sale, exchange, encumbrance or otherwise disposal of property and property rights;

 taking or granting loans and credits;

 entering into any agreement or transaction;

 commencing any new economic activities or terminating existing ones;

 appointment and dismissal of trade representatives; and

 other activities that may be prescribed by applicable laws.

Pursuant to the WAPDA Act, the Chairman is appointed for a five-year term, and each Member is
appointed for a three-year term.

Set out below are details of key management personnel:

Expiration of Term of
Name Age Title Office / Reappointment
Lieutenant General Muzammil
Hussain (Retd.) 65 Chairman 24 August 2021
Abdul Zahir Khan Durrani 59 Member (Water) 13 November 2021
Jamil Akhtar 59 Member (Power) 07 April 2022
Naveed Asghar Chaudhry 49 Member (Finance) 18 May 2023

Lieutenant General Muzammil Hussain (Retd.) is the Chairman of WAPDA. He was appointed
Chairman on 24 August 2016. Lieutenant General Hussain joined the Pakistan Army in 1976,
graduating from the Pakistan Military Academy with distinction. He was later inducted into the
Infantry Battalion, whereby he commanded an Infantry Brigade, before later commanding an Army
Division in Gilgit-Baltistan as Major General. Following his military career, Lieutenant General
Hussain entered diplomatic service as the Pakistan Defence Attaché to Indonesia. In addition to being
Chairman of WAPDA, Lieutenant General Hussain is also chairman of the board of directors of
DBDC, NJHPC and Kot Addu Power Company Limited (KAPCO).

Abdul Zahir Khan Durrani is a Member of WAPDA, heading the Water Wing since May 2019. He
graduated as a Civil Engineer from the University of Engineering & Technology, Lahore. He also
holds MS Civil Engineering degree from Georgia Institute of Technology in Atlanta, United States.
He joined WAPDA as a Junior Engineer in 1983. He has over 38 diversified experiences including
designing of transmission lines and grid stations. He has served WAPDA in senior positions such GM
(Central Design Office), GM (Coordination & Monitoring), and GM/PD Dasu Hydro Project.

Jamil Akhtar is a Member of WAPDA, heading Hydroelectric Power Generation and Operations and
Maintenance. Mr. Akhtar has a bachelor's degree in electrical engineering from University of

82
Engineering and Technology, Taxila. Mr. Akhtar spent his whole career at WAPDA which he joined
as a junior engineer in 1985 and was promoted to his current position in February 2021.

Naveed Asghar Chaudhry is a Member of WAPDA, heading the Finance Wing and Administration.
Mr Chaudhry has a bachelor's degree in electrical engineering from university of Engineering and
Technology, Lahore, together with a master's degree in Finance and a master's degree in economics
from Georgia State University in the United States, which he attended as a Fulbright Scholar. He also
holds an MBA from the Australian National University. Aside from his role as a Member of
WAPDA, Mr Chaudhry is also a member of the board of directors of DBDC, NJHPC, KAPCO, and
First Credit Invest Bank.

The business address of each member of key management personnel is 7th Floor, WAPDA House,
Shahrah-e-eQuaid-e-Azam, Lahore, Pakistan.

The Members

The Members are responsible for the day-to-day management and representation against third parties
of WAPDA (subject to approvals of the Chairman and the Government).

The responsibilities of the Members include:

 conducting WAPDA's day-to-day activities;

 reviewing agenda items for WAPDA meetings, obtaining all the necessary information,
preparing proposals and drafting resolutions;

 preparing and presenting to the Chairman for approval the business plan for the following year
(such business plan to include the budget, profit and loss forecast and WAPDA's investments
plan);

 ensuring fulfilment of resolutions passed at WAPDA meetings;

 developing policies, by-laws and other regulatory documents which are to be approved by the
Chairman and ensure compliance with such policies, by-laws and regulatory documents;

 deciding on the appointment, dismissal, training and remuneration of staff in their respective
business wings; and

 any other issues which may be assigned to the Members.

The following activities may be carried out by the Members:

 coordinating and managing operations of WAPDA;

 acting on behalf of WAPDA, without a power of attorney, and solely and independently
representing WAPDA in relation to any issues, any third parties, and before any state
authorities, as well as issue powers of attorney;

 entering into transactions on behalf of WAPDA, subject to any necessary consents or approvals
of the Chairman and/or the Government;

 applying incentives and/or sanctions to WAPDA's staff with the consent of the Chairman, in
accordance with internal regulations and provisions;

83
 appointing and dismissing staff;

 preparing necessary materials/reports and presenting these for approval at WAPDA meetings;

 ensuring enforcement of resolutions passed at a Meeting of the Authority; and

 any other activities deemed necessary for the achievement of the aims of WAPDA.

The business address of each Member is at the registered address of WAPDA.

Corporate Governance

WAPDA fully complies with all requirements regarding corporate governance stipulated under the
WAPDA Act.

Loans to Management

There were no net loans issued to WAPDA's key management personnel outstanding as at 30 June
2020.

Conflicts of Interest

There are no potential conflicts of interest between any duties of WAPDA's key management
personnel and their private interest and/or other duties.

Litigation Statement

As of the date of this Offering Circular, no member of WAPDA's key management personnel for at
least the previous five years:

 has any convictions in relation to fraudulent offences;

 has held an executive function in the form of a senior manager or a member of the
administrative management or supervisory bodies, of any company at the time of or preceding
any bankruptcy, receivership or liquidation; or

 has been subject to any official public incrimination and/or sanction by any statutory or
regulatory authority (including any designated professional body) nor has ever been disqualified
by a court from acting as a member of the administrative, management or supervisory bodies of
a company or from acting in the management or conduct of the affairs of a company.

Pensions

WAPDA provides a defined benefit pension scheme to its employees.

84
 SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
The Government is the sole owner of the WAPDA's charter capital.

Pakistan is a federal republic located in south-central Asia. The current Government was elected on
20 August 2018. Pakistan Tehreek-e-Insaf formed the current Government and Dr Arif Alvi is
currently President and Constitutional Head of State. The Government is headed by the Prime
Minister, Imran Khan.

Pakistan's economy is semi-industrialised, with centres of growth along the Indus River, Karachi and
major urban centres in Punjab. Major industries include textiles, chemicals, food processing, iron,
steel, automobiles, fertilisers, cement, dairy and sports goods. Pakistan's currency is the Rupee and its
fiscal year is 1 July to 30 June.

Related Party Transactions

In the ordinary course of its business, WAPDA has engaged, and continues to engage, in transactions
with related parties. Related parties include, among others, associated undertakings, subsidiaries, the
Government (including associated departments and entities being commonly controlled by the
Government), and key management personnel. In particular, the Government controls most of the
other key players in the Pakistani power sector, including the NTDC, which is the national
transmission company, and the CPPAG, which acts as the power market operator in Pakistan, as well
as GENCOs and DISCOs, which sell electricity directly to end customers. WAPDA is party to a PPA
with NTDC and CPPAG. See "—Operations—Power Wing (Hydroelectric Business)—Power
Purchase Agreement" for further detail. Parties are considered to be related if one party has the ability
to control the other party or to exercise significant influence over the other party in making financial
or operational decisions or if such parties are under common control.

The following tables show volumes of related party transactions, outstanding balances at the period
end and related party expense and income for the periods indicated. For further details of certain
transactions of WAPDA Hydroelectric, see Note 33 to the 2020 Financial Statements a.

Year ended 30 June

Nature of relationship Nature of transaction 2020 2019

(PKR thousands)

Government of Pakistan

Receipt of disbursements
Economic Affair Division against foreign re-lent loans 8,670,675 11,549,543

Adjustment of financing
with trade debts ― 16,238,071

Adjustment of financing
with prepayments ― 1,361,868

Adjustment of financing
4,029,325 ―
with Power Services &

85
 Investments

Payment of guarantee fee -

Exim Bank 9,740 13,990

Payment of guarantee fee -

Credit Suisse 12,950 52,350

Receipt of government
grants 67,791,043 21,736,070

Associated undertakings
due to common control

Central Power Purchasing Sale of electricity including

Agency related to tests run 62,763,536 67,229,632

Billing of hydel levies 47,646,812 103,784,809

Adjustment of borrowing
with trade debts ― 16,238,071

Interest on loan obtained for

payment of NHP 1,062,119 ―

Receipts against sale of

electricity and hydel levies 83,630,897 62,919,450

Payment of 4% return on
assets 9,284 9,284
Government of Punjab
Hydel levies adjustment /
payment 7,500,000 31,370,763

Payment of 4% return on
assets 257 257
Government of Sindh
Payment of 4% return on
Government of Khyber
assets 3,430 3,430
Pakhtunkhwa
Hydel levies adjustment /
payment 16,500,000 26,032,331
WAPDA Equipment
Insurance premium 49,389 55,046
Protection Scheme
WAPDA Third Sukuk
Payment of Ijarah rentals 1,780,126 1,834,072
Company
Payment of water usage
Government of Azad Jammu
charges 673,763 544,608
and Kashmir
Indus River System
152,160 146,076
Authority Payment of water

86
 management charges

Bridge financing - net 1,816,282 334,916

WAPDA Water Wing
Dams inspection and
monitoring charges 701,713 943,715

Transfer of loan for

Mohmand Dam 877,679 ―

Long-term advance for

technical services 1,601,939 106,562

Interest on bridge financing 613,326 369,886

WAPDA Coordination Wing
Bridge financing - net 220,447 446,164

Authority overhead 359,574 287,521

Interest on bridge financing 92,743 22,845

National Electric Power
Regulatory Authority
NEPRA fee 140,547 125,863
(NEPRA)
Short term borrowings
Power Services &
obtained 3,500,000 100,000
Investments (PSI)
Adjustment of long-term
finance 4,029,325 ―

Advance provided for land

acquisition 16,045,715 1,882,271
Land Acquisition Collectors
Advance paid to National
Highway Authority for
relocation and upgradation
of Karakoram Highway 1,167,123 4,299,161
National Highway Authority
Payment made against the
upgradation of transmission
line and switch yard of
Tarbela ― 225,080
NTDC
Advance against foreign
purchase of plant,
Chief Resident
machinery, stores and spares
Representative Karachi
- net 1,343,507 494,408
(CRRK)

See "Risk Factors—Factors that May Affect the Issuer's Ability to Fulfil its Obligations under the
Notes—WAPDA is wholly owned and controlled by the Government, operates under the WAPDA Act

87
and the Government has a substantial degree of influence over WAPDA's operations through its
regulatory, taxation and legislative powers and also controls most of the key players in the Pakistani
power sector, which may result in WAPDA operating its business in a manner that does not provide
adequate economic returns to WAPDA" and "—There can be no assurance that the Government will
be able to manage effectively the "circular debt" issue inherent in the Pakistani electricity sector".
Remuneration and Benefits

As at 30 June 2020, WAPDA Hydroelectric had 8,026 active employees all of whom are entitled to
post-employment benefits, and 9,135 pensioners to whom post-employment benefits payments are
disbursed, compared to 8,888 active employees, all of whom are entitled to post-employment benefits,
and 8,918 pensioners to whom post-employment benefits payments are disbursed, as at 30 June 2019.
The total salary expense in respect of active employees amounted to PKR 5.8 billion and PKR 5.4
billion for the years ended 30 June 2020 and 2019, respectively. The total compensation expense in
respect of pensioners was PKR 7.8 billion and PKR 5.4 billion for the years ended 30 June 2020 and
2019, respectively.
The table below shows the number of active employees and pensioners for the years ended 30 June
2020 and 2019 (see Note 32 to the 2020 Financial Statements):

Year ended 30 June

2020 2019
Active employees .............................................................................................. 8,026 8,888
Pensioners ......................................................................................................... 9,135 8,918

The table below shows salaries, wages and benefits in respect of active employees of WAPDA
Hydroelectric for the years ended 30 June 2020 and 2019 (see Note 25.1 to the 2020 Financial
Statements).

Year ended 30 June

2020 2019
(PKR thousands)

Pay and allowances ...........................................................................................

4,209,350 4,312,354
Other benefits ................................................................................................
1,577,496 1,133,264
5,786,846
Total salaries, wages and benefits................................................................ 5,445,618
The table below shows pension and benefits in respect of pensioners for the years ended 30 June 2020
and 2019 (see Note 25.2 to the 2020 Financial Statements).

Year ended 30 June

2020 2019
(PKR thousands)
7,752,279
Pension .............................................................................................................. 5,360,481
Free electricity ................................................................................................313,643 308,702

88
Free medical ................................................................................................ 617,813 474,521
Compensated absences...................................................................................... 202,207 213,202
8,885,942
Total retirement and other benefits .............................................................. 6,356,906

89
 TERMS AND CONDITIONS OF THE NOTES

The following is the text of the Conditions of the Notes which (subject to modification will be endorsed
on the Certificates issued in respect of the Notes:

The U.S.$500,000,000 7.500 per cent. Notes due 2031 (the Notes, which expression shall in these
terms and conditions (the Conditions), unless the context otherwise requires, include any further
notes issued pursuant to Condition 17 (Further Issues) and forming a single series with the Notes of
the Pakistan Water and Power Development Authority (the Issuer) are issued pursuant to a
Noteholders' Representative Deed dated 4 June 2021 (the Noteholders' Representative Deed) made
between the Issuer and The Bank of New York Mellon, London Branch as the representative of the
Noteholders (the Noteholders' Representative, which expression shall include its successor(s)) as
representative of the holders of the Notes (the Noteholders).

The statements in these Conditions include summaries of, and are subject to, the detailed provisions of
and definitions in the Noteholders' Representative Deed. The Notes are subject to an Agency
Agreement dated 4 June 2021 (the Agency Agreement) made between the Issuer, The Bank of New
York Mellon, London Branch as principal paying agent (the Principal Paying Agent), The Bank of
New York Mellon SA/NV, Dublin Branch as registrar (the Registrar) and transfer agent (the
Transfer Agent) and any other Agents and the Noteholders' Representative. References herein to
Agents means the Principal Paying Agent, the Registrar, the Transfer Agent and any other agent or
agents appointed from time to time pursuant to the Agency Agreement with respect to the Notes and
shall include their respective successors. Copies of the Noteholders' Representative Deed and the
Agency Agreement are available for inspection during normal business hours by the Noteholders at
the specified office for the time being of the Noteholders' Representative and at the specified office of
each of the Agents. The Noteholders are entitled to the benefit of, are bound by, and are deemed to
have notice of, all the provisions of the Noteholders' Representative Deed and the Agency Agreement
applicable to them.

1. FORM, DENOMINATION AND TITLE

1.1 Form and Denomination

The Notes are issued in registered form in amounts of U.S.$200,000 and integral multiples of
U.S.$1,000 in excess thereof (referred to as the principal amount of a Note). A note
certificate (each a Certificate) will be issued to each Noteholder in respect of its registered
holding of Notes. Each Certificate will be numbered serially with an identifying number
which will be recorded on the relevant Certificate and in the register of Noteholders which the
Issuer will procure to be kept by the Registrar.

1.2 Title

Title to the Notes passes only by registration in the register of Noteholders. The holder of any
Note will (except as otherwise required by law) be treated as its absolute owner for all
purposes (whether or not it is overdue and regardless of any notice of ownership or writing on
it, or the previous theft or loss of, the Certificate issued in respect of it) and no person will be
liable for so treating the holder. In these Conditions Noteholder and (in relation to a Note)
holder means the person in whose name a Note is registered in the register of Noteholders.

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2. TRANSFERS OF NOTES AND ISSUE OF CERTIFICATES

2.1 Transfers

A Note may be transferred by depositing the Certificate issued in respect of that Note, with
the form of transfer on the back duly completed and signed, at the specified office of the
Registrar or any Transfer Agent.

2.2 Delivery of new Certificates

Each new Certificate to be issued upon transfer of Notes will, within five business days of
receipt by the Registrar or any Transfer Agent of the duly completed form of transfer
endorsed on the relevant Certificate, be mailed by uninsured mail at the risk of the holder
entitled to the Note to the address specified in the form of transfer. For the purposes of this
Condition, business day shall mean a day on which banks are open for business in the city in
which the specified office of the Registrar or the relevant Transfer Agent (as the case may be)
with whom a Certificate is deposited in connection with a transfer is located.

Where some but not all of the Notes in respect of which a Certificate is issued are to be
transferred a new Certificate in respect of the Notes not so transferred will, within five
business days of receipt by the Registrar or any Transfer Agent of the original Certificate, be
mailed by uninsured mail at the risk of the holder of the Notes not so transferred to the
address of such holder appearing on the register of Noteholders or as specified in the form of
transfer.

2.3 Formalities free of charge

Registration of transfer of Notes will be effected without charge by or on behalf of the Issuer,
the Registrar or any Transfer Agent but upon payment (or the giving of such indemnity as the
Issuer, the Registrar or any Transfer Agent may require) in respect of any tax or other
governmental charges which may be imposed in relation to such transfer.

2.4 Closed Periods

No Noteholder may require the transfer of a Note to be registered during the period of 15 days
ending on (and including) the due date for any payment of principal or interest on that Note.

2.5 Regulations

All transfers of Notes and entries on the register of Noteholders will be made subject to the
detailed regulations concerning transfer of Notes scheduled to the Agency Agreement. The
regulations may be changed by each of the Issuer and the Registrar with the prior written
approval of the Noteholders' Representative and the Registrar or the Issuer, respectively. A
copy of the current regulations will be mailed (free of charge to the Noteholder and at the
Issuer's expense) by the Registrar to any Noteholder upon written request and satisfactory
proof of holding.

3. STATUS

The Notes are direct, unconditional and (subject to the provisions of Condition 5.1 (Negative
Pledge) unsecured obligations of the Issuer and (subject as provided above) rank and will

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 rank pari passu, without any preference among themselves, with all other outstanding
unsecured and unsubordinated obligations of the Issuer, present and future, but, in the event
of insolvency, only to the extent permitted by applicable laws relating to creditors' rights.

4. APPOINTMENT OF NOTEHOLDERS' REPRESENTATIVE

By purchasing Notes, each Noteholder is deemed to have agreed to the appointment of the
Noteholders' Representative as its attorney to act in its name and on its behalf and for its
account in respect of these Conditions, the Notes, the Noteholders' Representative Deed and
the Agency Agreement.

Each Noteholder acknowledges and agrees that at all times the Noteholders' Representative
shall act in accordance with the detailed provisions of the Noteholders' Representative Deed
and subject to, and with the benefit of, the rights, powers, authorities, discretions and
protections set out in its favour therein.

5. COVENANTS

5.1 Negative Pledge

So long as any of the Notes remains outstanding, the Issuer will not, and will not permit any
of its Subsidiaries to, create or permit to subsist, any Security Interest, other than a Permitted
Security Interest, upon, or with respect to, the whole or any part of its present or future
business, undertaking, assets or revenues (including any uncalled capital) to secure any
Indebtedness or any Guarantee of Indebtedness unless the Issuer, in the case of the creation of
the Security Interest, before or at the same time and, in any other case, promptly, takes any
and all action necessary to ensure that:

(a) all amounts payable by it under the Notes then outstanding are secured by the
Security Interest equally and rateably with the relevant Indebtedness or relevant
Guarantee of Indebtedness, as the case may be; or

(b) such other Security Interest or other arrangement (whether or not it includes the
giving of a Security Interest) is provided as is approved by an Extraordinary
Resolution of the Noteholders.

5.2 Maintenance of Authorisations and Legal Validity

The Issuer shall, and shall procure that each of its Material Subsidiaries shall, take all
necessary action to obtain and do or cause to be done all things necessary to ensure the
continuance of its or their respective corporate existence, business and operations, and the
Issuer shall, and shall procure that each of its Material Subsidiaries shall, take all necessary
action to obtain and do or cause to be done all things necessary to ensure the continuance of
all consents, licences, approvals and authorisations necessary in that regard.

The Issuer shall obtain, comply with the terms of and do all that is necessary to maintain in
full force and effect all authorisations, approvals, licences and consents and make or cause to
be made all registrations, recordings and filings required in or by the applicable laws and
regulations of Pakistan to enable it lawfully to perform its obligations under the Notes and the
Noteholders' Representative Deed and to ensure the legality, validity, enforceability or
admissibility in evidence in Pakistan of the Notes and the Noteholders' Representative Deed.

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5.3 Limitation on Indebtedness

(a) The Issuer will not, and will not permit any of its Subsidiaries to, incur, directly or
indirectly, any Indebtedness, unless:

(i) no Potential Event of Default nor Event of Default shall have occurred at the
time, or would occur as a consequence of, the incurrence of such
Indebtedness; and

(ii) on the date of (the Transaction Date), and after giving pro forma effect to,
such incurrence, the Consolidated Leverage Ratio would have been no more
than 4.5 to 1.0 for the Relevant Period.

(b) Condition 5.3(a) will not prohibit the incurrence of any of the following items of
Indebtedness:

(i) the incurrence by the Issuer or any of its Subsidiaries of any Foreign Relent
Loan or Cash Development Loan;

(ii) the incurrence by the Issuer or any of its Subsidiaries of Permitted

Refinancing Indebtedness;

(iii) intercompany Indebtedness incurred between the Issuer and any of its
Subsidiaries and between any two Subsidiaries of the Issuer, provided,
however, that any subsequent issuance or transfer of any shares which results
in any such Subsidiary ceasing to be a Subsidiary of the Issuer or any
subsequent disposition, pledge or transfer of such Indebtedness (other than to
the Borrower or any of its Subsidiaries) shall be deemed, in each case, to
constitute the incurrence of such Indebtedness by the obligor in respect of
such Indebtedness; and

(iv) Indebtedness which, when aggregated with any other Indebtedness incurred
under this Condition 5.3(b)(iv) does not exceed U.S.$20,000,000 (or its
equivalent in other currencies).

5.4 Mergers and Consolidation

The Issuer will not, directly or indirectly, in a single transaction or a series of related
transactions, enter into any reorganisation, participate in any other type of corporate
reconstruction, or sell, lease, transfer, convey or otherwise dispose of all or substantially all of
the assets of the Issuer or the Group (in each case, a Reorganisation) unless:

(a) the resulting or surviving Person or transferee (the Successor Entity) shall be the
Issuer or, if not the Issuer, shall be a Person organised and validly existing under the
laws of Pakistan and such Successor Entity, if not the Issuer, shall expressly assume,
by a deed supplemental to the Noteholders' Representative Deed, all the rights and
obligations of the Issuer under the Notes, the Noteholders' Representative Deed and
the Agency Agreement; and

(b) immediately prior to and immediately after giving effect to such transaction and the
incurrence of any Indebtedness to be incurred in connection therewith, and the use of

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 any net proceeds therefrom on a pro forma basis, no Event of Default or Potential
Event of Default shall have occurred and be continuing and the Consolidated
Leverage Ratio would have been no more than 4.5 to 1.0 for the Relevant Period.

The Issuer shall ensure that no Material Subsidiary will enter into any Reorganisation unless:

(i) the Successor Entity shall be the relevant Material Subsidiary or, if not such Material
Subsidiary, shall become a Material Subsidiary for the purposes hereof; and

(ii) immediately prior to and immediately after giving effect to such transaction and the
incurrence of any Indebtedness to be incurred in connection therewith, and the use of
any net proceeds therefrom on a pro forma basis, no Event of Default or Potential
Event of Default shall have occurred and be continuing and the Consolidated
Leverage Ratio would have been no more than 4.5 to 1.0 for the Relevant Period.

Notwithstanding the foregoing, any Material Subsidiary may consolidate with, merge with or
into or convey, transfer or lease, in one transaction or a series of transactions, all or
substantially all of its assets to the Issuer and/or one or more Subsidiaries of the Issuer (which
after such transaction will be deemed to be Material Subsidiaries for the purposes hereof until
at least the date of the next audited Financial Statements).

5.5 Limitation on Asset Sales

The Issuer will not, and will not permit any of its Material Subsidiaries to consummate any
Asset Sale, unless (i) the consideration received is at least equal to the Fair Market Value
(measured as of the date of the definitive agreement with respect to such Asset Sale) of assets
sold or disposed of and (ii) at least 75 per cent. of the consideration consists of cash, Cash
Equivalents or Replacement Assets and within 365 days of receipt of any Net Cash Proceeds,
the Issuer or any of its Material Subsidiaries shall apply such proceeds:

(a) to permanently repay any Senior Indebtedness owing to a person other than the Issuer
or its Subsidiaries;

(b) to acquire Replacement Assets;

(c) up to U.S.$50,000,000 (or its equivalent in other currencies) in any calendar year, for
general corporate purposes; or

(d) for any combination of (a) to (c) above.

Pending the final application of Net Cash Proceeds in accordance with this Condition 5.5,
such Net Cash Proceeds may be temporarily invested only in cash or Cash Equivalents or be
used to temporarily reduce revolving credit Indebtedness.

5.6 Transactions with Affiliates

The Issuer will not, and will not permit any of its Material Subsidiaries to, directly or
indirectly, conduct any business, enter into or permit to exist any transaction or series of
related transactions (including the purchase, sale, transfer, assignment, lease, conveyance or
exchange of any property or the rendering of any service) with, or for the benefit of, any
Affiliate (an Affiliate Transaction), including intercompany Indebtedness, unless the terms

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 of such Affiliate Transaction are not materially less favourable to the Issuer or such Material
Subsidiary, as the case may be, than those that could be obtained in a comparable arm's-length
transaction with a Person that is not an Affiliate of the Issuer or such Material Subsidiary.

This shall not apply to (i) any employment agreement, collective bargaining agreement,
employee benefit plan, officer, Member, director, chairman or board member indemnification
agreement, including any stock option, stock appreciation rights, stock incentive or similar
plans or any similar arrangement entered into by the Issuer or any of its Material Subsidiaries
in the ordinary course of business or consistent with past practice and payments or other
transactions pursuant thereto; (ii) payment of reasonable fees to, reimbursements of expenses
and indemnities provided on behalf of, officers, Members, directors, chairmen, board
members, employees or consultants of the Issuer or any of its Material Subsidiaries; (iii) any
Affiliate Transaction made pursuant to a contract existing on the Issue Date (excluding any
amendments or modifications thereto made after the date hereof); (iv) any Affiliate
Transaction entered into pursuant to mandatory requirements of applicable Pakistani laws or
regulations, including any sales of power services at tariffs determined (or in accordance with
tariff determination methodology adopted) by NEPRA (or any successor) from time to time;
and (v) transactions between or among the Issuer and its Subsidiaries.

5.7 Payment of Taxes and other Claims

The Issuer shall, and shall ensure that its Material Subsidiaries shall, pay or discharge or
cause to be paid or discharged, before the same shall become overdue all Taxes, assessments
and governmental charges levied or imposed upon, or upon the income, profits or property of
the Issuer and its Material Subsidiaries; provided that, none of the Issuer nor any of its
Material Subsidiaries shall be required to pay or discharge or cause to be paid or discharged
any such tax, assessment, charge or claim: (i) whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which adequate reserves in
accordance with IFRS or other appropriate provision has been made; (ii) which has been
restructured, extended or otherwise waived by the relevant authority or authorities or (iii)
whose amount, together with all such other unpaid or undischarged Taxes, assessments,
charges and claims, does not in the aggregate exceed U.S.$20,000,000 (or its equivalent in
other currencies).

5.8 Financial and other information

The Issuer hereby undertakes that it will deliver to the Noteholders' Representative within 180
days after the end of each of WAPDA Hydroelectric's and each Material Subsidiary's
financial years, copies of WAPDA Hydroelectric's and each such Material Subsidiary's
audited accounts for such financial year or, if audited consolidated accounts of the WAPDA
Hydroelectric Group for such financial year are available, such audited consolidated accounts,
together with the report of the Auditors thereon, which accounts shall be prepared, in each
case, in accordance with IFRS.

The Issuer hereby undertakes that it will deliver to the Noteholders' Representative within 120
days after the end of the first six months in each of WAPDA Hydroelectric's and each
Material Subsidiary's financial years, copies of WAPDA Hydroelectric's and each such
Material Subsidiary's unaudited interim accounts for the six month period then ended, or if
consolidated accounts for the WAPDA Hydroelectric Group are available for such six month
period, such consolidated accounts, and, if reviewed by the Auditors of WAPDA
Hydroelectric, such Material Subsidiary or the WAPDA Hydroelectric Group, as applicable,

95
 together with the review report of the Auditors thereon, which accounts shall be prepared, in
each case, in accordance with IFRS.

The Issuer hereby undertakes that it will deliver to the Noteholders' Representative, without
undue delay, such additional information regarding the financial position or the business of
the Issuer as the Noteholders' Representative may reasonably request.

The Issuer hereby undertakes that it will supply or procure to be supplied to the Noteholders'
Representative (in sufficient copies as may reasonably be required by the Noteholders'
Representative) with a copy to the Noteholders' Representative all such information as the
Stock Exchange (or any other or further stock exchange or stock exchanges or any other
relevant authority or authorities on which the Notes may, from time to time, be listed or
admitted to trading) may require in connection with the listing or admittance to trading of the
Notes.

The Issuer hereby undertakes that it will deliver to the Noteholders' Representative, without
undue delay, such additional information as the Noteholders' Representative requires for the
purposes of the discharge of the duties and discretions vested in it under the Notes or the
Noteholders' Representative Deed, including providing, without limitation, a certificate
signed by any Authorised Signatory of the Issuer certifying (i) those Subsidiaries which are
Material Subsidiaries and (ii) as to the Notes held by or on behalf of the Issuer or any member
of the Group as at the date of such certificate, such certificate with any such information as is
requested in writing by the Noteholders' Representative to be provided together with the
audited annual accounts of WAPDA Hydroelectric or the WAPDA Hydroelectric Group, as
applicable, being made available pursuant to the above and/or if so requested in writing by the
Noteholders' Representative, within 14 days of receipt of such written request from the
Noteholders' Representative.

5.9 Limitation on Restrictions on Distributions from Subsidiaries

The Issuer shall not, and shall not permit any of its Subsidiaries to, create or otherwise cause
or permit to exist or become effective any consensual encumbrance or consensual restriction
on the ability of any of its Subsidiaries:

(a) to pay dividends or make any other distributions on its share capital; or

(b) to make any loans or advances or pay any Indebtedness owed to the Issuer,

other than, in each case, encumbrances or restrictions existing under applicable law, the
Noteholders' Representative Deed or the Notes or any other agreement in effect prior to the
Issue Date and any amendment, restatement, modification, renewal, supplement or
replacement of such agreements; provided that the the relevant encumbrance or restriction
following such amendment, restatement, modification, renewal, supplement or replacement is
not materially more restrictive than such encumbrance or restriction contained in the relevant
agreement on the Issue Date (as determined in good faith by the management body of the
Issuer).

5.10 Restricted Payments

(a) The Issuer shall not, and shall not cause or permit any of its Material Subsidiaries to, directly
or indirectly:

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(i) declare or pay any dividend or make any other payment or distribution on account of
the Issuer's or any of its Material Subsidiaries' Equity Interests (including, without
limitation, any such payment or distribution made in connection with any merger or
consolidation involving the Issuer or any of its Material Subsidiaries) or to the direct
or indirect holders of the Issuer's or any of its Material Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable in Equity
Interests of the Issuer and other than dividends or distributions payable to the Issuer
or to a Material Subsidiary);

(ii) purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the Issuer) any
Equity Interests of the Issuer or any direct or indirect parent of the Issuer;

(iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness of the Issuer that is expressly
contractually subordinated in right of payment to the Notes (excluding any
intercompany Indebtedness between or among the Issuer and any of its Subsidiaries)
except (A) a payment of interest or principal at the Stated Maturity thereof or (B) the
purchase, repurchase, redemption, defeasance or other acquisition or retirement of
Indebtedness purchased in anticipation of satisfying a principal instalment or
scheduled maturity, in each case due within one year of the date of such purchase,
repurchase, redemption, defeasance or other acquisition or retirement;

(iv) make any Restricted Investment,

(all such payments and other actions set forth in paragraphs (a) through (d) above being
collectively referred to as Restricted Payments) unless at the time of and after giving effect
to such Restricted Payment:

(A) no Potential Event of Default or Event of Default has occurred and is continuing or
would occur as a consequence of such Restricted Payment;

(B) the Issuer would, at the time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made at the beginning of the
applicable Relevant Period, have been permitted to incur at least U.S.$1.00 of
additional Indebtedness pursuant to the Consolidated Leverage Ratio test set out in
Condition 5.3;

(C) such Restricted Payment together with the aggregate amount of all other Restricted
Payments made by the Issuer and its Material Subsidiaries since the Issue Date is less
than the sum, without duplication, of

I. 50 per cent. of the Consolidated Net Income of the WAPDA Hydroelectric

Group for the period (taken as one accounting period) from 1 July 2020 to the
end of the the WAPDA Hydroelectric Group's most recently ended fiscal
quarter for which financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100 per cent. of such deficit), determined by reference to the
latest Financial Statements; plus

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 II. to the extent that any Restricted Investment that was made after the Issue
Date is (x) sold for cash or otherwise cancelled, liquidated or repaid for cash,
or (y) made in an entity that subsequently becomes a wholly-owned Material
Subsidiary, the initial amount of such Restricted Investment.

(b) Condition 5.10(a) will not prohibit:

(i) the payment of any dividend or the consummation of any irrevocable redemption
within 60 days after the date of declaration of the dividend or giving of the
redemption notice, as the case may be, if at the date of declaration or notice, the
dividend or redemption payment would have complied with the provisions of these
Conditions;

(ii) the making of any Restricted Payment in exchange for, or out of or with the net cash
proceeds of the substantially concurrent sale or issuance (other than to a Subsidiary of
the Issuer) of, Equity Interests of the Issuer or from the substantially concurrent
contribution of common equity capital to the Issuer; provided that the amount of any
such net cash proceeds that are utilised for any such Restricted Payment will be
excluded from the calculation of amounts 5.10(a)(iv)(C);

(iii) the repurchase, redemption, defeasance or other acquisition or retirement for value of
Indebtedness of the Issuer that is contractually subordinated to the Notes with the net
cash proceeds from a substantially concurrent incurrence of Permitted Refinancing
Indebtedness for the purpose of such repurchase, redemption, defeasance or other
acquisition or retirement for value;

(iv) the declaration or payment of any dividend (or, in the case of any partnership or
limited liability company, any similar distribution) by a Subsidiary to the holders of
its Equity Interests on a pro rata basis;

(v) the repurchase of Equity Interests deemed to occur upon the exercise of stock options
to the extent such Equity Interests represent a portion of the exercise price of those
stock options;

(vi) payments of cash, dividends, distributions, advances or other Restricted Payments by

the Issuer or any of its Subsidiaries to allow the payment of cash in lieu of the
issuance of fractional shares upon (x) the exercise of options or warrants or (y) the
conversion or exchange of shares or other ownership interests of any such Person;

(vii) so long as no Potential Event of Default or Event of Default has occurred and is
continuing, other Restricted Payments in an aggregate amount not to exceed
U.S.$25,000,000 million (or an equivalent amount in any other currency or
currencies), since the Issue Date; and

(viii) so long as no Potential Event of Default or Event of Default has occurred and is
continuing, any Restricted Payment; provided that the Consolidated Net Leverage
Ratio on a pro forma basis after giving effect to any such Restricted Payment does not
exceed 4.5 to 1.0.

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(c) The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the
date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued
by the Issuer or such Subsidiary, as the case may be, pursuant to the Restricted Payment.

(d) Unsecured Indebtedness shall not be deemed to be subordinate or junior to secured

Indebtedness by virtue of its nature as unsecured Indebtedness.

5.11 Interpretation

In these Conditions:

an Affiliate of any specified Person means: (a) any other Person, directly or indirectly,
controlling or controlled by or under direct or indirect common control with such specified
Person; (b) any other Person who is a director or officer of such specified Person, of any
Subsidiary of such specified Person or of any Person described in (a) above;

Asset Sale means any sale, lease, transfer or other disposition by one or more transactions or
series of transactions (whether related or not) by the Issuer or any Material Subsidiary,
including any disposition by way of a merger, consolidation or similar transaction, of:

(a) any shares or ownership interest in a Subsidiary of the Issuer; or

(b) any other assets or revenues of the Group.

Notwithstanding the foregoing, none of the following items will be deemed to be an Asset
Sale:

(i) transfers of assets between or among the Issuer and any of its Material Subsidiaries;

(ii) an issuance of shares or ownership interests by a Subsidiary of the Issuer to the Issuer
or a Material Subsidiary;

(iii) sales or other dispositions of inventory, receivables and other assets in the ordinary
course of business;

(iv) any sale, transfer, assignment or other disposition in the ordinary course of business
of any property or equipment that has become damaged, worn out, obsolete or
otherwise unsuitable for use;

(v) any transfer, assignment or other disposition deemed to occur in connection with the
creation of any Security Interest permitted under Condition 5.1;

(vi) the sale or other disposition of cash or Cash Equivalents in the ordinary course of
business;

(vii) a surrender or waiver of contract rights or the settlement, release or surrender of

contract, tort or other claims of any kind in the ordinary course of business; and

(viii) dispositions of receivables in connection with the compromise, settlement or

collection thereof in the ordinary course of business or in bankruptcy or similar
proceedings and exclusive of factoring or similar arrangements

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Cash means, as at a Transaction Date, the amount of cash and bank balances of the WAPDA
Hydroelectric Group shown in the statement of financial position as at such Transaction Date
contained in the Financial Statements;

Cash Development Loan means moneys borrowed by the Issuer or any of its Subsidiaries
from the Government of Pakistan denominated and payable in Rupees for (a) the construction
and/or development of a specified project or projects and/or (b) any payment to be made by
Issuer or any of its Subsidiaries to any regional or provincial government of Pakistan in
connection with any project or projects;

Cash Equivalents means (without double counting cash and bank balances of the WAPDA
Hydroelectric Group as shown in the statement of financial position in the Financial
Statements):

(a) securities issued directly or indirectly and fully guaranteed by the government of a
country which has a credit rating of at least "A" or the equivalent thereof by S&P or
Fitch or "A2" or the equivalent thereof by Moody's or the equivalent rating category
of another Rating Agency or by an instrumentality or agency of any such government
having an equivalent credit rating, in each case having maturities of not more than
twelve months from the date of acquisition;

(b) certificates of deposit, time deposits, eurodollar time deposits, money market
deposits, overnight bank deposits or bankers' acceptances (and similar instruments)
having maturities of not more than twelve months from the date of acquisition thereof
issued by a bank or financial institution whose unsecured long term foreign currency
and non credit-enhanced debt is rated at the time of acquisition thereof at least "A" or
the equivalent thereof by S&P or Fitch or "A2" or the equivalent thereof by Moody's
or the equivalent rating category of another Rating Agency;

(c) repurchase obligations with a term of not more than 30 days for underlying securities
of the types described in paragraphs (a) and (b) above entered into with any financial
institution meeting the qualifications described in paragraph (b) above;

(d) commercial paper, maturing not more than twelve months after the date of acquisition
thereof, issued by a corporation (other than an Affiliate of the Issuer) which has a
credit rating of at least "A" or the equivalent thereof by S&P or Fitch or "A2" or the
equivalent thereof by Moody's or the equivalent rating category of another Rating
Agency; and

(e) interests in any investment company or money market fund which invests 90 per cent.
or more of its assets in instruments of the type specified in paragraphs (a) through (d)
above;

Consolidated Leverage Ratio means in respect of the WAPDA Hydroelectric Group and as
at any date of determination, the ratio of the total Net Financial Indebtedness of the WAPDA
Hydroelectric Group at such date to the EBITDA of the WAPDA Hydroelectric Group for the
Relevant Period, calculated in accordance with IFRS and determined by reference to the latest
Financial Statements. In the event that WAPDA Hydroelectric and any of the WAPDA
Hydroelectric Subsidiaries incurs or repays, repurchases, redeems or otherwise discharges any
Indebtedness subsequent to the commencement of the Relevant Period and on or prior to the
Transaction Date, the Consolidated Leverage Ratio will be calculated giving pro forma effect

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to such incurrence, repayment, repurchase, redemption or other discharge, and the use of any
proceeds therefrom, as if the same had occurred at the beginning of the Relevant Period;

Consolidated Net Income means, with respect to any specified Person for any period, the
aggregate of the net income/(loss) of such Person and its Subsidiaries for such period, on a
consolidated basis, determined in accordance with IFRS and without any reduction in respect
of preferred share dividends; provided, however, that there will not be included in such
Consolidated Net Income:

(a) consolidated depreciation expense;

(b) consolidated amortisation expense;

(c) any net gain (or loss) realised upon the sale or other disposition of any asset or
disposed operations of the Issuer or any Subsidiaries (including pursuant to any
sale/leaseback transaction) which is not sold or otherwise disposed of in the ordinary
course of business (as determined in good faith by the management body of the
Issuer); and

(d) any foreign currency transaction gains or losses in respect of Indebtedness of any
Person denominated in a currency other than the functional currency of such Person
and any foreign exchange gains or losses relating to translation of assets and
liabilities denominated in foreign currencies, each, as set out in the relevant notes to
the Financial Statements, and (iii) any foreign currency translation or transaction
gains or losses in respect of Indebtedness or other obligations of the Issuer or any
Subsidiary of the Issuer owing to the Issuer or any Subsidiary of the Issuer, each as
set out in the relevant notes to the Financial Statements;

EBITDA means, in relation to any Relevant Period, the total consolidated Net Profit of the
WAPDA Hydroelectric Group for that Relevant Period:

(a) without taking into account:

(i) Net Finance Charges (inclusive of amortisation of deferred finance fees and
other original issue discount and banking fees, charges and commissions (e.g.
letter of credit fees and commitment fees));

(ii) any share of the results of any associated company or undertaking;

(iii) extraordinary, non-recurring, one-off or exceptional items;

(iv) gains and/or losses arising on foreign currency exchange differences;

(v) gains and/or losses arising on disposals of non-current assets; and

(vi) Taxes; and

(b) adjusted by adding thereto (in each case to the extent deducted in determining Net
Profit for such Relevant Period) without duplication all amounts provided for
depreciation, amortisation and impairment of assets of the WAPDA Hydroelectric
Group for that Relevant Period, as determined from the Financial Statements;

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Equity Interests means shares and other ownership interests and all warrants, options or
other rights to acquire (but excluding any debt security that is convertible into, or
exchangeable for) shares and other ownership interests;

the equivalent on any given date in one currency (the first currency) of an amount
denominated in another currency (the second currency) is a reference to the amount of the
first currency which could be purchased with the amount of the second currency at the spot
rate of exchange quoted on the relevant Bloomberg page;

Fair Market Value means the value that would be obtained in an arm's length transaction
between an informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy, as determined in good faith by the management
body of the Issuer, provided that, if such transaction involves an aggregate value in excess of
U.S.$75,000,000 (or its equivalent in other currencies), the transaction will be deemed to be
entered into for Fair Market Value only if the same is confirmed by a certificate or report of
the auditors of the Issuer or of another independent appraiser acceptable to the Trustee
provided to the Issuer and the Trustee;

Financial Indebtedness means, as at a Transaction Date, the aggregate amount for the
WAPDA Hydroelectric Group (after the elimination of intra-Group Indebtedness) shown in
the statement of financial position contained in the Financial Statements, for or in respect of:

(a) moneys borrowed;

(b) any amount raised by acceptance under any acceptance credit facility;

(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes,
debentures, loan stock or any similar instrument;

(d) the amount of any liability in respect of any lease or hire purchase contract, which
would in accordance with IFRS be treated as a finance or capital lease;

(e) any amount raised under any other transaction (including any forward sale or
purchase agreement) having the commercial effect of borrowing, which is treated as
an obligation in accordance with IFRS; and

(f) the amount of any liability in respect of any guarantee or indemnity for any of the
items referred to in items (a) to (e) inclusive above;

Financial Statements means the audited annual or, as the case may be, semi-annual audited
or reviewed consolidated accounts of the WAPDA Hydroelectric Group or, if no such
consolidated accounts are available, the latest such accounts of WAPDA Hydroelectric and
each of the WAPDA Hydroelectric Subsidiaries in each case on a stand-alone basis, adjusted
as deemed appropriate by the Issuer, prepared in each case in accordance with IFRS and
delivered under Condition 5.8;

Foreign Relent Loans means moneys borrowed by the Issuer or any of its Subsidiaries under
loans from the Government of Pakistan, where those moneys have been borrowed by the
Government of Pakistan in a currency other than Rupees and are relent to the Issuer or such
Subsidiary by way of a loan denominated and payable in Rupees;

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Guarantee means, in relation to any Indebtedness of any Person, any obligation of another
Person to pay such Indebtedness including (without limitation):

(a) any obligation to purchase such Indebtedness;

(b) any obligation to lend money, to purchase or subscribe shares or other securities or to
purchase assets or services in order to provide funds for the payment of such
Indebtedness;

(c) any indemnity against the consequences of a default in the payment of such
Indebtedness; and

(d) any other agreement to be responsible for such Indebtedness;

Group means the Issuer and its Subsidiaries from time to time taken as a whole;

Hedging Obligations means, with respect to any specified Person, the obligations of such
Person under:

(a) currency exchange, interest rate or commodity swap agreements, currency swap,
interest rate or commodity cap agreements, currency exchange, interest rate or
commodity collar agreements and foreign exchange contracts or futures contracts;

(b) other agreements or arrangements designed to manage interest rates or interest rate
risk; and

(c) other agreements or arrangements designed to protect such Person against

fluctuations in currency exchange rates or commodity prices;

IFRS means International Financial Reporting Standards issued by the International

Accounting Standards Board (IASB) and interpretations issued by the International Financial
Reporting Interpretations Committee of the IASB (as amended, supplemented or re-issued
from time to time), as notified under the Companies Act, 2017 by the Securities and
Exchange Commission, in each case of Pakistan;

incur means issue, assume, guarantee, incur or otherwise become liable for; provided that,
any Indebtedness of a Person existing at the time such Person becomes a Subsidiary of
another Person (whether by merger, consolidation, acquisition or otherwise) will be deemed
to be incurred by the other Person at the time such Person becomes a Subsidiary of such other
Person;

Indebtedness means, with respect to any Person, any present or future indebtedness of such
Person for, or in respect of, moneys borrowed or raised including, without limitation (i) any
amount raised by acceptance under any acceptance credit facility, (ii) any amount raised
pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or
any other security or similar instrument, (iii) any amount raised pursuant to any issue of
shares which are expressed to be redeemable and (iv) any amount raised under any other
transaction (including any forward sale or purchase agreement) having the economic effect of
a borrowing, and including any equivalent undertaking or obligation of such Person in
connection with any Islamic financing arrangement;

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Investments means, with respect to any Person, all direct or indirect investments by such
Person in other Persons (including Affiliates) in the forms of loans (including guarantees or
other obligations), advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as investments on a balance
sheet prepared in accordance with IFRS. If the Issuer or any Material Subsidiary sells or
otherwise disposes of any Equity Interests of any direct or indirect Subsidiary such that, after
giving effect to any such sale or disposition, such Person is no longer a Subsidiary, the Issuer
will be deemed to have made an Investment on the date of any such sale or disposition equal
to the Fair Market Value of the Issuer's Investments in such Subsidiary that were not sold or
disposed of in an amount determined as provided in Condition 5.10(c). The acquisition by the
Issuer or any Subsidiary of a Person that holds an Investment in a third Person will be deemed
to be an Investment by the Issuer or such Subsidiary in such third Person in an amount equal
to the Fair Market Value of the Investments held by the acquired Person in such third Person
in an amount determined as provided in Condition 5.10(c). Except as otherwise provided in
these Conditions, the amount of an Investment will be determined at the time the Investment
is made and without giving effect to subsequent changes in value. The amount of any
Investment outstanding at any time shall be the original cost of such Investment, reduced (at
the Issuer's option) by any dividend, distribution, interest payment, return of capital,
repayment or other amount or value received in respect of such Investment.

Material Subsidiary means at any time a Subsidiary of the Issuer:

(a) whose gross revenues or total assets represent in each case not less than 10 per cent.
of the consolidated gross revenues or, as the case may be, consolidated total assets of
the WAPDA Hydroelectric Group, as determined at any time by reference to the then
latest audited consolidated accounts of the WAPDA Hydroelectric Group or, if no
such accounts are available, the then latest audited accounts of WAPDA
Hydroelectric and each of the WAPDA Hydroelectric Subsidiaries, adjusted as
deemed appropriate by the Issuer, provided that:

(i) a Subsidiary of the Issuer which would be a Material Subsidiary but which is
formed solely for the purposes of, and the sole business of which is, Islamic
financing by which Indebtedness is incurred for, or on behalf of, the Group,
shall be deemed not to be a Material Subsidiary;

(ii) where audited consolidated accounts of the WAPDA Hydroelectric Group are
available, in the case of a Subsidiary of the Issuer acquired after the end of
the financial period to which the then latest audited consolidated accounts of
the WAPDA Hydroelectric Group relate, the reference to the then latest
audited consolidated accounts of the WAPDA Hydroelectric Group for the
purposes of the calculation above shall, until accounts for the financial period
in which the acquisition is made have been prepared and audited as aforesaid,
be deemed to be a reference to the then latest audited consolidated accounts
of the WAPDA Hydroelectric Group as if such Subsidiary had been shown in
such accounts by reference to that Subsidiary's then latest relevant audited
accounts, adjusted as deemed appropriate by the Issuer;

(b) to which is transferred the whole or substantially the whole of the undertaking and
assets of a Subsidiary of the Issuer which immediately prior to such transfer is a

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 Material Subsidiary, provided that the transferor Subsidiary shall upon such transfer
forthwith cease to be a Material Subsidiary and the transferee Subsidiary shall cease
to be a Material Subsidiary pursuant to this subparagraph (b) on the date on which the
consolidated accounts of the WAPDA Hydroelectric Group or, if there are no such
accounts available, the audited accounts of WAPDA Hydroelectric and each of the
WAPDA Hydroelectric Subsidiaries for the financial period current at the date of
such transfer have been prepared and audited as aforesaid but so that such transferor
Subsidiary or such transferee Subsidiary may be a Material Subsidiary on or at any
time after the date on which such accounts have been prepared and audited as
aforesaid by virtue of the provisions of subparagraph (a) above or, prior to or after
such date, by virtue of any other applicable provision of this definition; or

(c) to which is transferred an undertaking or assets which, taken together with the
undertaking or assets of the transferee Subsidiary, generated (or, in the case of the
transferee Subsidiary being acquired after the end of the financial period to which the
then latest audited consolidated accounts of the WAPDA Hydroelectric Group or, if
no such accounts are available, the then latest audited accounts of WAPDA
Hydroelectric and each of the WAPDA Hydroelectric Subsidiaries relate, generate
gross revenues equal to) not less than 10 per cent. of the consolidated gross revenues,
or represent (or, in the case aforesaid, are equal to) not less than 10 per cent. of the
consolidated total assets, of the WAPDA Hydroelectric Group, all as calculated as
referred to in subparagraph (a) above, provided that the transferor Subsidiary (if a
Material Subsidiary) shall upon such transfer forthwith cease to be a Material
Subsidiary unless immediately following such transfer its undertaking and assets
generate (or, in the case aforesaid, generate gross revenues equal to) not less than 10
per cent. of the consolidated gross revenues, or its assets represent (or, in the case
aforesaid, are equal to) not less than 10 per cent. of the consolidated total assets, of
the WAPDA Hydroelectric Group, all as calculated as referred to in subparagraph (a)
above, and the transferee Subsidiary shall cease to be a Material Subsidiary pursuant
to this subparagraph (c) on the date on which the consolidated accounts of the
WAPDA Hydroelectric Group or, if no such accounts are available, the audited
accounts of WAPDA Hydroelectric and each of the WAPDA Hydroelectric
Subsidiaries for the financial period current at the date of such transfer have been
prepared and audited but so that such transferor Subsidiary or such transferee
Subsidiary may be a Material Subsidiary on or at any time after the date on which
such accounts have been prepared and audited as aforesaid by virtue of the provisions
of subparagraph (a) above or, prior to or after such date, by virtue of any other
applicable provision of this definition,

all as more particularly defined in the Noteholders' Representative Deed.

A report by two Members of the Issuer whether or not addressed to the Trustee that in their
opinion a Subsidiary of the Issuer is or is not or was or was not at any particular time or
throughout any specified period a Material Subsidiary may be relied upon by the Trustee
without further enquiry or evidence and, if relied upon by the Trustee, shall, in the absence of
manifest error, be conclusive and binding on all parties.

NEPRA means the National electric Power Regulatory Authority (NEPRA) of Pakistan;

Net Cash Proceeds means the aggregate cash proceeds received by the Borrower or any of its
Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received

105
upon the sale or other disposition of any non-cash consideration or any Cash Equivalents
received in any Asset Sale) or any other sale or disposition, net of the direct costs relating to
such Asset Sale or other sale or disposition, including, without limitation:

(a) all legal, accounting and investment banking commissions and other fees and
expenses incurred, title and recording tax expenses, and all federal, state, provincial,
foreign and local taxes required to be paid or accrued as a liability under IFRS, as a
consequence of such Asset Sale after taking into account any available tax credits or
deductions and any tax sharing arrangements;

(b) all payments made on any Indebtedness which is secured by any assets subject to
such Asset Sale, in accordance with the terms of any Security Interest upon such
assets, or which must by its terms, or in order to obtain a necessary consent to such
Asset Sale, or by applicable law be repaid out of the proceeds from such Asset Sale;

(c) all distributions and other payments required to be made to minority shareholders in
the Issuer's Subsidiaries or joint ventures as a result of such Asset Sale; and

(d) the deduction of appropriate amounts to be provided by the seller as a reserve, in

accordance with IFRS, or held in escrow, in either case for adjustment in respect of
the sale price or for any liabilities associated with the assets disposed of in such Asset
Sale and retained by the Issuer or any of its Subsidiaries after such Asset Sale;

Net Financial Indebtedness means Financial Indebtedness (excluding Foreign Relent Loans
and Cash Development Loans less Cash);

Net Finance Charges means , in relation to any Relevant Period, the aggregate amount of
interest and any other finance charges (whether or not paid, payable or capitalised) accrued by
the WAPDA Hydroelectric Group in that Relevant Period in respect of Financial
Indebtedness including:

(a) the interest element of leasing and hire purchase payments; and

(b) commitment fees, commissions, arrangement fees and guarantee fees,

adjusted (but without double counting) by deducting:

(i) interest income of the WAPDA Hydroelectric Group in respect of that Relevant
Period; and

(ii) interest income of the WAPDA Hydroelectric Group from any Cash for the Relevant
Period,

as determined (except as needed to reflect the terms of this definition) from the Financial
Statements;

Net Profit means, in relation to any Relevant Period, the positive difference (if any) that
remains after deducting the total costs and expenses from the gross revenue, in each case, of
the WAPDA Hydroelectric Group, for that Relevant Period as determined from the Financial
Statements;

106
Pakistan means the Islamic Republic of Pakistan;

Permitted Investment means:

(a) any Investment in the Issuer or any Subsidiary of the Issuer;

(b) any Investment in cash and Cash Equivalents;

(c) any Investment by the Issuer or any Subsidiary of the Issuer in a Person, if as a result
of such Investment:

(i) such Person becomes a Subsidiary of the Issuer; or

(ii) such Person is merged, consolidated or amalgamated with or into, or transfers

or conveys substantially all of its assets to, or is liquidated into, the Issuer or
a Subsidiary of the Issuer;

(d) any Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Condition 5.5;

(e) any acquisition of assets or shares or other ownership interests solely in exchange for
the issuance of Equity Interests of the Issuer;

(f) any Investments received in compromise or resolution of (i) obligations of trade

creditors or customers that were incurred in the ordinary course of business of the
Issuer or any of its Subsidiaries, including pursuant to any plan of reorganisation or
similar arrangement upon the bankruptcy or insolvency of any trade creditor or
customer; or (ii) litigation, arbitration or other disputes with Persons who are not
Affiliates;

(g) Investments consisting of purchases and acquisitions of inventory, supplies, materials

and equipment or purchases of contract rights or licenses or leases of intellectual
property, in each case in the ordinary course of business

(h) Investments represented by Hedging Obligations;

(i) any Guarantee of Indebtedness permitted to be incurred by Condition 5.3 other than a
Guarantee of Indebtedness of an Affiliate of the Issuer that is not a Subsidiary;

(j) guarantees of performance or other obligations (other than Indebtedness) arising in

the ordinary course of business of the Issuer and its Subsidiaries, including
obligations under licences or concessions related to the ordinary course of the
business of the Issuer and its Subsidiaries;

(k) any Investment existing on, or made pursuant to binding commitments existing on,
the Issue Date and any Investment consisting of an extension, modification or
renewal of any Investment existing on, or made pursuant to a binding commitment
existing on, the Issue Date; provided that the amount of any such Investment may be
increased (i) as required by the terms of such Investment as in existence on the Issue
Date or (ii) as otherwise permitted under these Conditions;

107
(l) Investments acquired after the Issue Date as a result of the acquisition by the Issuer or
any Subsidiary of another Person, including by way of a merger, amalgamation or
consolidation with or into the Issuer or any of its Subsidiaries, or all or substantially
all of the assets of another Person, in each case, in a transaction that is not prohibited
by Condition 5.4 after the Issue Date to the extent that such Investments were not
made in contemplation of such acquisition, merger, amalgamation or consolidation
and were in existence on the date of such acquisition, merger, amalgamation or
consolidation;

(m) Investments, when taken together with all other Investments made pursuant to this
paragraph (m) and at any time outstanding, in an aggregate amount at the time of
such Investment not to exceed U.S.$25,000,000 (or an equivalent amount in any other
currency or currencies); provided that, if an Investment is made pursuant to this
paragraph (m) in a Person that is not a Subsidiary and such Person subsequently
becomes a Subsidiary, such Investment shall thereafter be deemed to have been made
pursuant to paragraph (c) of this definition of "Permitted Investments" and not this
paragraph (m),

provided, however, that with respect to any Investment, the Issuer may, in its sole discretion,
allocate all or any portion of any Investment to one or more of the above paragraphs (a)
through (m) so that the entire Investment would be a Permitted Investment.

Permitted Refinancing Indebtedness means any Indebtedness of the Issuer or any of its
Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, refund,
refinance, replace, defease or discharge, any other Indebtedness of the Issuer or any of its
Subsidiaries (other than intercompany Indebtedness), provided that:

(a) the aggregate principal amount (or accreted value, if applicable, or if issued with an
initial issue discount, aggregate issue price) of such Permitted Refinancing
Indebtedness does not exceed the principal amount (or accreted value, if applicable,
or if issued with an initial issue discount, aggregate issue price) of the Indebtedness
exchanged, renewed, refunded, refinanced, replaced, defeased or discharged (plus all
accrued interest on the Indebtedness and the amount of all fees and expenses,
including premiums, incurred in connection therewith); and

(b) such Permitted Refinancing Indebtedness has (i) a final maturity date that is either
(A) later than the final maturity date of the Indebtedness being exchanged, renewed,
refunded, refinanced, replaced, defeased or discharged or (B) after the Maturity Date
(as defined in Condition 8.1) and (ii) has a Weighted Average Life to Maturity that is
greater than the Weighted Average Life to Maturity of the Indebtedness being
exchanged, renewed, refunded, refinanced, replaced, defeased or discharged;

Permitted Security Interest means:

(a) any Security Interest of a Person existing at the time that such Person is merged into,
or consolidated with or acquired by, the Issuer or any Subsidiary of the Issuer,
provided that such Security Interest was not created in contemplation of, and the
principal amount secured has not increased in contemplation of or since, such merger,
consolidation or acquisition;

108
(b) any Security Interest upon, or with respect to, property or assets to secure
Indebtedness incurred for the purpose of financing the acquisition of such property or
assets and any renewal and extension of such Security Interest which is limited to the
original property or assets the subject of such Security Interest and which (in either
case) secures any renewal or extension of the original secured Indebtedness where
there is no increase in the principal amount (or equivalent thereof) secured thereby;

(c) any Security Interest existing on any property or assets at the time of its acquisition
provided that such Security Interest was not created or the principal amount (or
equivalent thereof) secured thereby increased in contemplation of such acquisition
and any renewal or extension of any such Security Interest which is limited to the
original property or assets the subject of such Security Interest and which secures any
renewal or extension of the original secured Indebtedness where there is no increase
in the principal amount (or equivalent thereof) secured thereby;

(d) any Security Interest arising by operation of law (or pursuant to any agreement
establishing a Security Interest equivalent to any Security Interest which would
otherwise exist under relevant local law) and not arising as a result of a default
(howsoever defined) under any Indebtedness;

(e) any Security Interest upon, or with respect to, existing property or assets of the Issuer
or any of its Subsidiaries or any property or assets to be acquired by the Issuer or any
of its Subsidiaries to secure Indebtedness incurred for the purpose of financing all or
part of the costs of the acquisition or construction of any property or assets or
development of a project comprising any property and assets; provided that (i) the
holders of such Indebtedness expressly agree to limit their recourse to either (A) such
newly acquired property or assets and the revenues therefrom or the assets and
revenues of such project or (B) existing property or assets of the Issuer or a
Subsidiary of the Issuer and the revenues therefrom of equivalent or lesser value than
that of the property or assets and revenues of such property, assets or project being
acquired or constructed, or, in each case, the proceeds of insurance thereon as the
principal source of repayment of such Indebtedness and (ii) the property or assets the
subject of such Security Interest consists solely of such assets and revenues; and

(f) any Security Interest not otherwise permitted by the preceding paragraphs, provided
that the principal amount (or equivalent thereof) secured thereby does not exceed 5.0
per cent. of the consolidated total assets of the WAPDA Hydroelectric Group, as
determined at any time by reference to the then latest audited consolidated accounts
of the WAPDA Hydroelectric Group or, if no such accounts are available, the then
latest audited accounts of WAPDA Hydroelectric and each of the WAPDA
Hydroelectric Subsidiaries.

Person means any individual, company, corporation, firm, partnership, joint venture,
association, trust, organisation, state or agency of a state or any other entity, whether or not
having separate legal personality;

Rating Agency means Standard & Poor's Credit Market Services Europe Limited (S&P),
Fitch Ratings Ltd. (Fitch) or Moody's Investors Service Ltd. (Moody's), or any of their
respective affiliates or successors, or any other rating agency of international standing;

109
Replacement Assets means, on any date: (i) property or assets (other than assets classified as
current assets under IFRS) of a nature or type that are used or useful in WAPDA
Hydroelectric – NEPRA regulated business and (iii) shares or other ownership interests in any
Person holding property or assets of such nature or type, which will, upon the acquisition by
any member of the WAPDA Hydroelectric Group of such shares or other ownership interests,
become a WAPDA Hydroelectric Subsidiary;

Relevant Period means the most recent twelve-month period (which may be comprised of
interim periods) immediately preceding the relevant Transaction Date for which the Financial
Statements have been delivered under Condition 5.8;

Restricted Investment means an Investment other than a Permitted Investment;

Rupee means the lawful currency for the time being of Pakistan;

Security Interest means any mortgage, pledge, lien, hypothecation, security interest or other
charge or encumbrance or preferential arrangement which has the practical effect of
constituting a security interest (other than any transaction involving any sale, lease, transfer or
other disposal of any business, undertaking, assets or revenues pursuant to an Islamic
financing structure, provided that the business, undertaking, assets or revenues which are the
subject of such financing structure cannot be ultimately sold, transferred or otherwise
disposed of, except to the Issuer or any of its Subsidiaries) whether in effect on the date of the
Noteholders' Representative Deed or thereafter;

Senior Indebtedness means Indebtedness of the Issuer or a Subsidiary of the Issuer other
than Indebtedness which, in the instrument creating or evidencing the same, is expressly
stated to be subordinated in right of payment to the Notes;

Stated Maturity means, with respect to any instalment of interest or principal on any
Indebtedness, the date on which the payment of interest or principal was scheduled to be paid
(whether or not the borrower has a right to defer payment) in the documentation governing
such Indebtedness as of the date of original incurrence of the relevant Indebtedness, and will
not include any contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof;

Subsidiary means in relation to any Person (the first Person) any other Person (the second
Person) being a corporation or other business entity:

(a) which is controlled, directly or indirectly, by that first Person; or

(b) more than half the issued share capital of which is beneficially owned, directly or
indirectly, by that first Person,

and, for these purposes, the second Person shall be treated as being controlled by the first
Person if the first Person is able to direct the second Person's affairs and/or to control the
composition of the first Person's management board or equivalent body;

Taxes means any taxes, levies, duties, imposts or other charges or withholding of a similar
nature no matter where arising (including interest and penalties thereon and additions
thereto);

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 Transaction Date has the meaning given in Condition 5.3(a)(ii);

U.S.$ means the lawful currency for the time being of the United States of America.

WAPDA Hydroelectric means the WAPDA Hydroelectric – NEPRA regulated business of

WAPDA;

WAPDA Hydroelectric – NEPRA regulated business means the business of WAPDA and
its Subsidiaries comprising activities related to hydel power generation, including the
operation and development of hydel power stations, as regulated by NEPRA;

WAPDA Hydroelectric Group means WAPDA Hydroelectric and the WAPDA

Hydroelectric Subsidiaries from time to time taken as a whole;

WAPDA Hydroelectric Subsidiary means a Subsidiary of the Issuer undertaking WAPDA

Hydroelectric – NEPRA regulated business; and

Weighted Average Life to Maturity means, when applied to any Indebtedness at any date,
the number of years obtained by dividing:

(a) the sum of the products obtained by multiplying (i) the amount of each then
remaining instalment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect of the Indebtedness, by (ii)
the number of years (calculated to the nearest one twelfth) that will elapse between
such date and the making of such payment; by

(b) the then outstanding principal amount of such Indebtedness.

6. INTEREST

6.1 Interest Rate and Interest Payment Dates

The Notes bear interest from and including 4 June 2021 at the rate of 7.500 per cent. per
annum, payable semi-annually in arrear on 4 June and 4 December in each year (each an
Interest Payment Date).

6.2 Interest Accrual

Each Note will cease to bear interest from and including its due date for redemption unless,
upon due presentation, payment of the principal in respect of the Note is improperly withheld
or refused or unless default is otherwise made in respect of payment. In such event interest
will continue to accrue as provided in the Noteholders' Representative Deed.

6.3 Calculation of Broken Interest

When interest is required to be calculated in respect of a period of less than a full six months,
it shall be calculated by applying the rate of 7.500 per cent. per annum to each U.S.$1,000
principal amount of Notes (the Calculation Amount) and on the basis of a 360-day year
consisting of 12 months of 30 days each and, in the case of an incomplete month, the number
of days elapsed on the basis of a month of 30 days. The resultant figure shall be rounded to
the nearest cent, half a cent being rounded upwards. The interest payable in respect of a Note

111
 shall be the product of such rounded figure and the amount by which the Calculation Amount
is multiplied to reach the denomination of the relevant Note, without any further rounding.

7. PAYMENTS

7.1 Payments in respect of Notes

Payment of principal and interest will be made by transfer to the registered account of the
Noteholder. Payments of principal and payments of interest due otherwise than on an Interest
Payment Date will only be made against surrender of the relevant Certificate at the specified
office of any of the Agents. Interest on Notes due on an Interest Payment Date will be paid to
the holder shown on the register of Noteholders at the close of business on the date (the
record date) being the fifteenth day before the relevant Interest Payment Date.

For the purposes of this Condition, a Noteholder's registered account means the U.S. dollar
account maintained by or on behalf of it with a bank that processes payments in U.S. dollars,
details of which appear on the register of Noteholders at the close of business, in the case of
principal, on the second business day (as defined below) before the due date for payment and,
in the case of interest, on the relevant record date, and a Noteholder's registered address
means its address appearing on the register of Noteholders at that time.

7.2 Payments subject to applicable laws

Payments in respect of principal and interest on the Notes are subject in all cases to (i) any
fiscal or other laws and regulations applicable thereto in the place of payment, but without
prejudice to the provisions of Condition 9 (Taxation) and (ii) any withholding or deduction
required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue
Code of 1986 (the Code) or otherwise imposed pursuant to Sections 1471 through 1474 of the
Code, any regulations or agreements thereunder, any official interpretations thereof, or any
law implementing an intergovernmental approach thereto.

7.3 No commissions

No commissions or expenses shall be charged to the Noteholders in respect of any payments

made in accordance with this Condition.

7.4 Payment on Business Days

Where payment is to be made by transfer to a registered account, payment instructions (for

value the due date or, if that is not a Business Day (as defined below), for value the first
following day which is a Business Day) will be initiated on the Business Day preceding the
due date for payment or, in the case of a payment of principal or a payment of interest due
otherwise than on an Interest Payment Date, if later, on the Business Day on which the
relevant Certificate is surrendered at the specified office of an Agent.

Noteholders will not be entitled to any interest or other payment for any delay after the due
date in receiving the amount due if the due date is not a Business Day, if the Noteholder is
late in surrendering its Certificate (if required to do so) or if a cheque mailed in accordance
with this Condition arrives after the due date for payment.

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 In these Conditions, Business Day means any day which (subject to Condition 10
(Prescription) is a day on which commercial banks and foreign exchange markets settle
payments and are open for general business (including dealing in foreign exchange and
foreign currency deposits) in London and New York City and, in the case of presentation of a
Note Certificate, in the place in which the Note Certificate is presented.

7.5 Partial Payments

If the amount of principal or interest which is due on the Notes is not paid in full, the
Registrar will annotate the register of Noteholders with a record of the amount of principal or
interest in fact paid.

7.6 Agents

The initial Agents are set out above. The Issuer is entitled to vary or terminate the
appointment of any Agent and/or appoint additional or other Agents and/or approve any
changes in the specified office through which any Agent acts, provided that:

(a) there will at all times be a Principal Paying Agent and a Registrar (which may be the
same entity);

(b) so long as the Notes are listed on any stock exchange or admitted to listing by any
other relevant authority, there will at all times be an Agent (which may be the
Principal Paying Agent) having a specified office in such place as may be required by
the rules and regulations of the relevant Stock Exchange or any other relevant
authority; and

(c) there will at all times be a Paying Agent in the European Union or the United
Kingdom.

In acting under the Agency Agreement, the Agents act solely as agents of the Issuer and do
not assume any obligation to, or relationship of agency or trust with, any Noteholder. The
Agency Agreement contains provisions permitting any entity into which any Agent is merged
or converted or with which it is consolidated or to which it transfers all or substantially all of
its assets to become the successor agent.

Notice of any variation, termination, appointment and/or of any changes in specified offices
will be given to the Noteholders promptly by the Issuer in accordance with Condition 14
(Notices).

8. REDEMPTION AND PURCHASE

8.1 Redemption at Maturity

Unless previously redeemed or purchased and cancelled as provided below, the Issuer will
redeem the Notes at their principal amount on 4 June 2031 (the Maturity Date).

8.2 Redemption for Taxation Reasons

If the Issuer satisfies the Noteholders' Representative immediately before the giving of the
notice referred to below that:

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 (a) as a result of any change in, or amendment to, the laws or regulations of a Relevant
Jurisdiction (as defined in Condition 9 (Taxation), or any change in the application or
official interpretation of the laws or regulations of a Relevant Jurisdiction, which
change or amendment becomes effective after 2 June 2021, on the next Interest
Payment Date, the Issuer would be required to pay additional amounts as provided or
referred to in Condition 9 (Taxation); and

(b) the requirement cannot be avoided by the Issuer taking reasonable measures available
to it,

the Issuer may at its option, having given not less than 30 nor more than 60 days' notice to the
Noteholders in accordance with Condition 14 (Notices) (which notice shall be irrevocable and
shall specify the date fixed for redemption), redeem all the Notes, but not some only, at any
time at their principal amount together with interest accrued to but excluding the date of
redemption, provided that no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Issuer would be obliged to pay such additional amounts,
were a payment in respect of the Notes then due.

Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer
shall deliver to the Noteholders' Representative (i) a certificate signed by two Members of the
Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement
of facts showing that the conditions precedent to the right of the Issuer so to redeem have
occurred and (ii) an opinion of independent legal advisers of recognised standing to the effect
that the Issuer has or will become obliged to pay such additional amounts as a result of the
change or amendment and the Noteholders' Representative may (but shall not be obliged) to
accept the certificate as sufficient evidence of the satisfaction of the conditions precedent set
out above, in which event it shall be conclusive and binding on the Noteholders.

8.3 Redemption at the Option of the Issuer

The Issuer may, on not less than 30 nor more than 60 days' notice to the Noteholders in
accordance with Condition 14 (Notices) (which notices shall be irrevocable and shall specify
the date fixed for redemption), redeem all (but not some only) of the Notes at any time during
the period commencing on (and including) the day that is 90 days prior to the Maturity Date
to (but excluding) the Maturity Date at their principal amount, together with interest accrued
to the date fixed for redemption.

At any time prior to the day that is 90 days prior to the Maturity Date, the Issuer may at its
option, having given not less than 30 nor more than 60 days' notice to the Noteholders in
accordance with Condition 14 (Notices) (which notices shall be irrevocable and shall specify
the date fixed for redemption), redeem all (but not some only) of the Notes at the Make-
Whole Redemption Price.

For the purpose of this Condition 8.3:

(a) Make-Whole Redemption Price means, in respect of each Note, the greater of (i)
100 per cent. of the principal amount of the Notes and (b) the sum of the present
values of the Remaining Scheduled Payments discounted to the date of redemption on
a semi-annual basis (assuming a 360-day year consisting of 12 months of 30 days
each) at the U.S. Treasury Rate plus a spread of 50 basis points, together with accrued

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 interest on the principal amount of the Notes to the date of redemption, all as
determined by the Determination Agent;

(b) U.S. Treasury Rate means, with respect to any redemption date, the rate per annum
equal to the semi-annual equivalent yield to maturity (computed as of the third
business day immediately preceding that redemption date) of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for that
redemption date;

(c) Comparable Treasury Issue means the United States Treasury security or securities
selected by the Determination Agent that would be utilised, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the Notes;

(d) Comparable Treasury Price means, with respect to any redemption date, the
average of three Reference Treasury Dealer Quotations for the redemption date;

(e) Reference Treasury Dealer means each of the three nationally recognised firms
selected by the Determination Agent that are primary U.S. Government securities
dealers;

(f) Reference Treasury Dealer Quotation means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Determination Agent, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in writing to
the Determination Agent by such Reference Treasury Dealer at 5.00 p.m., New York
City time on the third Business Day immediately preceding such redemption date;

(g) Remaining Scheduled Payments means, with respect to the Notes, the remaining
scheduled payments of the principal thereof and interest thereon that would be due
after the related redemption date but for such redemption, provided, however, that if
that redemption date is not an Interest Payment Date, the amount of the next
succeeding scheduled interest payment thereon will be reduced by the amount of
interest accrued thereon to the redemption date; and

(h) Determination Agent means a leading investment bank or financial institution of

international standing (i) selected by the Issuer for the purposes of calculating the
Make-Whole Redemption Price, and (ii) notified to the Noteholders by the Issuer in
accordance with Condition 14 (Notices).

8.4 Redemption at the Option of the Holders upon a Change of Control

If a Change of Control Event occurs, the Issuer shall, upon the holder of any Note giving
notice to the Issuer at any time during the Change of Control Redemption Period, redeem
such Note on the Change of Control Redemption Date at its principal amount together with
interest accrued to (but excluding) the Change of Control Redemption Date.

Promptly upon the Issuer becoming aware that a Change of Control Event has occurred, the
Issuer shall give notice (a Change of Control Notice) to the Noteholders specifying the
nature of the Change of Control Event, the procedure for Noteholders to exercise their rights

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to require redemption of any Notes pursuant to this Condition 8.4, the Change of Control
Redemption Period and the Change of Control Redemption Date.

The right of Noteholders to require the redemption of Notes under this Condition 8.4 on the
occurrence of a Change of Control Event may be exercised by Noteholders in any multiple of
the principal amount of the Notes. To exercise such right, a Noteholder must deliver, at the
specified office of the Principal Paying Agent at any time during normal business hours of
such Principal Paying Agent within the Change of Control Redemption Period, a duly
completed and signed notice of redemption in the form (for the time being current) obtainable
from the specified office of the Principal Paying Agent (a Redemption Notice) and in which
the Noteholder must specify a bank account to which payment is to be made under this
Condition 8.4 accompanied by the relevant Certificate for such Notes or evidence satisfactory
to the Principal Paying Agent concerned that the relevant Certificate for such Notes will,
following delivery of the Redemption Notice, be held to its order or under its control.

All notices to be given by any Noteholder to the Issuer or by the Issuer to any Noteholder
under this Condition 8.4 must be given in accordance with Condition 14. Any Redemption
Notice given by a Noteholder pursuant to this Condition 8.4 shall be irrevocable except
where, prior to the due date of redemption, an Event of Default has occurred and the Trustee
has declared the Notes to be due and payable pursuant to Condition 11, in which event such
holder, at its option, may elect by notice to the Issuer to withdraw the Redemption Notice.
The Issuer will redeem all Notes which are the subject of a validly delivered Redemption
Notice on the Change of Control Redemption Date.

For the purposes of this Condition:

a Change of Control Event will occur at any time if the Government of Pakistan, ceases to
directly or indirectly wholly own and control the Issuer;

Change of Control Redemption Date means the first Business Day following the expiration
of the Change of Control Redemption Period provided that the Change of Control Notice is
given within 30 days of the Change of Control Event occurring, otherwise it means the date
falling 14 days after the date on which the relevant Noteholders exercise their right to require
the redemption of the relevant Notes in accordance with this Condition 8.4;

Change of Control Redemption Period means, in relation to any Change of Control Event,
the period from and including the date on which that Change of Control Event occurs
(whether or not the Issuer has given a Change of Control Notice in respect of such event) to
and including the date falling 60 days after the date on which the Change of Control Notice is
given, provided that if no Change of Control Notice is given, the Change of Control
Redemption Period shall not terminate; and

control means the power, directly or indirectly, through the ownership of voting securities or
other interests or through contractual or statutory control or otherwise, to direct the
management or elect or appoint a majority of the Members (or other persons performing
similar functions in lieu of the Members) of the Issuer.

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8.5 Purchases

The Issuer or any of its Subsidiaries (as defined above) may at any time purchase Notes at any
price in the open market or otherwise. Such Notes may be held, reissued, resold or, at the
option of the Issuer, surrendered to the Registrar for cancellation.

8.6 Cancellations

All Notes which are purchased by or on behalf of the Issuer or any of its Subsidiaries may,
and all Notes which are redeemed shall, be surrendered for cancellation to the Registrar and,
upon surrender thereof, will forthwith be cancelled. Any Notes so surrendered for
cancellation may not be reissued or resold and the obligations of the Issuer in respect of any
such Notes shall be discharged.

8.7 Notices Final

Upon the expiry of any notice as is referred to in paragraph 8.2, 8.3 or 8.4 above the Issuer
shall be bound to redeem the Notes to which the notice refers in accordance with the terms of
such paragraph.

9. TAXATION

9.1 Payment without Withholding

All payments of principal and interest in respect of the Notes by or on behalf of the Issuer will
be made without withholding or deduction for, or on account of, any present or future taxes or
duties of whatever nature imposed or levied by or on behalf of any Relevant Jurisdiction,
unless such withholding or deduction is required by law. In such event, the Issuer will pay
such additional amounts as shall be necessary in order that the net amounts received by the
Noteholders after such withholding or deduction shall equal the respective amounts of
principal and interest which would otherwise have been receivable in respect of the Notes in
the absence of such withholding or deduction; except that no such additional amounts shall be
payable with respect to any Note:

(a) presented for payment by or behalf of a holder which is liable for such taxes or duties
in respect of such Note by reason of having some connection with a Relevant
Jurisdiction other than the mere holding of the Notes; or

(b) presented for payment in any Relevant Jurisdiction; or

(c) presented for payment more than 30 days after the Relevant Date (as defined below)
except to the extent that the holder thereof would have been entitled to an additional
amount on presenting the same for payment on such thirtieth day assuming that day
to have been a Business Day (as defined in Condition 7 (Payments).

Notwithstanding any other provision of these Conditions, in no event will the Issuer be
required to pay any additional amounts in respect of the Notes for, or on account of, any
withholding or deduction required pursuant to an agreement described in Section 1471(b) of
the Code or otherwise imposed pursuant to Section 1471 through 1474 of the Code, any
regulations or agreements thereunder, or any official interpretations thereof, or any law
implementing an intergovernmental approach thereto.

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 Neither the Noteholders' Representative nor any Agent shall be responsible for paying any
tax, duty, charges, withholding or other payment referred to in this Condition 9 or for
determining whether such amounts are payable or the amount thereof, and shall not be
responsible or liable for any failure by the Issuer or any noteholder to pay such tax, duty,
charges, withholding or other payment.

9.2 Interpretation

In these Conditions:

(a) Relevant Date means the date on which such payment first becomes due, except that
if the full amount of the moneys payable has not been received by the an Agent or the
Noteholders' Representative on or prior to such due date, it means the date on which,
the full amount of such moneys having been so received, notice to that effect has
been duly given to the Noteholders by the Issuer in accordance with Condition 14
(Notices); and

(b) Relevant Jurisdiction means Pakistan or any political subdivision or any authority
thereof or therein having power to tax or any other jurisdiction or any political
subdivision or any authority thereof or therein having power to tax to which the
payments made by the Issuer of principal and interest on the Notes become generally
subject.

9.3 Additional Amounts

Any reference in these Conditions to any amounts in respect of the Notes shall be deemed
also to refer to any additional amounts which may be payable under this Condition.

10. PRESCRIPTION

The Notes will become void unless claims in respect of principal and/or interest are made
within a period of 10 years (in the case of principal) and five years (in the case of interest)
after the Relevant Date, as defined in Condition 9 (Taxation) thereafter.

11. EVENTS OF DEFAULT

The Noteholders' Representative at its discretion may, and if so requested in writing by the
holders of at least one-fifth in principal amount of the Notes then outstanding or if so directed
by an Extraordinary Resolution of the Noteholders shall (subject in each case to being
indemnified and/or secured and/or pre-funded to its satisfaction), (but, in the case of the
happening of any of the events described in subparagraphs (b) to (e) (other than the winding
up or dissolution of the Issuer) and, (f) to (j) inclusive below, only if the Noteholders'
Representative shall have certified in writing to the Issuer that such event is, in its opinion,
materially prejudicial to the interests of the Noteholders) give notice to the Issuer that the
Notes are, and they shall accordingly forthwith become, immediately due and repayable at
their principal amount, together with accrued interest as provided in the Noteholders'
Representative Deed, if any of the following events shall occur and be continuing (Events of
Default):

(a) if default is made in the payment of any principal or interest due in respect of the
Notes or any of them and the default continues for a period of 5 Business Days; or

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(b) if the Issuer fails to perform or observe any of its other obligations under these
Conditions or the Noteholders' Representative Deed and (except in any case where, in
the opinion of the Noteholders' Representative, the failure is incapable of remedy
when no such continuation or notice as is hereinafter mentioned will be required) the
failure continues for the period of 30 days next following the service by the
Noteholders' Representative on the Issuer of notice requiring the same to be
remedied; or

(c) if (i) any Financial Indebtedness of the Issuer or any Material Subsidiary becomes
capable of being declared due and repayable prematurely by reason of an event of
default (however described); (ii) the Issuer or any Material Subsidiary fails to make
any payment in respect of any Financial Indebtedness on the due date for payment as
extended by any originally applicable grace period; (iii) any security given by the
Issuer or any Material Subsidiary for any Financial Indebtedness becomes
enforceable; or (iv) default is made by the Issuer or any Material Subsidiary in
making any payment due under any Guarantee given by it in relation to any Financial
Indebtedness of any other person; provided that no event described in this paragraph
shall constitute an Event of Default unless the amount of the relevant Financial
Indebtedness, either alone or when aggregated (without duplication) with all other
amounts of Financial Indebtedness (if any) in respect of the other events specified in
this paragraph which have occurred and are continuing, amounts to at least
U.S.$10,000,000 (or its equivalent in any other currency or currencies) and, in the
case of Foreign Relent Loans and Cash Development Loans any event described in
this paragraph shall only constitute an Event of Default (subject as provided above) in
the event that the Government of Pakistan has demanded payment of any such
Financial Indebtedness that is due and payable but unpaid (the Unpaid Sum) and the
Issuer or any Material Subsidiary shall have failed to pay such Unpaid Sum; or

(d) if the aggregate amount of final non-appealable unsatisfied judgments, orders or

arbitration awards against the Issuer and the Material Subsidiaries exceeds
U.S.$10,000,000 (or its equivalent in any other currency) and such judgments, orders
and/or arbitration awards are not discharged, satisfied and/or stayed within 60 days
or, if later, the date therein specified for payment;

(e) if any order is made by any competent court or resolution passed for the winding up
or dissolution of the Issuer or any Material Subsidiary, save for the purposes of
reorganisation on terms previously approved in writing by the Trustee or by an
Extraordinary Resolution; or

(f) if the Issuer or any Material Subsidiary ceases or threatens to cease to carry on the
whole or a substantial part of its business, save for the purposes of reorganisation on
terms previously approved in writing by the Trustee or by an Extraordinary
Resolution, or the Issuer or any Material Subsidiary stops or threatens to stop
payment of, or is unable to, or admits inability to, pay, its debts (or any class of its
debts) as they fall due, or is deemed unable to pay its debts pursuant to or for the
purposes of any applicable law, or is adjudicated or found bankrupt or insolvent; or

(g) if (i) proceedings are initiated against the Issuer or any Material Subsidiary under any
applicable liquidation, insolvency, composition, reorganisation or other similar laws,
or an application is made (or documents filed with a court) for the appointment of an
administrative or other receiver, manager, administrator or other similar official, or an

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 administrative or other receiver, manager, administrator or other similar official is
appointed, in relation to the Issuer or any Material Subsidiary or, as the case may be,
in relation to the whole or a substantial part of the undertaking or assets of any of
them, or an encumbrancer takes possession of the whole or a substantial part of the
undertaking or assets of any of them, or a distress, execution, attachment,
sequestration or other process is levied, enforced upon, sued out or put in force
against the whole or a substantial part of the undertaking or assets of any of them and
(ii) in any case (other than the appointment of an administrator) is not discharged
within 30 days; or

(h) if the Issuer or any Material Subsidiary initiates or consents to proceedings relating to
itself under any applicable liquidation, insolvency, composition, reorganisation or
other similar laws (including the obtaining of a moratorium) or makes a conveyance
or assignment for the benefit of, or enters into any composition or other arrangement
with, its creditors generally (or any class of its creditors) or any meeting is convened
to consider a proposal for an arrangement or composition with its creditors generally
(or any class of its creditors); or

(i) if any event occurs which, under the laws of any relevant jurisdiction, has or may
have, in the Trustee's opinion, an analogous effect to any of the events referred to in
paragraphs (e) to (h) above; or

(j) if all or a substantial part of the undertaking, assets and/or revenues of the Issuer or
any Material Subsidiary are or is condemned, seized, nationalised or otherwise
appropriated by any Person acting under the authority of any national, regional or
local government; or

(k) the validity of the Notes or the Noteholders' Representative Deed is contested by the
Issuer or the Issuer denies any of its obligations under the Notes or the Noteholders'
Representative Deed or it is or becomes unlawful for the Issuer to perform or comply
with any or all of its obligations under the Notes or the Noteholders' Representative
Deed or any of such obligations are or become unenforceable or invalid.

12. ENFORCEMENT

12.1 Enforcement by the Noteholders' Representative

The Noteholders' Representative may at any time, at its discretion and without notice, take
such proceedings and/or other steps or action (including lodging an appeal in any
proceedings) against or in relation to the Issuer as it may think fit to enforce the provisions of
the Noteholders' Representative Deed and the Notes or otherwise, but it shall not be bound to
take any such proceedings or other steps or action unless (a) it has been so directed by an
Extraordinary Resolution of the Noteholders or so requested in writing by the holders of at
least one-fifth in principal amount of the Notes then outstanding, and (b) it has been
indemnified and/or secured and/or pre-funded to its satisfaction.

12.2 Limitation on Noteholders' Representative actions

The Noteholders' Representative may refrain from taking any action in any jurisdiction if the
taking of such action in that jurisdiction would, in its opinion based upon legal advice in the
relevant jurisdiction, be contrary to any law of that jurisdiction. Furthermore, the Noteholders'

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 Representative may also refrain from taking such action if it would otherwise render it liable
to any person in that jurisdiction or if, in its opinion based upon such legal advice, it would
not have the power to do the relevant thing in that jurisdiction by virtue of any applicable law
in that jurisdiction or if it is determined by any court or other competent authority in that
jurisdiction that it does not have such power.

12.3 Enforcement by the Noteholders

No Noteholder shall be entitled to (i) take any steps or action against the Issuer to enforce the
performance of any of the provisions of the Noteholders' Representative Deed or the Notes or
(ii) take any other proceedings (including lodging an appeal in any proceedings) in respect of
or concerning the Issuer, in each case unless the Noteholders' Representative, having become
bound so to take any such action, steps or proceedings, (a) fails so to do within a reasonable
period or (b) is unable to do so by reason of an order of a court having competent jurisdiction,
and the failure or inability shall be continuing.

13. REPLACEMENT OF CERTIFICATES

If any Certificate is lost, stolen, mutilated, defaced or destroyed it may be replaced at the
specified office of the Registrar upon payment by the claimant of such costs and expenses as
may be incurred in connection therewith and on such terms as to evidence and indemnity as
the Issuer may reasonably require. Mutilated or defaced Certificates must be surrendered
before replacements will be issued.

14. NOTICES

14.1 Notices to the Noteholders

All notices to the Noteholders will be deemed to be validly given if sent by first class mail or
(if posted to an address overseas) by airmail to the holders (or the first of any joint named
holders) at their respective addresses in the register of Noteholders maintained by the
Registrar. The Issuer shall also ensure that notices are duly given or published in a manner
which complies with the rules and regulations of any stock exchange or other relevant
authority on which the Notes are for the time being listed. Any such notice will be deemed to
have been given on the fourth day after being so mailed or on the date of the first publication
or, where required to be published in more than one newspaper, on the date of the first
publication in all required newspapers.

14.2 Notices from the Noteholders

Notices to be given by any Noteholder shall be in writing and given by lodging the same,
together with the relative Certificate, with the Registrar or, if the Certificates are held in a
clearing system, may be given through the clearing system in accordance with its standard
rules and procedures.

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15. MEETINGS OF NOTEHOLDERS, MODIFICATION, WAIVER, AUTHORISATION
AND DETERMINATION

15.1 Meetings of Noteholders

The Noteholders' Representative Deed contains provisions for convening meetings of the
Noteholders to consider any matter affecting their interests, including the sanctioning by
Extraordinary Resolution of a modification of the Notes or any of the provisions of the
Conditions, the Noteholders' Representative Deed or the Agency Agreement. The quorum at
any meeting for passing an Extraordinary Resolution is one or more persons holding or
representing not less than 50 per cent. in principal amount of the Notes for the time being
outstanding, or at any adjourned such meeting one or more persons holding or representing
whatever the principal amount of the Notes held or represented by him or them, except that, at
any meeting the business of which includes any matter defined in the Noteholders'
Representative Deed as a Basic Terms Modification, including the modification of certain of
the provisions of these Conditions and certain of the provisions of the Noteholders'
Representative Deed (including the date of maturity of the Notes or any date for payment of
interest thereon, reducing or cancelling the amount of principal or the rate of interest payable
in respect of the Notes or altering the currency of payment of the Notes), the necessary
quorum for passing an Extraordinary Resolution will be one or more persons holding or
representing not less than two-thirds, or at any adjourned such meeting not less than
one-third, of the principal amount of the Notes for the time being outstanding. The
Noteholders' Representative Deed provides that (i) a resolution passed at a meeting duly
convened and held in accordance with the Noteholders' Representative Deed by a majority
consisting of not less than three-fourths of the votes cast on such resolution, (ii) a resolution
in writing signed by or on behalf of the holders of not less than three-fourths in principal
amount of the Notes for the time being outstanding or (iii) consent given by way of electronic
consents through the relevant clearing system(s) (in a form satisfactory to the Noteholders'
Representative) by or on behalf of the holders of not less than three-fourths in principal
amount of the Notes for the time being outstanding, shall, in each case, be effective as an
Extraordinary Resolution of the Noteholders. An Extraordinary Resolution passed by the
Noteholders will be binding on all Noteholders, whether or not they are present at any
meeting and whether or not they voted on the resolution.

15.2 Modification, Waiver, Authorisation and Determination

The Noteholders' Representative may agree, without the consent of the Noteholders (i) to any
modification of, or to the waiver or authorisation of any breach or proposed breach of, any of
these Conditions or any of the provisions of the Noteholders' Representative Deed or the
Agency Agreement, or determine, without any such consent as aforesaid, that any Event of
Default or Potential Event of Default (as defined in the Noteholders' Representative Deed)
shall not be treated as such (provided that, in any such case, it is not, in the opinion of the
Noteholders' Representative, materially prejudicial to the interests of the Noteholders), or (ii)
to any modification which, in its opinion, is of a formal, minor or technical nature or to
correct a manifest error.

15.3 Noteholders' Representative to have Regard to Interests of Noteholders as a Class

In connection with the exercise by it of any of its trusts, powers, authorities and discretions
(including, without limitation, any modification, waiver, authorisation determination or
substitution), the Noteholders' Representative shall have regard to the general interests of the

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 Noteholders as a class but shall not have regard to any interests arising from circumstances
particular to individual Noteholders (whatever their number) and, in particular but without
limitation, shall not have regard to the consequences of any such exercise for individual
Noteholders (whatever their number) resulting from their being for any purpose domiciled or
resident in, or otherwise connected with, or subject to the jurisdiction of, any particular
territory or any political sub-division thereof and the Noteholders' Representative shall not be
entitled to require, nor shall any Noteholder be entitled to claim, from the Issuer, the
Noteholders' Representative or any other person any indemnification or payment in respect of
any tax consequence of any such exercise upon individual Noteholders except to the extent
already provided for in Condition 9 (Taxation) and/or any undertaking given in addition to, or
in substitution for, Condition 9 (Taxation) pursuant to the Noteholders' Representative Deed.

15.4 Notification to the Noteholders

Any modification, abrogation, waiver, authorisation, determination or substitution shall be

binding on the Noteholders and, unless the Noteholders' Representative agrees otherwise, any
modification or substitution shall be notified by the Issuer to the Noteholders as soon as
practicable thereafter in accordance with Condition 14 (Notices).

16. INDEMNIFICATION AND PROTECTION OF THE NOTEHOLDERS'

REPRESENTATIVE AND ITS CONTRACTING WITH THE ISSUER

16.1 Indemnification and protection of the Noteholders' Representative

The Noteholders' Representative Deed contains provisions for the indemnification of the
Noteholders' Representative and for its relief from responsibility and liability towards the
Issuer and the Noteholders, including (i) provisions relieving it from taking action unless
indemnified and/or secured and/or pre-funded to its satisfaction and (ii) provisions limiting or
excluding its liability in certain circumstances. The Noteholders' Representative Deed
provides that, when determining whether an indemnity or any security or pre-funding is
satisfactory to it, the Noteholders' Representative shall be entitled (i) to evaluate its risk in any
given circumstance by considering the worst-case scenario and (ii) to require that any
indemnity or security given to it by the Noteholders or any of them be given on a joint and
several basis and be supported by evidence satisfactory to it as to the financial standing and
creditworthiness of each counterparty and/or as to the value of the security and an opinion as
to the capacity, power and authority of each counterparty and/or the validity and effectiveness
of the security.

16.2 Noteholders' Representative Contracting with the Issuer

The Noteholders' Representative Deed also contains provisions pursuant to which the
Noteholders' Representative is entitled, inter alia, (i) to enter into business transactions with
the Issuer and/or any of the Issuer's Subsidiaries and to act as Noteholders' Representative for
the holders of any other securities issued or guaranteed by, or relating to, the Issuer and/or
any of the Issuer's Subsidiaries, (ii) to exercise and enforce its rights, comply with its
obligations and perform its duties under or in relation to any such transactions or, as the case
may be, any such trusteeship without regard to the interests of, or consequences for, the
Noteholders, and (iii) to retain and not be liable to account for any profit made or any other
amount or benefit received thereby or in connection therewith.

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17. FURTHER ISSUES

The Issuer shall be at liberty from time to time without the consent of the Noteholders to
create and issue further notes, having terms and conditions the same as the Notes, or the same
in all respects save for the amount and date of the first payment of interest thereon and the
date from which interest starts to accrue and so that the same shall be consolidated and form a
single series with the outstanding Notes. Any further notes or bonds which are to form a
single series with the outstanding notes or bonds of any series (including the Notes)
constituted by the Noteholders' Representative Deed or any supplemental deed shall, and any
other further notes or bonds may (with the consent of the Noteholders' Representative), be
constituted by a deed supplemental to the Noteholders' Representative Deed. The
Noteholders' Representative Deed contains provisions for convening a single meeting of the
Noteholders and the holders of notes or bonds of other series in certain circumstances where
the Noteholders' Representative so decides.

18. GOVERNING LAW AND SUBMISSION TO JURISDICTION(19A)

18.1 Governing Law

The Noteholders' Representative Deed and the Notes and any non-contractual obligations
arising out of or in connection with the Noteholders' Representative Deed and the Notes are
governed by, and construed in accordance with, English law.

18.2 Submission to Jurisdiction

(a) Subject to Condition 18.2(c) below, the English courts have exclusive jurisdiction to settle
any dispute arising out of or in connection with the Noteholders' Representative Deed or the
Notes including any dispute as to their existence, validity, interpretation, performance, breach
or termination or the consequences of their nullity and any dispute relating to any non-
contractual obligations arising out of or in connection with the Noteholders' Representative
Deed or the Notes (a Dispute) and, each of the Issuer, the Noteholders' Representative and
any Noteholders in relation to any Dispute submits to the exclusive jurisdiction of the English
courts.

(b) For the purposes of this Condition, the Issuer waives any objection to the English courts on
the grounds that they are an inconvenient or inappropriate forum to settle any Dispute.

(c) To the extent allowed by law, the Noteholders' Representative and the Noteholders may, in
respect of any Dispute or Disputes, take (i) proceedings in any other court with jurisdiction
and (ii) concurrent proceedings in any number of jurisdictions.

18.3 Appointment of Process Agent

The Issuer irrevocably appoints Law Debenture Corporate Services Limited at 8th Floor, 100
Bishopsgate, London, EC2N 4AG, United Kingdom as its agent for service of process in any
proceedings before the English courts in relation to any Dispute and agrees that, in the event
of Law Debenture Corporate Services Limited being unable or unwilling for any reason so to
act, it will immediately appoint another person as its agent for service of process in England
in respect of any Dispute. The Issuer agrees that failure by a process agent to notify it of any
process will not invalidate service. Nothing in this Condition shall affect the right to serve
process in any other manner permitted by law.

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18.4 Waiver of Immunity

The Issuer irrevocably and unconditionally with respect to any Dispute (i) waives any right to
claim sovereign or other immunity from jurisdiction, recognition or enforcement and any
similar argument in any jurisdiction, (ii) submits to the jurisdiction of the English courts and
the courts of any other jurisdiction in relation to the recognition of any judgment or order of
the English courts or the courts of any competent jurisdiction in relation to any Dispute and
(iii) consents to the giving of any relief (whether by way of injunction, attachment, specific
performance or other relief) or the issue of any related process, in any jurisdiction, whether
before or after final judgment including, without limitation, the making, enforcement or
execution against any property whatsoever (irrespective of its use or intended use) of any
order or judgment made or given in connection with any Dispute.

18.5 Other Documents

The Issuer has in the Agency Agreement and the Noteholders' Representative Deed submitted
to the jurisdiction of the English courts and appointed an agent in England for service of
process, in terms substantially similar to those set out above. In addition, the Issuer has, in
such documents, waived any rights to sovereign immunity and other similar defences which it
may have.

19. RIGHTS OF THIRD PARTIES

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999
to enforce any term of this Note, but this does not affect any right or remedy of any person
which exists or is available apart from that Act.

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 GLOBAL CERTIFICATE
The Global Certificate contains the following provisions which apply to the Notes in respect of which
it is issued whilst they are represented by the Global Certificate, some of which modify the effect of
the Conditions. Unless otherwise defined, terms defined in the Conditions have the same meaning in
paragraphs 1 to 7.

1. Account Holders
For so long as any of the Notes are evidenced by the Global Certificate, each person (other than
another clearing system) who is for the time being shown in the records of Euroclear or Clearstream,
Luxembourg (as the case may be) as the holder of a particular aggregate principal amount of the
Notes (each an Accountholder) (in which regard any certificate or other document issued by
Euroclear or Clearstream, Luxembourg (as the case may be) as to the aggregate principal amount of
such Notes standing to the account of any person shall be conclusive and binding for all purposes save
in the case of manifest error) shall be treated as the holder of such aggregate principal amount of such
Notes (and the expression "Noteholders" and references to "holding of Notes" and to "holder of
Notes" shall be construed accordingly) (the Accountholder's Holding) for all purposes other than
with respect to payments on such Notes, for which purpose the Registered Holder shall be deemed to
be the holder of such aggregate principal amount of the Notes in accordance with and subject to the
terms of the Global Certificate. Each Accountholder must look solely to Euroclear or Clearstream,
Luxembourg, as the case may be, for its share of each payment made to the Registered Holder.

2. Cancellation
Cancellation of any Note following its redemption or purchase by the Issuer or any of its Subsidiaries
will be effected by reduction in the aggregate principal amount of the Notes in the register of
Noteholders.

3. Payments
For so long as the Registered Holder is shown in the Register as the holder of the Notes evidenced by
the Global Certificate, the Registered Holder shall (subject as set out above under 'Accountholders') in
all respects be entitled to the benefit of such Notes and shall be entitled to the benefit of the Agency
Agreement. Payments of all amounts payable under the Conditions in respect of the Notes as
evidenced by this Global Certificate will be made to the Registered Holder pursuant to the Conditions.
Distributions of amounts with respect to book-entry interests in the Notes held through Euroclear or
Clearstream, Luxembourg will be credited, to the extent received by the Principal Paying Agent, to
the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the
relevant system's rules and procedures.

Upon any payment of any amount payable under the Conditions the amount so paid shall be entered
by the Registrar on the register, which entry shall constitute prima facie evidence that the payment has
been made.
For the purposes of Condition 7.1 (Payments in respect of Notes), so long as the Notes as evidenced
by the Global Certificate are held on behalf of Euroclear and/or Clearstream, Luxembourg, the record
date in respect of the Notes shall be the close of the business day (being for this purpose a day on
which Euroclear and Clearstream, Luxembourg are open for business) before the relevant due date.

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4. Interest Calculation
For so long as Notes are evidenced by the Global Certificate, interest payable to the Registered Holder
will be calculated by applying the rate of 7.500 per cent. per annum to the outstanding principal
amount of the Notes evidenced by the Global Certificate and on the basis of a 360-day year consisting
of 12 months of 30 days each and, in the case of an incomplete month, the number of days elapsed on
the basis of a month of 30 days. The resultant figure is rounded to the nearest cent (half a cent being
round upwards).

5. Notices
So long as the Notes are evidenced by the Global Certificate and such Global Certificate is held on
behalf of a clearing system, notices to Noteholders may be given by delivery of the relevant notice to
that clearing system for communication by it to entitled Accountholders in substitution for notification
as required by Condition 14 (Notices) provided that, so long as the Notes are listed on any stock
exchange notices shall also be published in accordance with the rules of such exchange. Any such
notice shall be deemed to have been given to the Noteholders on the day on which such notice is
delivered to such clearing system.
Whilst any of the Notes are evidenced by the Global Certificate, notices to be given by such
Noteholder may be given by such Noteholder (where applicable) through the applicable clearing
system's operational procedures approved for this purpose and otherwise in such manner as the
Principal Paying Agent and the applicable clearing system may approve for this purpose.

6. Exchange and Registration of Title

The Global Certificate will be exchangeable (free of charge to the holder) in whole but not in part for
Certificates only upon the occurrence of an Exchange Event. An Exchange Event means that:

(a) an Event of Default (as defined in Condition 11 (Events of Default)) has occurred and is
continuing; or

(b) the Issuer has been notified by that both Euroclear or Clearstream, Luxembourg have been
closed for business for a continuous period of 14 days (other than by reason of holiday,
statutory or otherwise) or have announced an intention permanently to cease business or have
in fact done so and no successor clearing system is available; or

(c) the Issuer has or will become subject to adverse tax consequences which would not be
suffered were the Notes evidenced by the Global Certificate in definitive form.
The Issuer will promptly give notice to the Noteholders in accordance with Condition 14 (Notices) if
an Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or
Clearstream, Luxembourg, as the case may be, acting on the instructions of any Accountholder may
give notice to the Registrar requesting exchange and, in the event of the occurrence of an Exchange
Event as described in (c) above, the Issuer may also give notice to the Registrar requesting exchange.
Any exchange shall occur no later than ten days after the date of receipt of the first relevant notice by
the Registrar.
Exchanges will be made upon presentation of the Global Certificate at the office of the Registrar by or
on behalf of the Registered Holder on any day on which banks are open for general business in the
city in which the Registrar has its specified office and will be effected by the Registrar (a) entering
each Accountholder in the Register as the registered holder of the principal amount of Notes equal to
such Accountholder's Holding (as defined below) and (b) completing, authenticating and dispatching
to each Accountholder a Certificate evidencing such Accountholder's Holding. The aggregate

127
principal amount of the Notes evidenced by Certificates issued upon an exchange of the Global
Certificate will be equal to the aggregate outstanding principal amount of the Notes evidenced by the
Global Certificate.
The Registrar will not register title to the Notes in a name other than that of a nominee for the
common depositary for a period of fifteen calendar days preceding the due date for any payment of
principal or interest in respect of the Notes.

7. Transfers
Transfers of book-entry interests in the Notes will be effected through the records of Euroclear and/or
Clearstream, Luxembourg and their respective participants in accordance with the rules and
procedures of Euroclear and/or Clearstream, Luxembourg and their respective direct and indirect
participants.

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 TAXATION
Pakistani Taxation
General
This summary of the principal Pakistani tax consequences of holding the Notes is only included as
guidance and does not constitute tax advice. Prospective investors should consult their own advisers
with regard to their potential tax liabilities resulting from an investment in the Notes.
In addition, this summary only addresses the tax consequences to non-residents holding the Notes as
capital assets, and does not address the tax consequences which may be relevant to other classes of
non-resident holders.
The summary is based on present Pakistani tax laws and practices.
Tax on interest payments
Clause 75 of the Second Schedule to the Income Tax Ordinance (2001) exempts from income tax any
income of an agency of a foreign Government, a foreign national (company, firm or association of
persons), or any other non-resident person approved by the Federal Government for the purposes of
this clause, from profit on moneys borrowed under a loan agreement or in respect of a foreign
currency instrument approved by the Federal Government.
The Notes have been approved on 7 April 2021 by the Revenue Division, Federal Board of Revenue,
for the purposes of Clause 75 of Part I of the Second Schedule of the Income Tax Ordinance.
Withholding tax
Payments by the Issuer of interest and principal under the Notes shall not be subject to any
withholding or deduction for any taxes under the laws of Pakistan.
Stamp Duty
The Issuer has undertaken to bear the liability for stamp duty in respect of the Notes, inter alia, in
Pakistan. Under the Stamp Act 1899, where the Issuer assumes liability for stamp duty, the instrument
to which such assumption relates is exempt from duty.
Stamp Duty on any transfer of the Notes
Under the Stamp Act 1899, any transfer of the Notes outside Pakistan would not give rise to liability
to pay stamp duty in Pakistan provided that the Notes so transferred or any instrument of transfer
related thereto are not executed or brought into Pakistan.

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 SUBSCRIPTION AND SALE
Under the terms and conditions contained in a Subscription Agreement (the Subscription
Agreement) dated 2 June 2021 between the Issuer, J.P. Morgan Securities plc, Standard Chartered
Bank and Deutsche Bank Aktiengesellschaft (the Joint Bookrunners), the Issuer has agreed to issue
and sell to the Joint Bookrunners U.S.$500,000,000 in aggregate principal amount of the Notes and,
subject to certain conditions, the Managers have jointly and severally agreed to subscribe for the
Notes.
The Subscription Agreement provides that the obligations of the Joint Bookrunners to pay for and
accept delivery of the Notes are subject to the approval of certain legal matters by their counsel and
certain other conditions. Pursuant to the Subscription Agreement, the Joint Bookrunners will be paid
certain commissions in respect of their services for managing the issue and sale of the Notes. The
Joint Bookrunners will also be reimbursed in respect of certain of their expenses, and the Issuer has
agreed to indemnify the Joint Bookrunners, together with Habib Bank Limited (the Co-Manager, and
together with the Joint Bookrunners, the Managers) against certain liabilities incurred in connection
with the issue, offer and sale of the Notes.
In addition, in the ordinary course of their business activities, the Managers and their affiliates may
make or hold a broad array of investments and actively trade debt and equity securities (or related
derivative securities) and financial instruments (including bank loans) for their own account and for
the accounts of their customers. Such investments and securities activities may involve securities
and/or instruments of the Issuer or the Issuer's affiliates. Certain of the Managers or their affiliates that
have a lending relationship with the Issuer routinely hedge their credit exposure to the Issuer
consistent with their customary risk management policies. Typically, such Managers and their
affiliates would hedge such exposure by entering into transactions which consist of either the
purchase of credit default swaps or the creation of short positions in securities, including potentially
the Notes. Any such short positions could adversely affect future trading prices of the Notes. The
Managers and their affiliates may also make investment recommendations and/or publish or express
independent research views in respect of such securities or financial instruments and may hold, or
recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Selling Restrictions

United States
The Notes have not been and will not be registered under the Securities Act, or the securities laws of
any state or other jurisdiction of the United States, and may not be offered or sold within the United
States except in certain transactions exempt from or not subject to, the registration requirements of the
Securities Act. Each Manager has represented, warranted and agreed that it has not offered or sold,
and that it will not offer or sell, any Notes as part of its distribution at any time within the United
States except in accordance with Regulation S of the Securities Act. Terms used in this paragraph
have the meanings given to them by Regulation S.
Until 40 days after the commencement of the offering of the Notes, an offer or sale of Notes within
the United States by any dealer that is not participating in the offering of the Notes may violate the
registration requirements of the Securities Act if such offer or sale is made otherwise than in
accordance with an available exemption from registration under the Securities Act.
Prohibition of Sales to EEA Retail Investors

Each Manager has represented and agreed that it has not offered, sold or otherwise made available and
will not offer, sell or otherwise make available any Notes to any retail investor in the EEA. For the

130
purposes of this provision, the expression retail investor means a person who is one (or more) of the
following:

(i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or

(ii) a customer within the meaning of the Insurance Distribution Directive, where that customer
would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.
United Kingdom
Prohibition of Sales to UK Retail Investors
Each Manager has represented and agreed that it has not offered, sold or otherwise made available and
will not offer, sell or otherwise make available any Notes to any retail investor in the UK. For the
purposes of this provision, the expression retail investor means a person who is one (or more) of the
following:

(i) a retail client as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms
part of domestic law by virtue of the EUWA; or

(ii) a customer within the meaning of the FSMA and any rules or regulations made under the
FSMA to implement the Insurance Distribution Directive, where that customer would not
qualify as a professional client as defined in point (8) of Article 2(1) of UK MiFIR.
Other Regulatory Restrictions
Each Manager has represented, warranted and agreed that:

(a) it has only communicated or caused to be communicated and will only communicate or cause
to be communicated any invitation or inducement to engage in investment activity (within the
meaning of section 21 of the FSMA received by it in connection with the issue or sale of any
Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and

(b) it has complied and will comply with all applicable provisions of the FSMA with respect to
anything done by it in relation to the Notes in, from or otherwise involving the United
Kingdom.

Pakistan

Each Manager has represented, warranted and agreed that the Notes or interests therein will not be
offered, sold or transferred directly or indirectly in Pakistan, to residents of Pakistan, or to, or for the
account or benefit of, such persons. The SBP confirmed on 28 April 2021 that nonresident Pakistani
citizens are free to purchase the Notes and to transfer the Notes to other nonresident persons, subject,
in each case, to the condition that the purchase price is paid in convertible foreign currency outside
Pakistan.

The United Arab Emirates (excluding the Dubai International Financial Centre and the Abu
Dhabi Global Market)
Each has represented, warranted and agreed that the Notes have not been and will not be offered, sold
or publicly promoted or advertised by it in the United Arab Emirates (excluding the Dubai
International Financial Centre and the Abu Dhabi Global Market) other than in compliance with any
laws applicable in the United Arab Emirates governing the issue, offering and sale of securities.

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Dubai International Financial Centre

Each Manager has represented, warranted and agreed that it has not offered and will not offer the
Notes to any person in the Dubai International Financial Centre unless such offer is:
(a) an "Exempt Offer" in accordance with the Markets Rules (MKT) Module of the Dubai
Financial Services Authority (the DFSA) rulebook; and
(b) made only to persons who meet the Professional Client criteria set out in Rule 2.3.3 of the
Conduct of Business Module of the DFSA rulebook.

Abu Dhabi Global Market

Each Manager has represented, warranted and agreed that it has not offered and will not offer the
Notes to any person in the Abu Dhabi Global Market unless such offer is:
(c) an "Exempt Offer" in accordance with the Markets Rules (MKT) Module of the Financial
Services Regulatory Authority (the FSRA) rulebook; and
(d) made only to persons who meet the Professional Client criteria set out in Rule 2.4.1 of the
Conduct of Business Module of the FSRA rulebook.

Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Act
of Japan (Act No. 25 of 1948, as amended; the FIEA) and each Manager has represented and agreed
that it will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any
resident of Japan (as defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and
Foreign Trade Act (Act No. 228 of 1949, as amended)), or to others for re-offering or resale, directly
or indirectly, in Japan or to, or for the benefit of, a resident of Japan except pursuant to an exemption
from the registration requirements of, and otherwise in compliance with, the FIEA and any other
applicable laws, regulations and ministerial guidelines of Japan.

Hong Kong

Each Manager has represented, warranted and agreed that:

(a) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document,
any Notes other than (a) to "professional investors" as defined in the Securities and Futures
Ordinance (Cap. 571) of Hong Kong (the Securities and Futures Ordinance) and any rules
made under the Securities and Futures Ordinance; or (b) in other circumstances which do not
result in the document being a "prospectus" as defined in the Companies Ordinance (Winding
Up and Miscellaneous Provisions) (Cap. 32) of Hong Kong (the C(WUMP)O) or which do
not constitute an offer to the public within the meaning of the C(WUMP)O; and

(b) it has not issued or had in its possession for the purposes of issue, and will not issue or have in
its possession for the purposes of issue, in each case whether in Hong Kong or elsewhere, any
advertisement, invitation or document relating to the Notes, which is directed at, or the
contents of which are likely to be accessed or read by, the public in Hong Kong (except if
permitted to do so under the securities laws of Hong Kong) other than with respect to any
Notes which are or are intended to be disposed of only to persons outside Hong Kong or only
to "professional investors" as defined in the Securities and Futures Ordinance and any rules
made under the Securities and Futures Ordinance.
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Singapore
Each Manager has acknowledged that the Offering Circular has not been and will not be registered as
a prospectus with the Monetary Authority of Singapore (the MAS). Accordingly, each Manager has
represented, warranted and agreed that it has not offered or sold any Notes or caused such Notes to be
made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or
cause the Notes to be made the subject of an invitation for subscription or purchase, and has not
circulated or distributed, nor will it circulate or distribute, this Offering Circular or any other
document or material in connection with the offer or sale, or invitation for subscription or purchase, of
the Notes, whether directly or indirectly, to any person in Singapore other than (i) to an institutional
investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as
modified or amended from time to time (the SFA)) pursuant to Section 274 of the SFA; (ii) to a
relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or
any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified
in Section 275 of the SFA; or (iii) otherwise pursuant to, and in accordance with the conditions of,
any other applicable provision of the SFA.
Where Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the
sole business of which is to hold investments and the entire share capital of which is owned
by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold
investments and each beneficiary of the trust is an individual who is an accredited investor,
securities or securities-based derivative contracts (each term as defined in Section 2(1) of the SFA) of
that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be
transferred within six months after that corporation or that trust has acquired the Notes pursuant to an
offer made under Section 275 of the SFA except:

(i) to an institutional investor or to a relevant person, or to any person arising from an offer
referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(ii) where no consideration is or will be given for the transfer;

(iii) where the transfer is by operation of law;

(iv) as specified in Section 276(7) of the SFA; or

(v) as specified in Regulation 37A of the Securities and Futures (Offer of Investments) (Securities
and Securities-based Derivatives Contracts) Regulations 2018 of Singapore.
Notification under Section 309B(1)(c) of the SFA – In connection with Section 309B of the SFA
and the CMP Regulations 2018, the Issuer has determined the classification of the Notes as prescribed
capital markets products (as defined in the CMP Regulations 2018) and Excluded Investment
Products (as defined in the MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and
the MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

Kingdom of Saudi Arabia

No action has been or will be taken in the Kingdom of Saudi Arabia that would permit a public
offering of the Notes. Any investor in the Kingdom of Saudi Arabia or who is a Saudi person (a Saudi

133
Investor) who acquires any Notes pursuant to an offering should note that the offer of Notes is a
private placement under Article 9 or Article 10 of the "Rules on the Offer of Securities and
Continuing Obligations" as issued by the Board of the Capital Market Authority of Saudi Arabia (the
CMA) resolution number 3-123-2017 dated 27 December 2017, as amended by CMA resolution
number 1-7-2021 dated 14 January 2021 (the KSA Regulations), made through an authorised person
licensed to carry out arranging activities by the CMA and following a notification to the CMA under
Article 11 of the KSA Regulations.

The Notes may thus not be advertised, offered or sold to any person in the Kingdom of Saudi Arabia
other than to "Sophisticated Investors" under Article 9 of the KSA Regulations or by way of a limited
offer under Article 10 of the KSA Regulations. Each Manager has represented and agreed that any
offer of Notes by it to a Saudi Investor will be made in compliance with Article 9 or Article 10 of the
KSA Regulations.

Each offer of Notes shall not therefore constitute a "public offer", an "exempt offer" or a "parallel
market offer" pursuant to the KSA Regulations but is subject to the restrictions on secondary market
activity under Article 15 of the KSA Regulations. Any Saudi Investor who has acquired Notes
pursuant to a private placement under Article 9 or Article 10 of the KSA Regulations may not offer or
sell those Notes to any person unless the offer or sale is made through an authorised person
appropriately licensed by the CMA and (a) the Notes are offered or sold to a Sophisticated Investor
(as defined in Article 9 of the KSA Regulations); (b) the price to be paid for the Notes in any one
transaction is equal to or exceeds Saudi Riyals 1 million or an equivalent amount; or (c) the offer or
sale is otherwise in compliance with Article 15 of the KSA Regulations.

General
Each Manager has represented, warranted and agreed that it will (to the best of its knowledge and
belief) comply with all applicable securities laws and regulations in force in any jurisdiction in which
it purchases, offers, sells or delivers the Notes or possesses or distributes this Offering Circular and
will obtain any consent, approval or permission required by it for the purchase, offer, sale or delivery
by it of the Notes under the laws and regulations in force in any jurisdiction to which it is subject or in
which it makes such purchases, offers, sales or deliveries and none of the Issuer and any other
Manager shall have any responsibility therefor.
None of the Issuer and the Managers represents that the Notes may at any time lawfully be sold in
compliance with any applicable registration or other requirements in any jurisdiction, or pursuant to
any exemption available thereunder, or assumes any responsibility for facilitating any such sale.
Persons into whose possession this Offering Circular or any Notes may come must inform themselves
about, and observe any applicable restrictions on the distribution of this Offering Circular and the
offering and sale of the Notes.

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 GENERAL INFORMATION

Authorisation
The Issuer has obtained all necessary consents, approvals, exemptions and authorisations under the
laws of the Islamic Republic of Pakistan in connection with the issue and performance of the Notes.
Pursuant to Rule 16(1)(d) and 17(1)(c) of the Rules of Business 1973, as amended, the issue of the
Notes was approved by the Economic Coordination Committee of the Cabinet Division of
Government on 24 December 2020, as ratified by the Cabinet Division on 29 December 2020, and the
Ministry of Water Resources on 15 March 2021.

Listing
An application has been made to the London Stock Exchange for the Certificates to be admitted to
trading on the ISM. The ISM is not a UK regulated market within the meaning of UK MiFIR. The
ISM is a market designated for professional investors. Notes admitted to trading on the ISM are not
admitted to the Official List of the United Kingdom Listing Authority. The London Stock Exchange
has not approved or verified the contents of this Offering Circular. Such admission to trading is
expected to be effective on or immediately following the Closing Date.

Documents Available
For so long as the Notes remain outstanding, copies (and English translations where the documents in
question are not in English) of the following documents will, when published, be available for
inspection at the specified office of the Principal Paying Agent during normal business hours on any
weekday (excluding Saturdays, Sundays and public holidays):

(a) a copy of the constitutional documents of the Issuer;

(b) the Noteholders' Representative Deed and the Agency Agreement;

(c) this Offering Circular and any supplement(s) thereto; and

(d) the Annual Financial Statements.

However, if the relevant Agent is not able to make available for inspection at its specified office such
documents by events beyond its reasonable control, the relevant Agent may provide such documents
to a Noteholder electronically, subject to such Noteholder being able to provide evidence satisfactory
to the Issuer and the relevant Agent as to its holding and identity.

Clearing Systems
The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg (which
are the entities in charge of keeping the records). The ISIN for the Notes is XS2348591707. The
Common Code for the Notes is 234859170.
The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels,
Belgium and the address of Clearstream, Luxembourg is Clearstream Banking S.A., 42 Avenue JF
Kennedy, L-1855 Luxembourg.

Post-issuance information
If and for so long as the Notes are admitted to trading on the ISM or any other stock exchange, the
Issuer intends to comply with its continuing obligations pursuant to the ISM Rulebook or such other

135
applicable rules. Otherwise, the Issuer does not intend to provide post-issuance information in
connection with this issue.

Significant or Material Change

There has been no significant adverse change in the financial performance or position of the Issuer
since 30 June 2020 and there has been no material adverse change in the prospects of the Issuer since
30 June 2020.

Litigation
The Issuer is not or has not been involved in any governmental, legal or arbitration proceedings
(including any such proceedings which are pending or threatened of which the Issuer is aware) in the
12 months preceding the date of this Offering Circular which may have or have in such period had a
significant effect on the financial position or profitability of the Issuer as of the date of this Offering
Circular.

Independent Auditors
The Annual Financial Statements have been audited by EY in accordance with ISA as applicable in
Pakistan. EY is an audit firm authorised by the local authority in Pakistan.
EY is located at 96-B-1, 4th Floor, Pace Mall Building, M.M. Alam Road, Gulberg-II, PO Box 104,
Lahore - 54660.
EY has issued an unqualified audit opinion on the 2020 Financial Statements and an unqualified audit
opinion on the 2019 Financial Statements, as stated in their respective reports included elsewhere in
the document.

136
 INDEX TO FINANCIAL STATEMENTS

Financial Statements as of and for the Year Ended 30 June 2020

Report on the Audit of the Financial Statements.................................................. F-2
Statement of Financial Position............................................................................ F-4
Statement of Profit or Loss ................................................................................... F-5
Statement of Comprehensive Income................................................................... F-6
Statement of Changes in Equity ........................................................................... F-7
Statement of Cash Flows ...................................................................................... F-8
Notes to Financial Statements .............................................................................. F-10

Financial Statements as of and for the Year Ended 30 June 2019

Report on the Audit of the Financial Statements.................................................. F-61
Statement of Financial Position............................................................................ F-63
Statement of Profit or Loss ................................................................................... F-64
Statement of Comprehensive Income................................................................... F-65
Statement of Changes in Equity ........................................................................... F-66
Statement of Cash Flows ...................................................................................... F-67
Notes to Financial Statements .............................................................................. F-69

F-1
EY Ford Rhodes Tel: +9242 3577 8402-11
Chartered Accountants Fax:+9242 3577 8412-13
96-B-I, 4th Floor, Pace Mall Building ey.lhr@pk.ey.com
M. M. Alam Road, Gulberg-II ey.com/pk
P.O. Box 104, Lahore-54660

F-2


F-3
F-4
F-5
F-6
F-7
PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020

2020 2019
Operating activities Note ------------------- PKR '000' -------------------

Profit for the year before net movements in

regulatory deferral account debit balances 5,470,705 7,948,693

Adjustments to reconcile profit for the year before net movements

in regulatory deferral account debit balances to net cash flows:

Depreciation of operating fixed assets 5.1.1 7,642,768 7,655,469

Finance and other costs 27 32,421,494 38,294,563
Sukuk III Ijarah rentals 25 1,780,126 1,834,072
Provision of employee retirement and other benefits 17.1 8,885,942 6,356,906
Income from financial assets 28.1 (2,673,440) (4,460,407)
Gain on disposal of operating fixed assets 28.2 (9,324) (104,867)
Amortization of deferred grants 28.2 (246,283) (319,471)
47,801,283 49,256,265
53,271,988 57,204,958
Working capital adjustments:

(Increase) / decrease in current assets:

Stores, spare and loose tools (652,533) (425,773)
Receivable from the customer against sale of electricity (37,437,658) (35,665,693)
Receivable from the customer against hydel levies 10,172,428 (35,414,460)
Advances 317,991 (1,467,421)
Prepayments 6,920 10,678
Other receivables (3,773,652) (1,689,364)

(Decrease) / increase in current liabilities:

Trade and other payables (1,224,583) (2,739,730)
Payable against hydel levies 22,820,889 45,691,031
(9,770,198) (31,700,732)
Net cash flows from operations 43,501,790 25,504,226

Payment of Sukuk III Ijarah rentals (1,780,126) (1,834,072)

Long term loans, advances and deposits given (1,663,916) (136,189)
Payment of employee retirement and other benefits 17 (3,102,547) (2,736,655)
(6,546,589) (4,706,916)
Net cash flows from operating activities 36,955,201 20,797,310

Investing activities

Purchase of operating fixed assets and capital stores (1,365,877) (2,465,341)

Capital expenditure incurred on capital work in progress (89,387,547) (42,100,698)
Proceeds from sale of operating fixed assets 9,324 107,841
Short term investments made during the year - (46,000,000)
Short term investments realized during the year 3,000,000 74,000,000
Interest and other income received 2,119,333 4,291,692
Grants received 16 71,740,293 24,298,519
Net cash flows (used in) / from investing activities (13,884,474) 12,132,013

F-8 Page 5 of 57
F-9
PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020

1. LEGAL STATUS AND OPERATIONS

1.1 Pakistan Water and Power Development Authority (WAPDA) is a body corporate, created under the Pakistan
Water and Power Development Authority Act, 1958 (West Pakistan Act No. XXXI of 1958), commonly known
as WAPDA Act and is fully owned by the Government of Pakistan (GoP) through Ministry of Water and Power
(now Ministry of Water Resources). The registered office of WAPDA is situated at WAPDA House, Shahrah-e-
Quaid-e-Azam, Lahore, Pakistan.

The statutory mandate of WAPDA is to develop and utilize the water and power resources of Pakistan on a
unified and multipurpose basis. The mandate of WAPDA also included generation, transmission and
distribution of power and the construction, maintenance and operation of power houses and grids, till the year
1998. Thereafter, in line with the strategic plan approved by the GoP, WAPDA Power Wing was restructured
where by assets and liabilities relating to power distribution activities were transferred to 8 Distribution
Companies (DISCOs) on 01 July 1998, generation activities (other than hydel generation activities) were
transferred to 4 Generation Companies (GENCOs) and transmission activities were transferred to National
Transmission and Dispatch Company (NTDC) on 01 March 1999.

WAPDA decided to segregate the operation and development of hydel power generation activities (WAPDA
Hydroelectric - NEPRA regulated business) from its non core activities (non-regulated business) under
NEPRA Rules, 2009. The regulated business comprises activities purely related to the hydel power
generation and development.

These financial statements only represent the financial information of WAPDA Hydroelectric - NEPRA
regulated business (''WAPDA Hydroelectric'', ''Hydroelectric'' or ''the entity'') and have been prepared in
accordance with the accounting and financial reporting framework described in Note 2.2.

1.2 Generation license

National Electric Power Regulatory Authority (NEPRA) has issued Generation License no. GL(Hydel) /05
/2004 to WAPDA on 03 November 2004 valid for Thirty (30) years up to 2034 under section 30 of NEPRA Act
1997 for its Hydel power stations. Management expects that the generation license would be renewed upon
its expiry.

1.3 Operational hydel power stations

WAPDA Hydroelectric is currently generating electricity from 21 hydropower stations, which have been
described below along with their installed capacity as per the generation license:

Installed Installed
Power Station Province Capacity Power Station Province Capacity
(MW) (MW)
- Tarbela KPK* 3,478 - Jabban KPK 22
- Ghazi Barotha Punjab 1,450 - Rasul Punjab 22
- Tarbela 4th Extension KPK 1,410 - Dargai KPK 20
- Mangla AJK** 1,000 - Gomal Zam KPK 17
- Warsak KPK 243 - Nandipur Punjab 14
- Chashma Punjab 184 - Shadiwal Punjab 14
- Duber Khwar KPK 130 - Chichoki Punjab 13
- Allai Khwar KPK 121 - Kurram Garhi KPK 4
- Golen Gol KPK 108 - Chitral KPK 1
- Jinnah Hydel Punjab 96 - Renala Khurd Punjab 1
- Khan Khwar KPK 72

* Khyber Pakhtunkhwa ** Azad Jammu and Kashmir

F-10 Page 7 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

1.4 Projects under development

Following major projects are under development as at reporting date:

1 Diamer Bhasha Dam 4 Mangla Refurbishment

2 Mohmand Dam 5 Keyal Khwar
3 Dasu Hydropower Project

2. BASIS OF PREPARATION

2.1 Carve-out methodology

WAPDA Hydroelectric is not a separate legal entity but meets the definition of a reporting entity under
International Financial Reporting Standards (IFRS) under the Conceptual Framework for IFRS. IFRS defines
a reporting entity as an entity that is required, or chooses, to prepare financial statements.

WAPDA Hydroelectric is part of WAPDA Power Wing, which is a segment of WAPDA and is in the business
of generation and sale of hydroelectricity, which represent its economic activities. All the operating activities of
WAPDA Hydroelectric are clearly defined and separately managed from the other businesses of WAPDA and
accounting records are maintained on this basis. The assets of WAPDA Hydroelectric are used solely by
WAPDA Hydroelectric and are registered in the name of WAPDA. The liabilities relate to the activities of
WAPDA Hydroelectric.

Although the reporting boundary is defined above, the assets and liabilities presented within the reporting
boundary remain the assets and liabilities of WAPDA and are not legally separable from WAPDA’s other
assets and liabilities. As such legally, the assets of WAPDA Hydroelectric may be available to the other
claims of WAPDA.

All revenues and costs associated with WAPDA Hydroelectric's business activities are included in these
financial statements.

These carve out financial statements do not constitute statutory financial statements within the meaning of
Section 223 of the Companies Act, 2017 (the Act). WAPDA Hydroelectric elected to apply those IFRSs, which
are applicable to companies registered under the Companies Act, 2017 in Pakistan. The IFRSs applicable to
companies are notified by the SECP and accordingly WAPDA Hydroelectric has applied these accounting and
reporting standards applicable in Pakistan including the relevant exemptions granted by the SECP in the
preparation of these financial statements.

2.2 Statement of compliance

These carved out financial statements have been prepared in accordance with the accounting and reporting
standards as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise
of:

- International Financial Reporting Standards (IFRS) issued by the International Accounting Standards
Board (IASB) and notified under the Act by the SECP.

- Islamic Financial Accounting Standards, (IFAS) issued by the Institute of Chartered Accountants of
Pakistan (ICAP) as are notified under the Act.

- Directives issued under the Act.

Where the directive issued under the Act differs from the IFRSs, the directives issued under the Act have
been followed.

2.3 Exemptions from applicability of certain standards and interpretation to standards

- The SECP, through its S.R.O no. 985(I)/2019, dated 02 September 2019, has exempted the
requirements contained in IFRS 9 (Financial Instruments) related to application of Expected Credit
Losses (ECL) method till 30 June 2021, in respect of financial assets due or ultimately due from the
GoP, provided that such companies shall follow relevant requirements of IAS 39 – Financial
Instruments: Recognition and Measurement, in respect of above referred financial assets during the
exemption period.

F-11 Page 8 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

The major financial assets of WAPDA Hydroelectric include receivable from the Central Power
Purchasing Agency (CPPA-G). Accordingly, ECL under IFRS 9 is not applicable on these receivable,
however, the management has assessed incurred losses under IAS 39.

- The SECP through its S.R.O. no.24(I)/2012 dated 16 January 2012 and S.R.O 986(I)/2019, dated 02
September 2019, has granted exemption from requirements of certain International Financial Reporting
Standards (“IFRS”) to all companies that have executed their power purchase agreements before 01
January 2019, as follows:

a) IFRS 16 (Leases) to the extent of the power purchase agreements executed before the effective
date of IFRS 16 i.e. 01 January 2019;
b) International Accounting Standard 21 (The Effects of Changes in Foreign Exchange Rates) to the
extent of capitalization of exchange differences; and
c) In case of capitalization of exchange differences under (b) above, recognition of embedded
derivative under IFRS 9 (Financial Instruments) shall not be permitted.

WAPDA has entered into the Power Purchase Agreement (PPA) with the CPPA-G on 24 January 2011.
Under the PPA, WAPDA Hydroelectric is obligated to sell and deliver all output of its power plants in
accordance with provisions of PPA. WAPDA Hydroelectric's arrangement with the CPPA-G falls under
the definition of lease under IFRS-16 for which WAPDA Hydroelectric is availing the exemption granted
by the SECP.

Furthermore, pursuant to the SECP exemption for capitalization of exchange differences under IAS 21,
the exchange gain / loss on translation of foreign currency loan and related bank balances of under
development hydropower projects is capitalized as part of capital work in progress.

2.4 Functional and presentation currency

These financial statements are presented in Pakistani Rupees ("PKR" or "Rs.") which is also WAPDA
Hydroelectric's functional currency. All values have been rounded to the nearest thousands of rupees, except
when otherwise indicated.

2.5 Basis of measurement

These financial statements have been prepared under the historical cost convention except for recognition of
employee retirement and other benefits at present value.

2.6 Use of estimates and judgments

The preparation of financial statements in conformity with accounting and reporting standards, as applicable
in Pakistan, requires management to make judgments, estimates and assumptions that affect the application
of accounting policies and reported amounts of assets and liabilities, income and expenses. Uncertainty about
these assumptions and estimates could result in outcomes that require a material adjustment to the carrying
amount of assets or liabilities affected in future periods.

The estimates and associated assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results of which form the basis of making
judgment about carrying value of assets and liabilities that are not readily available from other sources. Actual
results may differ from these estimates. The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognized in the period in which estimates are revised
if the revision affects only that period, or in the period of the revision and future periods if the revision affects
both current and future periods.

Judgments made by the management in the application of accounting and reporting standards, as applicable
in Pakistan that have significant effect on the financial statements and estimates with a significant risk of
material adjustment in the next year are documented in the following accounting policies and notes, and relate
primarily to:

F-12 Page 9 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Note
- Renewal of generation license 1.2
- Useful lives, impairment and method
of depreciation of operating fixed assets 4.2.1.4
- Allowance against stores and spares 4.6
- Impairment allowance against financial assets 4.7.1
- Regulatory deferral account 4.10
- Employee retirement and other benefits 4.12.1

3. STANDARDS, INTERPRETATIONS AND AMENDMENTS TO ACCOUNTING AND REPORTING

STANDARDS THAT ARE NOT YET EFFECTIVE

The standards and interpretations with respect to the accounting and reporting standards as applicable in
Pakistan that are issued, but not yet effective, up to the date of issuance of Hydroelectric's financial
statements are disclosed below. Hydroelectric intends to adopt these standards, if applicable, when they
become effective.

Standard or Interpretation

- IFRS 3 - Definition of a Business (Amendments)

The amendment to IFRS 3 Business Combinations clarifies that to be considered a business, an
integrated set of activities and assets must include, at a minimum, an input and a substantive process
that, together, significantly contribute to the ability to create output. Furthermore, it clarifies that a
business can exist without including all of the inputs and processes needed to create outputs. The
amendments are effective for annual reporting periods beginning on or after 1 January 2020. These
amendments will have no impact on the financial statements of Hydroelectric, unless Hydroelectric
enters into any business combinations.

- Amendments to IAS 1 and IAS 8 Definition of Material

The amendments provide a new definition of material that states, “information is material if omitting,
misstating or obscuring it could reasonably be expected to influence decisions that the primary users of
general purpose financial statements make on the basis of those financial statements, which provide
financial information about a specific reporting entity.” The amendments clarify that materiality will
depend on the nature or magnitude of information, either individually or in combination with other
information, in the context of the financial statements. A misstatement of information is material if it
could reasonably be expected to influence decisions made by the primary users. The amendments are
effective for annual reporting periods beginning on or after 1 January 2020. These amendments will
have no impact on the financial statements of, nor is there expected to be any future impact to,
Hydroelectric.

- Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform

The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a
number of reliefs, which apply to all hedging relationships that are directly affected by interest rate
benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainty about the
timing and/or amount of benchmark-based cash flows of the hedged item or the hedging instrument.
The amendments are effective for annual reporting periods beginning on or after 1 January 2020. These
amendments will have no impact on the financial statements of Hydroelectric as it does not have any
interest rate hedge relationships.

- The changes in Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16)
The amendments provide temporary reliefs which address the financial reporting effects when an
interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR).
The amendments include the following practical expedients:
- A practical expedient to require contractual changes, or changes to cash flows that are directly
required by the reform, to be treated as changes to a floating interest rate, equivalent to a
movement in a market rate of interest.
- Permit changes required by IBOR reform to be made to hedge designations and hedge
documentation without the hedging relationship being discontinued.

F-13 Page 10 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Standard or Interpretation

- Provide temporary relief to entities from having to meet the separately identifiable requirement
when an RFR instrument is designated as a hedge of a risk component.

The amendments are effective for annual reporting periods beginning on or after 1 January 2021. These
amendments will have no impact on the financial statements of WAPDA Hydroelectric.

- Reference to the Conceptual Framework – Amendments to IFRS 3

In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the
Conceptual Framework. The amendments are intended to replace a reference to the Framework for the
Preparation and Presentation of Financial Statements, issued in 1989, with a reference to the
Conceptual Framework for Financial Reporting issued in March 2018 without significantly changing its
requirements.
The Board also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential
‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of
IAS 37 or IFRIC 21 Levies, if incurred separately.
At the same time, the Board decided to clarify existing guidance in IFRS 3 for contingent assets that
would not be affected by replacing the reference to the Framework for the Preparation and Presentation
of Financial Statements.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022 and
are apply prospectively. The amendments are not expected to have a material impact on the financial
statements of Hydroelectric.

- Amendments to IFRS 16 Covid-19 Related Rent Concessions

On 28 May 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16
Leases The amendments provide relief to lessees from applying IFRS 16 guidance on lease
modification accounting for rent concessions arising as a direct consequence of the Covid-19
pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent
concession from a lessor is a lease modification. The amendment is effective for annual reporting
periods beginning on or after 1 June 2020. This amendment will have no impact on the financial
statements of Hydroelectric.

- Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37

In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include
when assessing whether a contract is onerous or loss-making.
The amendments apply a “directly related cost approach”. The costs that relate directly to a contract to
provide goods or services include both incremental costs and an allocation of costs directly related to
contract activities. General and administrative costs do not relate directly to a contract and are excluded
unless they are explicitly chargeable to the counterparty under the contract.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022.
Considering the nature of operation of Hydroelectric, these amendments are not expected to have a
material impact on Hydroelectric.

- IAS 41 Agriculture – Taxation in fair value measurements

As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued amendment
to IAS 41 Agriculture. The amendment removes the requirement in paragraph 22 of IAS 41 that entities
exclude cash flows for taxation when measuring the fair value of assets within the scope of IAS 41.
An entity applies the amendment prospectively to fair value measurements on or after the beginning of
the first annual reporting period beginning on or after 1 January 2022 with earlier adoption permitted.
These amendments are not applicable to Hydroelectric.

- Amendments to IAS 1: Classification of Liabilities as Current or Non-current

In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the
requirements for classifying liabilities as current or non-current. The amendments clarify:
- What is meant by a right to defer settlement.
- That classification is unaffected by the likelihood that an entity will exercise its deferral right.
- That only if an embedded derivative in a convertible liability is itself an equity instrument would the
terms of a liability not impact its classification.

F-14 Page 11 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Standard or Interpretation

The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and
must be applied retrospectively. Hydroelectric expects that these amendments will have no impact on
financial statements as their current practice is already in line with the proposed amendments.

- IFRS 9 Financial Instruments – Fees in the "10 per cent" test for derecognition of financial
liabilities
As part of its 2018-2020 annual improvements to IFRS standards process the IASB issued amendment
to IFRS 9. The amendment clarifies the fees that an entity includes when assessing whether the terms
of a new or modified financial liability are substantially different from the terms of the original financial
liability. These fees include only those paid or received by the borrower and the lender, including fees
paid or received by either the borrower or lender on the other’s behalf. The amendments are effective
for annual reporting periods beginning on or after 1 January 2022. An entity applies the amendment to
financial liabilities that are modified or exchanged on or after the beginning of the annual reporting
period in which the entity first applies the amendment. The amendments are not expected to have a
material impact on the financial statements of Hydroelectric.

- IFRS 1 First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-

time adopter
As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued an
amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards. The
amendment permits a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to measure cumulative
translation differences using the amounts reported by the parent, based on the parent’s date of
transition to IFRS. This amendment is also applied to an associate or joint venture that elects to apply
paragraph D16(a) of IFRS 1. The amendment is effective for annual reporting periods beginning on or
after 1 January 2022. The amendments is not applicable to Hydroelectric.

- Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16
In May 2020, the IASB issued Property, Plant and Equipment — Proceeds before Intended Use, which
prohibits entities from deducting from the cost of an item of property, plant and equipment, any
proceeds from selling items produced while bringing that asset to the location and condition necessary
for it to be capable of operating in the manner intended by management. Instead, an entity recognizes
the proceeds from selling such items, and the costs of producing those items, in profit or loss.

The amendment is effective for annual reporting periods beginning on or after 1 January 2022 and must
be applied retrospectively to items of property, plant and equipment made available for use on or after
the beginning of the earliest period presented when the entity first applies the amendment. The
amendments are not expected to have a material impact on the financial statements of Hydroelectric.

- IFRS 10 - and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture (Amendment)
The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of
a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the
gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in
IFRS 3, between an investor and its associate or joint venture, is recognized in full. Any gain or loss
resulting from the sale or contribution of assets that do not constitute a business, however, is
recognized only to the extent of unrelated investors’ interests in the associate or joint venture.
The IASB has deferred the effective date of these amendments indefinitely, but an entity that early
adopts the amendments must apply them prospectively. These amendments are not applicable to
Hydroelectric.

The IASB has also issued the revised Conceptual Framework for Financial Reporting (the Conceptual
Framework) in March 2018 which is effective for annual periods beginning on or after 1 January 2020 for
preparers of financial statements who develop accounting policies based on the Conceptual Framework. The
revised Conceptual Framework is not a standard, and none of the concepts override those in any standard or
any requirements in a standard. The purpose of the Conceptual Framework is to assist IASB in developing
standards, to help preparers develop consistent accounting policies if there is no applicable standard in place
and to assist all parties to understand and interpret the standards.

F-15 Page 12 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Standard or Interpretation

Further, the following new standards have been issued by IASB which are yet to be notified by the SECP for
the purpose of applicability in Pakistan:

- IFRS 1 - First-time Adoption of International Financial Reporting Standards

- IFRS 17 – Insurance Contracts

In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new
accounting standard for insurance contracts covering recognition and measurement, presentation and
disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts (IFRS 4) which was issued
in 2005. IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-
insurance), regardless of the type of entities that issue them, as well as to certain guarantees and
financial instruments with discretionary participation features. A few scope exceptions will apply. The
overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more
useful and consistent for insurers. In contrast to the requirements in IFRS 4, which are largely based on
grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for
insurance contracts, covering all relevant accounting aspects. The core of IFRS 17 is the general
model, supplemented by:
- A specific adaptation for contracts with direct participation features (the variable fee approach)
- A simplified approach (the premium allocation approach) mainly for short-duration contracts
IFRS 17 is effective for reporting periods beginning on or after 1 January 2023, with comparative figures
required. Early application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or
before the date it first applies IFRS 17. This standard is not applicable to Hydroelectric.

4. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies which have been adopted in the preparation of financial statements of
WAPDA Hydroelectric are consistent with previous year except as discribed in Note 4.1 to these financial
statements as follows:

4.1 New and amended standards and interpretations

WAPDA Hydroelectric has adopted the following accounting standards and the amendments and
interpretation of IFRSs which became effective for the current year: Hydroelectric has not early adopted any
other standard, interpretation or amendment that has been issued but is not yet effective.

Standard or Interpretation

- IFRS 16 - Leases
IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an
Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the
Substance of transactions Involving the Legal Form of a Lease.

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases
and requires lessees to account for all leases under a single on-balance sheet model similar to the
accounting for finance leases under IAS 17.

The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g.,
personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less).

At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e.,
the lease liability) and an asset representing the right to use the underlying asset during the lease term
(i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on
the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events
(e.g., a change in the lease term, a change in future lease payments resulting from a change in an index
or rate used to determine those payments). The lessee will generally recognize the amount of the
remeasurement of the lease liability as an adjustment to the right-of-use asset.

F-16 Page 13 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Standard or Interpretation

Management has identified that only one of WAPDA arrangement, its Power Purchase Agreement
(PPA), dated 24 January 2011, with the CPPA-G, contain a lease with significant impact on financial
statements, as of 01 July 2019. Under the PPA, WAPDA Hydroelectric is obligated to deliver all output
of hydroelectricity generation units, during whole of their economic life. Accordingly, management has
determined that WAPDA Hydroelectric is lessor under PPA and that it is a finance lease arrangement.
This determination is consistent with management determination under IFRIC 4 ''Determining whether
an arrangement contains a lease'', which has been replaced by IFRS 16 with effect from 01 July 2019.
Under IFRS 16, WAPDA Hydroelectric would derecognize its hydroelectricity generation units, as they
are made available to CPPA-G. Instead, WAPDA Hydroelectric would recognize is required to
recognize lease receivable, equal to lease payments discounted at interest rate implicit in the
arrangement. WAPDA Hydroelectric would then recognize finance income over the lease term of a
finance lease, based on a pattern reflecting a constant periodic rate of return on the net investment.
Accounting by a lessor has remained consistent with those requires by IAS 17 - Leases.

As mentioned in Note 2.3, the SECP has, however, via S.R.O 986(I)/2019, dated 2 September 2019,
granted exemption from requirements of IFRS 16 to all companies that have executed their power
purchase agreements before 01 January 2019. Resultantly, upon adopting said exemption, adoption of
IFRS 16 didn’t have any impact on WAPDA Hydroelectric. Before the aforementioned SRO, the same
exemption was granted to power sector companies through S.R.O. no.24(I)/2012 dated 16 January
2012 against application of IFRIC 4.

WAPDA Hydroelectric continue to recognize net book value of hydroelectricity generation units and
recognize lease payments as revenue, under IFRS 15 - Revenue from Contracts with Customers (refer
to Notes 4.2.1 and 4.18.1 for accounting policy adopted for hydroelectricity generation units and
revenue recognition).

Under accounting and reporting standards as applicable in Pakistan, ijarah arrangements are accounted
for as per Islamic Financial Accounting Standard (IFAS) 2 "IJARAH". Upon adoption, IFRS 16 is applied
on all other leases arrangements, except for Ijarah and arrangements against which exemption have
been granted by the SECP. WAPDA Hydroelectric has applied IFAS 2 for the accounting of its Ijarah
arrangements.

- IAS 19 - Plan Amendment, Curtailment or Settlement (Amendments)

The amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement
occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or
settlement occurs during the annual reporting period, an entity is required to:
- Determine current service cost for the remainder of the period after the plan amendment,
curtailment or settlement, using the actuarial assumptions used to remeasure the net defined
benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that
event.
- Determine net interest for the remainder of the period after the plan amendment, curtailment or
settlement using: the net defined benefit liability (asset) reflecting the benefits offered under the
plan and the plan assets after that event; and the discount rate used to remeasure that net defined
benefit liability (asset).
The amendments also clarify that an entity first determines any past service cost, or a gain or loss on
settlement, without considering the effect of the asset ceiling. This amount is recognized in profit or
loss.

An entity then determines the effect of the asset ceiling after the plan amendment, curtailment or
settlement. Any change in that effect, excluding amounts included in the net interest, is recognized in
other comprehensive income. This amendment has no significant impact on the financial statements of
Hydroelectric.

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NOTES TO THE FINANCIAL STATEMENTS

Standard or Interpretation

- IAS 28 - Long-term Interests in Associates and Joint Ventures – (Amendments)

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint
venture to which the equity method is not applied but that, in substance, form part of the net investment
in the associate or joint venture (long-term interests). This clarification is relevant because it implies that
the expected credit loss model in IFRS 9 applies to such long-term interests.

The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of
the associate or joint venture, or any impairment losses on the net investment, recognized as
adjustments to the net investment in the associate or joint venture that arise from applying IAS 28
Investments in Associates and Joint Ventures. This amendment has no material impact on the financial
statements of Hydroelectric.

- IFRIC 23 - Uncertainty over Income Tax Treatments

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty
that affects the application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12,
nor does it specifically include requirements relating to interest and penalties associated with uncertain
tax treatments. The Interpretation specifically addresses the following:
- Whether an entity considers uncertain tax treatments separately
- The assumptions an entity makes about the examination of tax treatments by taxation authorities
- How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates
- How an entity considers changes in facts and circumstances
An entity has to determine whether to consider each uncertain tax treatment separately or together with
one or more other uncertain tax treatments. The approach that better predicts the resolution of the
uncertainty should be followed. This amendment has no significant impact on the financial statement of
Hydroelectric.

- IFRS 3 - Business Combinations - Previously held Interests in joint operation - (Amendments)

The amendments clarify that, when an entity obtains control of a business that is a joint operation, it
applies the requirements for a business combination achieved in stages, including remeasuring
previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the
acquirer remeasures its entire previously held interest in the joint operation. This amendment has no
significant impact on the financial statements of Hydroelectric.

- IFRS 11 - Joint Arrangements - Previously held interests in a joint operation

A party that participates in, but does not have joint control of, a joint operation might obtain joint control
of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS
3. The amendments clarify that the previously held interests in that joint operation are not remeasured.
This amendment has no impact on Hydroelectric.

- IAS 23 - Borrowing Costs - Borrowing costs eligible for capitalization

The amendments clarify that an entity treats as part of general borrowings any borrowing originally
made to develop a qualifying asset when substantially all of the activities necessary to prepare that
asset for its intended use or sale are complete. This amendment has no significant impact on the
financial statements of Hydroelectric.

- IFRS 9 - Prepayment Features with Negative Compensation - (Amendments)

Under IFRS 9, a debt instrument can be measured at amortized cost or at fair value through other
comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and
interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the
appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial
asset passes the SPPI criterion regardless of the event or circumstance that causes the early
termination of the contract and irrespective of which party pays or receives reasonable compensation
for the early termination of the contract. These amendments have no significant impact on the financial
statements of Hydroelectric.

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NOTES TO THE FINANCIAL STATEMENTS

Standard or Interpretation

- IAS 12 - Income Taxes - Income tax consequences of payments on financial instruments

classified as equity
The amendments clarify that the income tax consequences of dividends are linked more directly to past
transactions or events that generated distributable profits than to distributions to owners. Therefore, an
entity recognizes the income tax consequences of dividends in profit or loss, other comprehensive
income or equity according to where the entity originally recognized those past transactions or events.
This amendment has no significant impact on the financial statements of Hydroelectric.

- IFRS 14 - Regulatory Deferral Accounts

IFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to
continue applying most of its existing accounting policies for regulatory deferral account balances upon
its first-time adoption of IFRS. The SECP has adopted IFRS 14 and Hydroelectric has determined that,
although it is not applying IFRS for the first-time, IFRS 14 is applicable as it forms part of accounting
and reporting standards as applicable in Pakistan.

Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the
statement of financial position and present movements in these account balances as separate line
items in the statement of profit or loss and Other Comprehensive Income (OCI).

The standard requires disclosure of the nature of, and risks associated with, the entity’s rate-regulation
and the effects of that rate-regulation on its financial statements.

WAPDA Hydroelectric has earlier adopted regulatory deferral accounting, in accordance with the
guidance available in IAS 8 and local industry practice, which is in line with the IFRS 14 requirements.
Hence adoption of IFRS 14 didn't have any material impact on the financial statements.

4.2 Property, plant and equipment

4.2.1 Operating fixed assets

4.2.1.1 Cost
Operating fixed assets are stated at cost less accumulated depreciation and any impairment loss. The cost
comprises of purchase price, including import duties, non-recourse purchase taxes and other related costs of
bringing the asset to its present working condition and location for its intended use.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
WAPDA Hydroelectric and the cost of the item can be measured reliably. All other repair and maintenance
costs are charged to profit or loss during the period in which they are incurred.

Major spare parts and standby equipment are classified as property, plant and equipment rather than stores,
spares and loose tools when they meet the definition of operating fixed assets. Major spare parts and standby
equipment available for use are depreciated over their useful lives, or the remaining life of principal asset,
whichever is lower.

4.2.1.2 Derecognition
An item of operating fixed assets is derecognized upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and carrying amount of the asset) is included in the profit or
loss in the year the asset is derecognized.

4.2.1.3 Depreciation
Depreciation is charged to profit or loss on straight-line method so as to write off the cost of operating fixed
assets, over their estimated remaining useful lives at the rates specified below. However, depreciation
charged on assets that directly relates to construction and acquisition of other assets is included in the cost of
such assets. Depreciation on addition to operating fixed assets is charged from the month in which the asset
is available for use and continued till the month of disposal.

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Depreciation for the year is recognized on a straight line basis over the estimated useful life of each
component of an item of operating fixed assets. Significant components of individual assets are assessed and
if a component has a useful life that is different from the remainder of that asset, that component is
depreciated separately. Depreciation is not charged to fully depreciated assets. Lands are not depreciated.

The useful lives and methods of depreciation of each component of operating fixed assets are reviewed at
each reporting date and adjusted prospectively, if appropriate.

Following depreciation rates, based on the estimated useful lives of the assets, are generally applied:

Depreciation
Sr.
Description of assets rates
no
2020 2019
1 Building and civil works 2% 2%
Power generation plant assets
a. Turbines 2.86-4% 2.86-4%
b. Generators (Class - F insulation) 2.86% 2.86%
c. Generators (Class - B insulation) 3.33% 3.33%
d. Gas Insulated Switch (GIS) Gear 4.00% 4.00%
e. Switchyard equipment 4.00% 4.00%
f. Medium and Low Voltage (MV/LV) Switch gear Control and
2 Protection Equipment 4.00% 4.00%

g. Telecommunication and SCADA equipment 5.00% 5.00%

h. Cranes 3.33% 3.33%
i. Trash Rack and Cleaning Machines 3.33% 3.33%
j. Truck Trailer 5.00% 5.00%
k. High Voltage (HV) Circuit Breaker Air Blast Type 4.00% 4.00%
l. High Voltage (HV) Circuit Breaker SF-6 Type 3.33% 3.33%
3 Transmission line equipment 4.00% 4.00%
4 Dams and reservoirs 1-1.25% 1-1.25%
5 General / plant assets 10% 10%
6 Office equipment 10-25% 10-25%
7 Furniture and fixtures 10% 10%
8 Transportation equipment 20% 20%

4.2.1.4 Useful lives, impairment and method of depreciation of operating fixed assets

WAPDA Hydroelectric reviews the useful lives of operating fixed assets on regular basis. The depreciation
method and the useful life of each part of operating fixed assets that is significant in relation to the total cost
of the asset are reviewed, and adjusted if appropriate, at each reporting date.

WAPDA Hydroelectric assesses at each reporting date whether there is any indication that assets excluding
inventory may be impaired. In making these assessment, WAPDA Hydroelectric uses the technical resources
available inside/outside WAPDA Hydroelectric, as appropriate. If such indication exists, the carrying amounts
of such assets are reviewed to assess whether they are recorded in excess of their recoverable amounts.
Where the carrying value exceeds the recoverable amount, assets are written down to the recoverable
amount and the difference is charged to the statement of profit or loss.

4.2.2 Capital work-in-progress

Capital work in progress is stated at cost less accumulated impairment losses, if any. Projects of capital work
in progress are transferred to operational offices (hereinafter referred as "formations") of WAPDA
Hydroelectric when 100% progress is certified by the consultants and verified by WAPDA Hydroelectric's own
engineers. Capital work in progress mainly includes direct cost, netted with respective test run revenue,
incurred on the development projects including incurred on land acquisition, salaries of personnel deployed at
respective development projects and mobilization advances given to designated contractors and consultants.

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NOTES TO THE FINANCIAL STATEMENTS

4.3 Borrowing costs

Interest during construction directly attributable to the construction of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, is not capitalized and
instead charged to profit or loss as the same is reimbursed by NEPRA as part of tariff which is being billed
and recognized as revenue. Correspondingly investment income earned on the temporary investment of
specific borrowings pending their expenditure on qualifying assets is also credited to profit or loss.

4.4 Retention money payable

A retention is a percentage of the contract payment value which is held by WAPDA Hydroelectric of
designated contractors and consultants. Retention money is released following the expiry of a defects liability
period, being part of normal credit terms under such agreements. Retention money payable is recognized at
the consideration to be paid at the expiry of the defects liability period.

4.5 Impairment of non-financial assets

The carrying amounts of non-financial assets other than stores, spares and loose tools are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, then
the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is
the higher of its value in use and its fair value less costs to sell. In assessing value in use, the estimated
future cash flows are discounted to their present value using a discount rate that reflects current market
assessment of the time value of money and the risks specific to the asset. For the purpose of impairment
testing, assets that cannot be tested individually are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or
groups of assets (the “cash-generating unit, or CGU”).

WAPDA Hydroelectric's corporate assets do not generate separate cash inflows. If there is an indication that
a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the
corporate asset belongs. An impairment loss is recognized if the carrying amount of an asset or its CGU
exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss.

Impairment loss recognized in prior periods is assessed at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates
used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortization, if no impairment loss had been recognized.

4.6 Stores, spare parts and loose tools

These are valued at weighted average cost, while items considered obsolete are carried at nil value. Items in
transit are valued at cost comprising invoice value plus other direct charges paid thereon till the reporting
date. WAPDA Hydroelectric reviews stores and spare parts for possible impairment on an annual basis and
provision is made for obsolescence, based on management’s best estimate.

4.7 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.

4.7.1 Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value
through other comprehensive income (OCI), and fair value through profit or loss.

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NOTES TO THE FINANCIAL STATEMENTS

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash
flow characteristics and Hydroelectric’s business model for managing them. With the exception of trade
receivables that do not contain a significant financing component or for which Hydroelectric has applied the
practical expedient, Hydroelectric initially measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain
a significant financing component or for which Hydroelectric has applied the practical expedient are measured
at the transaction price.

In order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it
needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal
amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or
loss, irrespective of the business model.

Hydroelectric’s business model for managing financial assets refers to how it manages its financial assets in
order to generate cash flows. The business model determines whether cash flows will result from collecting
contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at
amortized cost are held within a business model with the objective to hold financial assets in order to collect
contractual cash flows while financial assets classified and measured at fair value through OCI are held within
a business model with the objective of both holding to collect contractual cash flows and selling.

Purchases or sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the
date that Hydroelectric commits to purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:
- Financial assets at amortized cost (debt instruments)
- Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt
instruments)
- Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses
upon derecognition (equity instruments)
- Financial assets at fair value through profit or loss

Financial assets at Financial assets at amortized cost are subsequently measured using the
amortized cost effective interest rate (EIR) method and are subject to impairment. Gains and
(debt instruments) losses are recognized in profit or loss when the asset is derecognized, modified
or impaired.

Hydroelectric’s financial assets at amortized cost includes receivables from the

customer, other receivables, short term investments and long term loans to
employees and deposits.

Financial assets at fair
value through OCI
(debt instruments)
For debt instruments at fair value through OCI, interest income, foreign
exchange revaluation and impairment losses or reversals are recognized in the
statement of profit or loss and computed in the same manner as for financial
assets measured at amortized cost. The remaining fair value changes are
recognized in OCI. Upon derecognition, the cumulative fair value change
recognized in OCI is recycled to profit or loss.

Hydroelectric doesn't have any financial assets measured at fair value through
OCI.

Financial assets
designated at fair
value through OCI
(equity instruments)
Upon initial recognition, Hydroelectric can elect to classify irrevocably its equity
investments as equity instruments designated at fair value through OCI when
they meet the definition of equity under IAS 32 Financial Instruments:
Presentation and are not held for trading. The classification is determined on an
instrument-by instrument basis.

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NOTES TO THE FINANCIAL STATEMENTS

Gains and losses on these financial assets are never recycled to profit or loss.
Dividends are recognized as other income in the statement of profit or loss
when the right of payment has been established, except when Hydroelectric
benefits from such proceeds as a recovery of part of the cost of the financial
asset, in which case, such gains are recorded in OCI. Equity instruments
designated at fair value through OCI are not subject to impairment assessment.

Hydroelectric hasn't elected to classify any financial assets under this category.

Financial assets at fair Financial assets at fair value through profit or loss are carried in the statement
value through profit or of financial position at fair value with net changes in fair value recognized in the
loss statement of profit or loss.

Hydroelectric doesn't have any financial assets measured at fair value through
profit or loss.

Impairment of financial assets

WAPDA Hydroelectric recognizes an allowance for ECLs for all debt instruments (excluding receivable from
the CPPA-G) not held at fair value through profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all the cash flows that Hydroelectric expects to
receive, discounted at an approximation of the original effective interest rate. The expected cash flows will
include cash flows from the sale of collateral held or other credit enhancements that are integral to the
contractual terms.

ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase
in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that
are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has
been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

The trade receivable of WAPDA Hydroelectric represents amounts due from the CPPA-G (a Government
owned entity) against sale of electricity and hydel levies. SRO No. 985(1)/2019 issued by SECP on 2
September 2019 in respect of the companies holding financial assets due from GOP, the requirements
contained in "IFRS 9 (Financial instrument) with respect to application of expected credit losses method" shall
not be applicable till 30 June 2021. Accordingly, no impairment charge is recorded on the trade receivables.
However, receivables from CPPA-G are assessed at each reporting date to determine whether there is any
objective evidence that it is impaired as per IAS 39. A financial asset is considered to be impaired if objective
evidence indicates that one or more events have had a negative effect on the estimated future cash flows of
that asset.

4.7.2 Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss,
loans and borrowings, or payables, as appropriate.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.

WAPDA Hydroelectric's financial liabilities include trade and other payables (excluding due to statutory
authorities), loans and borrowings, retention money payable, short term borrowings and interest payable.

Subsequent measurement

For the purposes of subsequent measurement, financial liabilities are classified in two categories:

- Financial liabilities at fair value through profit or loss

- Financial liabilities at amortized cost (loans and borrowings)

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NOTES TO THE FINANCIAL STATEMENTS

Financial liabilities at Financial liabilities at fair value through profit or loss include financial liabilities
fair value through held for trading and financial liabilities designated upon initial recognition as at
profit or loss fair value through profit or loss.

Financial liabilities are classified as held for trading if they are incurred for the
purpose of repurchasing in the near term. Gains or losses on liabilities held for
trading are recognized in the statement of profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit
or loss are designated at the initial date of recognition, and only if the criteria in
IFRS 9 are satisfied. WAPDA Hydroelectric has not designated any financial
liability as at fair value through profit or loss.

Financial liabilities at
amortized cost (loans
and borrowings)
This is the category most relevant to WAPDA Hydroelectric. After initial
recognition, interest-bearing loans and borrowings are subsequently measured
at amortized cost using the Effective Interest Rate (EIR) method. Gains and
losses are recognized in profit or loss when the liabilities are derecognized as
well as through the EIR amortization process.

Amortized cost is calculated by taking into account any discount or premium on

acquisition and fees or costs that are an integral part of the EIR. The EIR
amortization is included as finance costs in the statement of profit or loss.

4.7.3 Derecognition

4.7.3.1 Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)
is primarily derecognized (i.e., removed from the statement of financial position) when:
- The rights to receive cash flows from the asset have expired; or
- Hydroelectric has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-
through’ arrangement; and either (a) Hydroelectric has transferred substantially all the risks and rewards
of the asset, or (b) Hydroelectric has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.

When Hydroelectric has transferred its rights to receive cash flows from an asset or has entered into a pass-
through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor
transferred control of the asset, Hydroelectric continues to recognize the transferred asset to the extent of its
continuing involvement. In that case, Hydroelectric also recognizes an associated liability. The transferred
asset and the associated liability are measured on a basis that reflects the rights and obligations that
Hydroelectric has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower
of the original carrying amount of the asset and the maximum amount of consideration that Hydroelectric
could be required to repay.

4.7.3.2 Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability. The
difference in the respective carrying amounts is recognized in the statement of profit or loss.

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4.7.4 Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the entity currently has a legally enforceable right to set off the amounts and it
intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

4.8 Hydel levies

The Article 161 (2) of the Constitution of Islamic Republic of Pakistan provides that the net profits earned by
the Federal Government, or any undertaking established or administered by the Federal Government i.e.
WAPDA as determined by the Presidential Order no. 3 of June 1991, from the bulk generation of power at a
hydroelectric station shall be paid to the provinces in which hydroelectric stations are situated.

Hydel levies mainly comprise of Net Hydel Profits (NHP) attributable to the Governments of Punjab (GoPb)
and Khyber Pakhtunkhwa (GoKPK) as per instructions of the GoP and also include Water Usage Charges
(WUC) payable to the Government of Azad, Jammu and Kashmir (GoAJ&K) and Water Management Charges
(WMC) payable to the Indus River System Authority (IRSA). These levies are billed to the CPPA-G at Federal
Government notified rates and recognized in the statement of financial position as receivable and unpaid
amount of levies is recognized as payable against hydel levies.

4.9 Bank balances

Bank balances comprise of cash at banks and other highly liquid financial assets which are held for the
purpose of meeting short-term cash commitments with original maturities of less than three months which are
subject to insignificant risk of changes in their fair value.

For the purpose of the statement of cash flows, bank balances consist of balances with banks, as defined
above, as they are considered an integral part of WAPDA Hydroelectric’s cash management.

4.10 Regulatory deferral account

A regulatory deferral account balance is defined as the balance of any expense (or income) account that
would not be recognized as an asset or a liability in accordance with other Standards, but that qualifies for
deferral because it is included, or is expected to be included, by the rate regulator in establishing the rates
that can be charged to customers.

As mentioned in Note 1.1, WAPDA was formed under the WAPDA Act, which prescribes that rate of sale of
electricity shall be so fixed as to provide for recovering the operating costs, interest charges, depreciation of
assets and return on investment. WAPDA Hydroelectric submits its tariff petition after every two years with the
NEPRA (regulator for determining the tariff of electricity in the country and also a related party of WAPDA
Hydroelectric), on the basis of management's best estimate of the expected cost and the difference of actual
cost incurred versus the estimate of cost considered by the NEPRA in determining the previous tariffs. The
NEPRA determines the next tariff based upon the tariff petitions filed by the WAPDA Hydroelectric. The
regulatory deferral balances arise due to this rate regulation process. The management is confident that no
significant risks exits as of reporting date in respect of rate regulation.

WAPDA Hydroelectric initially recognizes deferral account balance at historic cost, without accounting for the
effect of time value of money, based on the management's best estimate considering the tariff structure under
the WAPDA Act and tariff determinations of the NEPRA. Such amounts are expected to be recovered through
tariff from the CPPA-G, in future periods and these are transferred from regulatory deferral account to
receivable from the customer. At each reporting date, the outstanding balance of deferral amount is assessed
for probability of recovery, considering decisions of the NEPRA. An impairment charge is also recognized, if
recoverable amount, without accounting for the effect of time value of money is less than their carrying value.

4.11 Government / deferred grants

Grants are recognized where there is reasonable assurance that the grant will be received and all attached
conditions will be complied with. WAPDA Hydroelectric receives two type of grants: against specific expenses
or for specific assets. When the grant relates to an expense item, it is recognized as income over the period
necessary to match the costs that it is intended to compensate. Where the grant relates to an asset, it is
recognized as deferred income and charged to profit or loss over the expected useful life of the related asset.

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NOTES TO THE FINANCIAL STATEMENTS

Monetary grant:
If grant is in the form of cash, it is measured at the amount of cash received or receivable.

Non-monetary grant:
When WAPDA Hydroelectric receives grants of non-monetary assets, the asset and the grant are recorded at
nominal amounts.

4.12 Employee retirement and other benefits

WAPDA Hydroelectric operates following retirement and other long term schemes for its employees.

a) Pension:
WAPDA Hydroelectric offers post employment pension scheme to its eligible employees and their
dependents. Under the unfunded scheme all such employees are entitled for lifetime pension based on
“Pensionable Salary” as defined in the pension scheme rules of WAPDA. After the death of the
employee, their spouse and minor children (if any) are also eligible for 75% of pension benefit.

No benefits under this scheme are available to any employee who either resigned from the service
before 25 years or who is dismissed / terminated from the service of Hydroelectric due to misconduct.

b) Free medical facility:

WAPDA Hydroelectric provides free medical benefits to its pensioners. The level of post-retirement
medical benefit for a retiree (or beneficiaries) depends on whether the retiree opts for cash medical
allowance during service or not. Pensioners eligible for full medical benefits are allowed to use all
medical and surgical facilities available at WAPDA Hospitals and Dispensaries. Specialist consultation
is also provided if considered necessary by WAPDA Medical Officer.

The retirees can opt to take cash medical allowance in accordance with their basic pay scale.

c) Free electricity facility:

WAPDA Hydroelectric offers free electricity benefit to its eligible employees and their dependents.
Under the unfunded scheme all such employees are entitled for lifetime free electricity benefit based on
their last served employment scale, starting from the date of retirement. After the death of the
employee, their spouse and minor children (if any) are also eligible for the 50% of the free electricity
benefit.

No benefits under this scheme are available to any employee who either resigned from the service
before 25 years or who is dismissed / terminated from the service of WAPDA Hydroelectric due to
misconduct.

d) Compensated absences:
WAPDA Hydroelectric provides leave encashment benefit to its employees. Employees of WAPDA
Hydroelectric are entitled to receive 48 days leave per annum. The un-utilized leave are accumulated
subject to a maximum of 365 days. The un-utilized accumulated leave are en-cashed at the time of
leaving the service.

The employees are also entitled to take Leave Preparatory to Retirement (LPR) of one year retirement.
A general practice of the employees is to take leave encashment benefit on monthly/quarterly/semi-
annually basis in the last year before retirement which is equivalent to rendering additional service
during LPR.

Due to materially different risks associated with each benefit plan the entity has disaggregated the above
benefits for disclosure purposes. The entity underwrites the actuarial risk associated with the above benefits
and determines the defined benefit liability by consulting an qualified independent actuary.

The entity recognizes the defined benefit liabilities in the statement of financial position. The cost of providing
benefits under the defined benefit plan is determined by an independent qualified actuary using the projected
unit credit method. Actuarial valuation is conducted every year.

F-26 Page 23 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Re-measurements, comprising of actuarial gains and losses from changes in actuarial and experience
assumptions for pension, free electricity and free medical benefits are recognized immediately in the
statement of financial position with a corresponding debit or credit to accumulated profits through other
comprehensive income in the period in which they occur, whereas actuarial gain and loss from changes in
actuarial and experience assumptions for compensated absences is recognized in statement of profit or loss.
Re-measurement of defined benefit liabilities recognized in other comprehensive income shall not be
reclassified to profit or loss in subsequent periods.

Past service costs are recognized in the profit or loss on earlier of; the date of the plan amendment or
curtailment, and the date when entity recognizes related restructuring cost. Net interest is calculated by
applying the discount rate to the defined benefit liabilities. The entity recognizes the current service cost, past
service cost, gains and losses on curtailments, non-routine settlements and net interest expense or income
changes in the defined benefit obligations in the statement of profit or loss.

4.12.1 Estimates and judgments

The cost of employee retirement and benefits are determined using actuarial valuations. An actuarial valuation
involves making various assumptions that may differ from actual developments in the future. These includes
the determination of the discount rate, future salary increases, mortality rates, future pension increases, future
increase in medical costs and future increase in electricity costs.

Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly
sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. WAPDA
Hydroelectric uses the valuation performed by an independent actuary as the present value of its defined
benefit obligations. Actuarial valuation is conducted every year and is based on assumptions as mentioned in
notes to these financial statements.

4.12.2 Risks associated with benefit schemes

Pension
- WAPDA Hydroelectric provides pension benefits to all of its regular employees.
- The pension scheme is an un-funded scheme. There is no minimum funding requirement for a pension
scheme which leads to relatively less secured pension benefits.
- The pension scheme is a defined benefit scheme with benefits based on service and last drawn salary.
Therefore, the liabilities of the scheme are sensitive to the salary increases and pension increases.

Medical
- WAPDA Hydroelectric provides post-retirement medical benefits to all of its regular employees.
- The post-retirement medical benefits scheme is an un-funded scheme. In general, there is no practice in
the local market to have a funded post-employment medical benefit scheme.
- There is no minimum funding requirements for a post-retirement medical benefit scheme which leads to
relatively less secured post-retirement medical benefits.
- The post-retirement medical benefit scheme is categorized as a post-employment defined benefit
scheme in accordance with the provisions of IAS-19. The liabilities of the scheme are sensitive to the
increases in medical cost incurred by retirees in future.

Electricity
- WAPDA Hydroelectric provides post-retirement free electricity to all of its regular employees.
- The post-retirement free electricity scheme is an un-funded scheme. This mean that the cost incurred
by WAPDA Hydroelectric on providing this benefit is not paid from any fund.
- The post-retirement free electricity scheme is categorized as a post-employment defined benefit
scheme in accordance with the provisions of IAS-19. The liabilities of the scheme are sensitive to the
increases in electricity cost in future.

Leave Encashment / Compensated Absences

- WAPDA Hydroelectric provides leave encashment benefit to all of its regular employees.
- The leave encashment benefit scheme is an un-funded Scheme. This mean that the cost incurred by
WAPDA Hydroelectric on providing this benefit is not paid from any fund.
- The leave encashment benefit scheme is categorized as other long term employee benefit in
accordance with the provisions of IAS-19. The benefit is based on the last drawn salary. Therefore,
liabilities of the scheme are sensitive to the increases in salaries.

F-27 Page 24 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

4.13 Provisions

Provisions are recognized when Hydroelectric has a present obligation (legal or constructive) as a result of a
past event, it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation.

When Hydroelectric expects some or all of a provision to be reimbursed, the reimbursement is recognized as
a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is
presented in the statement of profit or loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that
reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the
provision due to the passage of time is recognized as a finance cost.

WAPDA Hydroelectric has no legal or constructive obligation regarding dismantling and removal of the power
generation plants and restoration of the related sites.

4.14 Current versus non-current classification

Hydroelectric presents assets and liabilities in the statement of financial position based on current/non-current
classification. An asset is current when it is:
- Expected to be realized or intended to be sold or consumed in the normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realized within twelve months after the reporting period; or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period
All other assets are classified as non-current.

A liability is current when:

- It is expected to be settled in the normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period; or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the
reporting period
The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of
equity instruments do not affect its classification.
Hydroelectric classifies all other liabilities as non-current.

4.15 Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based on
the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability; or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by Hydroelectric.

The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant
that would use the asset in its highest and best use.

Hydroelectric uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the
use of unobservable inputs.

F-28 Page 25 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
- Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
- Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable

For assets and liabilities that are recognized in the financial statements at fair value on a recurring basis,
Hydroelectric determines whether transfers have occurred between levels in the hierarchy by re-assessing
categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at
the end of each reporting period.

As at reporting date, WAPDA Hydroelectric has no financial or non-financial assets for which fair value
modelling is required (2019: Nil).

4.16 Events after the reporting period

If Hydroelectric receives information after the reporting period, but prior to the date of authorization for issue,
about conditions that existed at the end of the reporting period, Hydroelectric will assess if the information
affects the amounts that it recognizes in Hydroelectric’s financial statements. Hydroelectric will adjust the
amounts recognized in its financial statements to reflect any adjusting events after the reporting period and
update the disclosures that relate to those conditions in the light of the new information. For non-adjusting
events after the reporting period, Hydroelectric will not change the amounts recognized in its financial
statements but will disclose the nature of the non-adjusting event and an estimate of its financial effect, or a
statement that such an estimate cannot be made, if applicable.

4.17 Foreign currencies

Transactions in foreign currencies are initially recorded by Hydroelectric at its functional currency spot rates at
the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
spot rates of exchange at the reporting date.

Differences arising on settlement or translation of monetary items are recognized in profit or loss with the
exception of exchange differences on translation of foreign currency loan and related foreign currency bank
balances related to projects under development, which is being capitalized to the extent they are eligible for
capitalization, up to the date of commissioning of the projects, in pursuant to the exemption granted by SECP
as disclosed in Note 2.3. All other exchange differences are charged to statement of profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial transactions. There are no non-monetary items measured at fair
value in a foreign currency.

In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or
part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance
consideration, the date of the transaction is the date on which Hydroelectric initially recognizes the non-
monetary asset or non-monetary liability arising from the advance consideration. If there are multiple
payments or receipts in advance, Hydroelectric determines the transaction date for each payment or receipt of
advance consideration.

4.18 Revenue from contract with customer

Revenue is measured based on the consideration to which Hydroelectric expects to be entitled in a contract
with a customer and excludes amounts collected on behalf of third parties. Hydroelectric recognize revenue
when it transfers control of a product or service to a customer.

4.18.1 Sale of electricity

WAPDA signed its PPA with the CPPA-G, the sole customer of WAPDA Hydroelectric on 24 January 2011.

F-29 Page 26 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Performance obligations
Under the PPA, WAPDA Hydroelectric is obligated to:
- sell and deliver all Net Electric Output (NEO) of all power stations of WAPDA Hydroelectric; and
- make available the installed capacity of power stations to the CPPA-G.

Since, the CPPA-G simultaneously receives and consumes the benefits provided by Hydroelectric, hence
performance obligations are satisfied over time. However, Hydroelectric applies the practical expedient of
right to invoice to recognize the revenue under IFRS 15. There is no significant financing component and
significant variable consideration. The individual components of consideration is billed on monthly basis in
accordance with terms of the PPA. The invoices are raised to the CPPA-G on monthly basis and are payable
within 25 days from the date of invoice.

The power sale invoice comprises of payments for a fixed charge and a variable charge. Fixed charge
payments are computed by multiplying the fixed charge rate with the installed capacity and variable charge
payments are computed by multiplying the variable charge rate with the net electrical output in the month to
which the relevant invoice relates. The fixed charge rate and the variable charge rate for each agreement year
are approved by NEPRA and notified by the Federal Government in the official Gazette.

4.18.2 Grant income

- Grant related to operating fixed assets are taken to income over the useful life of the operating assets in
order to match with the corresponding depreciation expense.

- Grant for operating expenditures are amortized on the basis of expenditure incurred in accordance with
the terms attached to the respective grants.

4.18.3 Sale of scrap and store items

- Revenue from sale of scrap and store items is recognized when control of items passes to buyers which
is generally on dispatch of goods.

4.19 Ijarah

ljarah is a contract whereby the owner of an asset, other than consumable, transfers its usufruct to another
person for an agreed period for an agreed consideration. All Ijarah agreements are treated as operating lease.

Sales and lease back under Ijarah

A sale and leaseback transaction involves the sale of an asset by the vendor and the leasing of the same
asset back to the vendor. When an asset is sold with an intention to enter into an ljarah arrangement, any
profit or loss based on the asset’s fair value should be recognized immediately. If the sale price is below fair
value, any profit or loss should be recognized immediately except that, if the loss is compensated by future
lease payments at below market price, it should be deferred and amortized in proportion to the lease
payments over the period for which the asset is expected to be used. If the sale price is above fair value, the
excess over fair value should be deferred and amortized over the period for which the asset is expected to be
used.

WAPDA have Ijarah agreements with WAPDA Second and Third Sukuk Companies, whereby certain power
generation plant assets of Tarbela have been sold to above Sukuk Companies and WAPDA Hydroelectric has
leased the subject assets back at agreed rentals from the Sukuk Companies.

Ijarah rentals payable under Ijarah arrangement are charged to profit or loss on a straight line basis over the
term of the Ijarah lease arrangement as per the Islamic Financial Accounting Standard - 2 IJARAH. At the end
of Ijarah term, Sukuk Companies would gift the leased assets back to WAPDA Hydroelectric, which would be
recognized at nominal value.

4.20 Taxation

Income of WAPDA is exempt from income tax as per provisions of Clause 66 (xvi) Part-I of Second Schedule
to the Income Tax Ordinance, 2001. Interest income u/s 151, property income u/s 155 and cash withdrawals
from bank u/s 231A of the Income Tax Ordinance, 2001 are also exempt. Exemption certificates in these
regards are issued by Commissioner Income Tax on yearly basis. As mentioned in Note 2.1, WAPDA
Hydroelectric, being a segment of WAPDA, falls under the exemptions granted under the Income Tax
Ordinance 2001.

F-30 Page 27 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

5. PROPERTY, PLANT AND EQUIPMENT 2020 2019

Note ------------------------ PKR '000' ------------------------
Operating fixed assets 5.1 264,145,471 266,137,486
Capital Work In Progress (CWIP) 5.2 261,449,502 173,583,127
525,594,973 439,720,613
5.1 Operating fixed assets

2020
Cost Accumulated depreciation
Opening Closing Opening Closing Net book value
Asset class Disposals Depreciation Disposals
balance Direct Transferred balance balance Charge for the balance as at 30 June
during the year / rates during the year /
as at additions from CWIP as at as at year as at 2020
adjustments adjustments
01 July 2019 30 June 2020 01 July 2019 30 June 2020
--------------------------------------------------------------- PKR '000' ---------------------------------------------------------------
%--------------------------------------------------------------- PKR '000' ---------------------------------------------------------------
Land 5,905,191 47,561 114,032 - 6,066,784 - - - - - 6,066,784
Building and civil works 76,570,919 155,636 249,145 (267) 76,975,433 2 16,845,279 1,544,795 (138) 18,389,936 58,585,497
Power generation plant assets 113,667,372 961,273 1,477,267 - 116,105,912 2.86-5 34,332,696 3,806,812 - 38,139,508 77,966,404
Transmission line equipment 14,808,667 - 2,443,575 - 17,252,242 4 1,640,409 597,618 - 2,238,027 15,014,215
Dams and reservoirs 130,082,405 - - - 130,082,405 1-1.25 25,023,608 1,298,543 - 26,322,151 103,760,254
General / plant assets 3,222,795 147,771 707 (219) 3,371,054 10 872,024 294,274 (197) 1,166,101 2,204,953
Office equipment 220,529 28,416 150 (2,591) 246,504 10-25 135,460 29,358 (1,555) 163,263 83,241
Furniture and fixtures 691,296 31,806 - - 723,102 10 617,357 10,065 - 627,422 95,680

F-31
Transportation equipment 2,383,286 48,611 - (3,142) 2,428,755 20 1,948,141 114,293 (2,122) 2,060,312 368,443
347,552,460 1,421,074 4,284,876 (6,219) 353,252,191 81,414,974 7,695,758 (4,012) 89,106,720 264,145,471

2019
Cost Accumulated depreciation
Opening Closing Opening Net book value
Asset class Disposals during Depreciation Disposals during Closing
balance Direct Transferred from balance balance Charge for the as at
the year / rates the year / balance as at
as at additions CWIP as at as at year 30 June 2019
adjustments adjustments 30 June 2019
01 July 2018 30 June 2019 01 July 2018
--------------------------------------------------------------- PKR '000' ---------------------------------------------------------------
%--------------------------------------------------------------- PKR '000' ---------------------------------------------------------------
Land 5,698,714 10,329 199,052 (2,904) 5,905,191 - - - - - 5,905,191
Building and civil works 53,428,867 357,366 22,785,005 (319) 76,570,919 2 15,311,924 1,533,530 (175) 16,845,279 59,725,640
Power generation plant assets 68,848,628 1,092,398 43,850,334 (123,988) 113,667,372 2.86-5 30,534,495 3,807,110 (8,909) 34,332,696 79,334,676
Transmission line equipment 5,644,096 292 9,164,279 - 14,808,667 4 1,047,898 592,511 - 1,640,409 13,168,258
Dams and reservoirs 113,077,114 1,013,304 15,991,987 - 130,082,405 1-1.25 23,727,016 1,296,475 117 25,023,608 105,058,797
General / plant assets 1,179,992 55,118 1,990,678 (2,993) 3,222,795 10 579,827 293,210 (1,013) 872,024 2,350,771
Office equipment 196,900 23,629 - - 220,529 10-25 107,615 27,845 - 135,460 85,069
Furniture and fixtures 682,206 9,090 - - 691,296 10 584,934 32,423 - 617,357 73,939
Transportation equipment 2,318,617 71,610 - (6,941) 2,383,286 20 1,832,172 122,215 (6,246) 1,948,141 435,145
251,075,134 2,633,136 93,981,335 (137,145) 347,552,460 73,725,881 7,705,319 (16,226) 81,414,974 266,137,486

5.1.1 Deprecation charge for the year has been allocated as follows: 2020 2019
Note ---------------------- PKR '000' ----------------------
Cost of revenue 25 7,642,768 7,655,469
Transferred to CWIP 52,990 49,850
7,695,758 7,705,319

Page 28 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS
5.1.2 Operating fixed assets by power station

2020
Cost Accumulated depreciation
Opening Closing Opening Closing Net book value
Power stations Additions / Disposals Disposals during
balance balance balance Charge for the balance as at
transfers during during the year / the year /
as at as at as at year as at 30 June 2020
the year adjustments adjustments
01 July 2019 30 June 2020 01 July 2019 30 June 2020

------------------------------------------------------------------------------------------------------------------- PKR '000' -------------------------------------------------------------------------------------------------------------------

Tarbela 22,364,125 724,803 - 23,088,928 16,006,256 412,111 - 16,418,367 6,670,561
Ghazi Barotha 96,352,933 198,510 - 96,551,443 31,406,794 1,630,520 - 33,037,314 63,514,129
Mangla 33,914,579 93,597 - 34,008,176 7,058,029 610,680 - 7,668,709 26,339,467
Warsak 3,444,205 23,401 (3,142) 3,464,464 2,255,500 69,522 (2,137) 2,322,885 1,141,579
Chashma 21,033,321 194,719 - 21,228,040 10,149,970 457,161 - 10,607,131 10,620,909
Rasul 383,069 5,971 - 389,040 106,740 6,444 - 113,184 275,856
Dargai 157,363 665 - 158,028 65,806 3,526 - 69,332 88,696
Nandipur 122,339 315 - 122,654 75,353 3,171 - 78,524 44,130
Shadiwal 114,855 16,247 (267) 130,835 53,858 5,339 - 59,197 71,638

F-32
Chichoki 101,515 16,948 - 118,463 41,285 3,858 - 45,143 73,320
Kurram Garhi 58,413 2,722 - 61,135 17,552 1,488 - 19,040 42,095
Renala Khurd 32,451 - - 32,451 10,116 1,291 - 11,407 21,044
Chitral 81,901 1,323 - 83,224 58,779 1,495 - 60,274 22,950
Khan Khwar 9,642,146 690 - 9,642,836 1,596,109 181,588 - 1,777,697 7,865,139
Allai Khwar 15,202,343 17,145 - 15,219,488 2,991,609 265,288 - 3,256,897 11,962,591
Gomal Zam 7,520,004 2,040 - 7,522,044 975,070 146,489 - 1,121,559 6,400,485
Jinnah Hydel 18,274,432 21,386 - 18,295,818 2,476,881 435,610 - 2,912,491 15,383,327
Jabban 3,898,603 2,895 - 3,901,498 751,354 116,102 - 867,456 3,034,042
Duber Khwar 20,837,586 70,088 - 20,907,674 2,025,929 343,238 - 2,369,167 18,538,507
Tarbela 4th Extension 66,613,909 7,299 - 66,621,208 2,339,972 2,265,168 - 4,605,140 62,016,068
Golen Gol 26,938,282 4,219,632 - 31,157,914 666,610 674,546 - 1,341,156 29,816,758
Others 464,086 85,554 (2,810) 546,830 285,402 61,123 (1,875) 344,650 202,180
2020 347,552,460 5,705,950 (6,219) 353,252,191 81,414,974 7,695,758 (4,012) 89,106,720 264,145,471
2019 251,075,134 96,614,471 (137,145) 347,552,460 73,725,881 7,705,319 (16,226) 81,414,974 266,137,486

Page 29 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2020 2019
5.2 Capital Work In Progress (CWIP) Note --------------------- PKR '000' ---------------------

Opening balance as at 01 July 173,583,127 223,506,927

Addition in direct cost during the year 5.2.3 92,151,251 44,057,535
Transferred to operating fixed assets (4,284,876) (93,981,335)
Closing balance as at 30 June 5.2.1 261,449,502 173,583,127

5.2.1 Projects breakup movement 2020

Dasu
Diamer Bhasha Tarbela 4th Hydropower Keyal Mangla Mohmand Warsak 2nd Other
Golen Gol Total
Dam Extension Project Khwar Upgradation Dam Rehabilitation Projects
(5.2.3)
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- PKR '000' ---------------------------------------------------------------------------------------------------------------------

Opening balance as at 01 July 2019 85,686,501 2,506,632 3,667,766 49,351,643 3,168,027 6,893,431 16,709,162 1,034,723 4,565,242 173,583,127

Movement in CWIP during the year:

Additions / (adjustments) during the year 57,760,477 2,163,663 550,071 19,137,024 171,522 4,289,560 5,609,120 139,472 2,330,342 92,151,251
Transferred to operating fixed assets - - (4,217,837) - - - - - (67,039) (4,284,876)

F-33
57,760,477 2,163,663 (3,667,766) 19,137,024 171,522 4,289,560 5,609,120 139,472 2,263,303 87,866,375
Closing balance as at 30 June 2020 143,446,978 4,670,295 - 68,488,667 3,339,549 11,182,991 22,318,282 1,174,195 6,828,545 261,449,502

2019
Dasu
Diamer Bhasha Tarbela 4th Hydropower Keyal Mangla Mohmand Warsak 2nd Other
Golen Gol Total
Dam Extension Project Khwar Upgradation Dam Rehabilitation Projects
(5.2.3)
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- PKR '000' ----------------------------------------------------------------------------------------------------------------------

Opening balance as at 01 July 2018 - (Un-audited) 77,201,695 66,606,173 26,924,253 38,848,272 2,801,429 4,425,880 - 1,021,346 5,677,879 223,506,927

Movement in CWIP during the year:

Additions / (adjustments) during the year 8,484,806 2,326,634 3,667,767 10,503,371 366,598 2,467,551 16,709,162 13,377 (481,731) 44,057,535
Transferred to operating fixed assets - (66,426,175) (26,924,254) - - - - - (630,906) (93,981,335)
8,484,806 (64,099,541) (23,256,487) 10,503,371 366,598 2,467,551 16,709,162 13,377 (1,112,637) (49,923,800)
Closing balance as at 30 June 2019 85,686,501 2,506,632 3,667,766 49,351,643 3,168,027 6,893,431 16,709,162 1,034,723 4,565,242 173,583,127

5.2.2 The project-wise break up of Interest During Construction (IDC) charged to profit or loss is as follows.

IDC till 1 July 2018 - (Un-audited) 32,921,685 19,280,631 6,228,366 9,184,086 654,484 33,557 - 290,031 - 68,592,840
IDC for the year 8,485,098 8,896,598 2,096,314 8,262,820 96,829 193,498 - 153,258 120,326 28,304,741
IDC till 30 June 2019 41,406,783 28,177,229 8,324,680 17,446,906 751,313 227,055 - 443,289 120,326 96,897,581
IDC for the year 8,453,917 4,782,744 1,974,400 10,003,628 96,748 313,254 - 156,279 371,980 26,152,950
IDC till 30 June 2020 49,860,700 32,959,973 10,299,080 27,450,534 848,061 540,309 - 599,568 492,306 123,050,531

Page 30 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

5.2.3 This includes net exchange loss of Rs. 831 million (2019: Rs. 1,973 million) which arose on translation of
foreign direct loan and foreign currency bank balance, directly related to Dasu Hydropower project.

2020 2019
6. LONG TERM LOANS, ADVANCES Note --------------------- PKR '000' ---------------------
AND DEPOSITS

Loans to employees - secured 6.1 649,432 594,207

Advance to WAPDA Water Wing 6.2 1,708,501 106,562
Security deposits 2,053 1,956
2,359,986 702,725

6.1 Long term loans to employees against purchase of:

- House buildings 227,587 199,081
- Plots 485,337 456,614
- Vehicles 9,673 4,962
- Others 79 139
6.1.1 722,676 660,796
Less: current portion shown under current assets
- House buildings 22,759 19,908
- Plots 48,534 45,661
- Vehicles 1,935 992
- Others 16 28
73,244 66,589
649,432 594,207

6.1.1 These represent loans provided to the permanent employees and are recoverable in 120 monthly
installments in respect of purchase of plot and house buildings and in 60 monthly installments for other
loans. Loans against plot are secured against the mortgage of land in favor of WAPDA, whereas other
loans are secured against employees' balances in General Provident Fund maintained with WAPDA.
Most of these loans are interest free and the management considers that discounting impact of these
loans would be insignificant.

6.2 This advance has been given to WAPDA Water Wing for providing of technical services for hydro
development projects.

2020 2019
7. STORES, SPARES AND LOOSE TOOLS Note --------------------- PKR '000' ---------------------

Stores and spares 5,824,512 5,184,714

Loose tools 348,652 335,917
6,173,164 5,520,631

8. RECEIVABLE FROM THE CUSTOMER

Unsecured, considered good

Receivable from the CPPA-G - related party:

- against sale of electricity 105,114,822 67,677,164
- against hydel levies 8.1 114,433,362 124,605,790
8.2 219,548,184 192,282,954

F-34 Page 31 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2020 2019
8.1 Receivable against hydel levies Note --------------------- PKR '000' ---------------------

NHP - Government of Punjab 8.1.1 65,196,519 77,279,939

NHP - Government of KPK 8.1.2 47,854,089 46,399,684
WUC - Government of AJ&K 8.1.3 1,139,274 769,003
WMC - IRSA 8.1.4 243,480 157,164
114,433,362 124,605,790

8.1.1 This represents NHP receivable from the CPPA-G against bulk generation of power from hydro-electric
stations situated in Punjab by WAPDA Hydroelectric and is paid / payable to the Government of Punjab, in
accordance with GoP notification S.R.O. 290 (I)/2018 dated 23 February 2018.

8.1.2 This represents NHP receivable from the CPPA-G against bulk generation of power from hydro-electric
stations situated in KPK by WAPDA Hydroelectric and is paid / payable to the Government of Khyber
Pakhtunkhwa, in accordance with GoP notification S.R.O. 290 (I)/2018 dated 23 February 2018.

8.1.3 This represents Water Usage Charges (WUC) receivable from the CPPA-G and is paid / payable to the
Government of Azad Jammu and Kashmir, in accordance with GoP notification S.R.O. 290 (I)/2018 dated
23 February 2018.

8.1.4 This represents Water Management Charges (WMC) receivable from the CPPA-G and is paid / payable
to the Indus River System Authority (IRSA) in pursuant to letter no. A-II-6/10/2010-IRSA dated 25 August
2011 i.e. 01 July 2011 and S.R.O. 290 (I)/2018 dated 23 February 2018.

2020 2019
8.2 Aging of trade debts --------------------- PKR '000' ---------------------

Not past due: 9,624,761 10,660,327

Past due:
- 0 - 30 days 10,093,570 10,461,178
- 31 - 60 days 7,809,449 8,863,374
- More than 60 days 192,020,404 162,298,075
219,548,184 192,282,954

As discussed in Note 29.1.2, receivable from the customer of WAPDA Hydroelectric represents amounts
due from the CPPA-G (a Government owned entity) against sale of electricity and hydel levies. In
pursuant with the SRO No. 985(1)/2019 issued by SECP on 2 September 2019 in respect of the
companies holding financial assets due from GOP, the requirements contained in ''IFRS 9 (Financial
instrument) with respect to application of expected credit losses method (ECL)'' shall not be applicable till
30 June 2021.

Amounts receivable from the CPPA-G has been acknowledged by CPPA-G, a fellow Government owned
entity, which has direct access to cashflows of electricity distribution entities; accordingly, the
management is confident that there is no objective evidence that any significant credit loss has incurred.
Accordingly, no allowance in this regard has been created.

2020 2019
9. SHORT TERM INVESTMENTS Note --------------------- PKR '000' ---------------------
Amortized cost:
Investment in Term Deposit Receipt (TDR) 9.1 - 3,000,000
Innovative Investment Bank Limited 9.2 261,000 261,000
261,000 3,261,000
Less: allowance for expected credit loss (261,000) (261,000)
- 3,000,000
F-35 Page 32 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

9.1 These represented term deposit receipts from commercial banks having maturity up to six months. These
carried mark-up at the rate of 13.05% to 13.5% (2019: 11% to 13.5%) per annum.

9.2 This represents investment made in the Innovative Investment Bank Limited (the Bank). On maturity, the
balance remained unpaid, hence the case was lodged with the Honorable Lahore High Court (LHC) for
the recovery of the said amount. The Honorable Lahore High Court decided the case in favor of WAPDA
and attached the property with forced sale value of Rs. 220 million and appointed Court Auctioneers for
recovery of this amount.

Further, Securities and Exchange Commission of Pakistan (SECP) obtained stay order from LHC and
initiated voluntary winding-up of the Bank by court. The LHC first appointed Provisional Manager to run
the affairs of the Bank and there after Joint Official Liquidators (JOLs) for winding-up of the Bank.
WAPDA lodged its formal claim as preferential claimant being the entity owned by the GoP before JOLs
of the Bank under liquidation. JOLs through decision dated 09 September 2020 rejected WAPDA’s claim
as to preferential claimant and against that JOLs' decision, WAPDA filed an appeal before LHC which is
pending for adjudication. WAPDA Hydroelectric has recognized the expected credit loss against the said
investment in it's financial statements.

2020 2019
10. OTHER RECEIVABLES Note --------------------- PKR '000' ---------------------

Bridge financing to:

- WAPDA Water Wing 10.1 4,336,886 2,520,604
- WAPDA Coordination Wing 10.2 1,269,462 460,689
5,606,348 2,981,293
Interest receivable on bridge financing to:
- WAPDA Water Wing 1,254,382 641,056
- WAPDA Coordination Wing 115,704 22,961
1,370,086 664,017
Others:
- Considered good 10.3 & 10.4 1,924,260 927,625
- Considered doubtful 1,286,558 1,286,558
3,210,818 2,214,183
Provision against doubtful receivable 10.5 (1,286,558) (1,286,558)
1,924,260 927,625
8,900,694 4,572,935

10.1 This represents unsecured bridge financing extended to WAPDA Water Wing for Kurram Tangi Dam and
Kachi Canal Project. The loan carries interest at the rate of 14.99% per annum (2019: 14.91% per
annum). These are expected to be recovered in next twelve months.

10.2 This represents unsecured bridge financing extended to WAPDA Coordination Wing to meet its working
capital requirements. The loan carries interest at the rate of 14.99% per annum (2019: 14.91% per
annum). These are expected to be recovered in next twelve months.

10.3 This includes Rs. 554 million (2019: Rs. 495 million) receivable in respect of interest income from Land
Acquisition Collectors of Hazro and Ghazi (related parties) against advances given for land acquisition for
Ghazi Barotha Hydropower Project.

10.4 This includes interest receivable Rs. 1,062 million (2019: Nil) from the CPPA-G paid by Hydroelectric on
the loan of Rs. 17,500 million obtained by WAPDA Hydroelectric from Allied Bank Limited for onward
payment of net hydel profits to Provincial Governments in pursuant to the decision of the Economic
Coordination Committee (ECC), GoP.

10.5 This represents provision against unreconciled balance with the CPPA-G.

F-36 Page 33 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2020 2019
11. LOANS AND ADVANCES Note --------------------- PKR '000' ---------------------

Advances to: unsecured, considered good

- Employees against expense 727,727 381,841
- Chief Resident Representative Karachi 11.1 1,946,707 3,449,460
- Suppliers and others 2,831,507 1,992,631
5,505,941 5,823,932
Current portion of long term loans 6.1 73,244 66,589
5,579,185 5,890,521

11.1 This advance has been given to the Chief Resident Representative Karachi (CRRK), (a segment of
WAPDA) against import of stores and spare parts.

2020 2019
12. BANK BALANCES Note --------------------- PKR '000' ---------------------

Direct working capital balances

Balance with the banks:
- current accounts
Hydroelectric's own balance 745,312 1,536,177

Balances held for specific utilizations:

Balance with the banks:
- current accounts
un-utilized balance of loans and grants 12.1 48,681,846 54,866,832

- deposit accounts
un-utilized balance of loans and grants 12.2 3,504,384 5,364,488
Hydroelectric's own balance 12.3 5,575,617 9,909,958
9,080,001 15,274,446
Total bank balances 58,507,159 71,677,455

12.1 Un-utilized balance of loans and grants

Held in current accounts:

IDA relent loan for Dasu hydropower project 15.1.2.2 1,177,497 1,836,259
Foreign direct loan for Dasu hydropower project 15.2.2 43,582,810 49,065,464
IDA relent loan for Tarbela 4th extension project 15.1.1.11 277,246 803,924
IBRD relent loan for Tarbela 4th extension project 15.1.1.12 - 488,769
USAID grant for Mangla refurbishment project 16.1.2 2,378,018 1,330,345
AFD relent loan for Mangla refurbishment project 15.1.2.5 634,401 745,947
IBRD relent loan for Tarbela 5th extension project 15.1.2.6 35,093 346,131
USAID grant for Golen Gol hydropower project 16.1.3 596,781 249,993
48,681,846 54,866,832

12.2 Un-utilized balance of loans and grants

Held in deposit accounts:

Syndicated local facility for
Dasu hydropower project 15.4 3,504,384 5,364,488

12.3 Deposit accounts carry interest at the rate ranging from 5.50% to 12.75% (2019: 9.8% to 11.75%) per
annum.

F-37 Page 34 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

13. REGULATORY DEFERRAL

ACCOUNT DEBIT BALANCES
Operating
Interest on
costs and
loans Total
others
(Note 13.1)
(Note 13.2)
------------------------------------------ PKR '000' ------------------------------------------
Balance as at 01 July 2018 - (Un-audited) 4,741,619 8,618,871 13,360,490
Balances arising in the year 3,887,300 (382,798) 3,504,502
Recovery / reversal (Note 13.3) - (5,560,000) (5,560,000)
Net movement 3,887,300 (5,942,798) (2,055,498)
Balance as at 30 June 2019 8,628,919 2,676,073 11,304,992
Balances arising in the year / net movement 2,394,980 7,384,384 9,779,364
Balance as at 30 June 2020 11,023,899 10,060,457 21,084,356

13.1 This regulatory deferral account debit balance represents the interest on loans obtained by WAPDA Hydroelectric for
payment of NHP to the Provincial Governments and management expects that this would be recovered within 24
months from the reporting date.

13.2 This regulatory deferral account debit balance represents the operating and maintenance cost, depreciation and return
on regulatory asset base. The management expects that this would be recovered within 24 months from the reporting
date.

13.3 This represented the transfer from regulatory deferral account debit balance to receivable from the customer.

13.4 As described in Note 4.20, income of WAPDA Hydroelectric is exempt from tax, accordingly there are no tax
implications on regulatory deferred account debit balance.

13.5 For detail regarding rate regulatory process, refer to Note 4.10.

14. GOVERNMENT OF PAKISTAN'S INVESTMENT

This represents equity investment of the GoP in WAPDA Hydroelectric.

2020 2019
Note ----------------- PKR '000' -----------------
15. LONG TERM FINANCING - interest bearing

Foreign loans:
- relent from the GoP in PKR - unsecured (FRL) 15.1 106,864,636 109,662,906
- direct - secured 15.2 58,923,690 59,144,090
165,788,326 168,806,996
Local loans:
- cash development loans from the GoP - unsecured 15.3 88,005,767 89,086,166
- syndicated term finance facility - secured 15.4 25,000,000 25,000,000
- diminishing musharakah - secured 15.5 - 38,120,000
113,005,767 152,206,166
278,794,093 321,013,162
Less: current portion shown under current liabilities
- foreign relent loans 15.6 100,359,051 41,123,950
- foreign direct loans 15.2.2 - 59,144,090
- cash development loans 15.6 49,005,767 22,586,166
- syndicated term finance facility 15.4.1 25,000,000 25,000,000
- diminishing musharakah - 38,120,000
174,364,818 185,974,206
104,429,275 135,038,956

F-38 Page 35 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2020 2019
15.1 Foreign relent loans from the GoP - unsecured: Note ----------------- PKR '000' -----------------

Operational power station loans 15.1.1 72,320,543 82,187,122

Development project loans 15.1.2 34,544,093 27,475,784
106,864,636 109,662,906

15.1.1 Operational power station loans

Outstanding
Rate of Repayment
semi annual
interest commence-
Loan name Note installments 2020 2019
per ment /
as on
annum maturity
30 June 2020
----------------- PKR '000' -----------------
Ghazi Barotha
ADB-1424-PAK 15.1.1.1 14.00% 2 2001/2021 470,814 941,629
KfW-9566316 15.1.1.2 14.00% 6 2003/2023 892,043 1,189,390
Pk-P-47 15.1.1.3 17.00% - 2005/2020 - 569,427
1,362,857 2,700,446
Chashma
Citi Bank of Japan 15.1.1.4 11.00% 10 2005/2025 529,441 635,329

Allai, Dubair and Khan Khwar

projects
IDB-PAK-0117 15.1.1.5 17.00% 6 2014/2023 680,620 4,936,817

Jabban Power station

AFD Credit Facility 15.1.1.6 15.00% 16 2014/2028 1,578,520 1,775,835

Golen Gol
Kuwait Fund Loan No. 742 15.1.1.7 17.00% 10 2014/2025 2,219,789 2,663,746
Saudi Fund Loan No. 10/479 15.1.1.8 17.00% 10 2014/2025 1,796,153 2,155,384
Saudi Fund Loan No. 14/609 15.1.1.9 15.00% 27 2019/2034 4,980,147 5,349,047
OPEC Fund Loan No. 1205 15.1.1.10 17.00% 16 2018/2028 1,121,466 1,261,649
OPEC Fund Loan No. 1206 15.1.1.10 17.00% 16 2019/2028 1,385,938 937,211
11,503,493 12,367,037
Tarbela 4th Extension
IDA Credit No. 5079-PK 15.1.1.11 15.00% 33 2017/2037 17,667,972 18,059,104
IBRD 8144-PK 15.1.1.12 15.00% 23 2020/2031 38,997,640 41,712,554
56,665,612 59,771,658
72,320,543 82,187,122

15.1.1.1 This loan has been obtained for Ghazi Barotha Hydropower Station from Asian Development Bank (ADB) by the GoP
and further re-lent to WAPDA Hydroelectric. This carries mark up @ 14% (2019: 14%) per annum inclusive of interest
rate of 11% (2019: 11%) plus 3% (2019: 3%) "Exchange Risk Cover" which is charged on principal amount. This loan is
secured through GoP guarantee in favor of ADB and WAPDA Hydroelectric is responsible for repayment to the GoP.

15.1.1.2 This loan has been obtained for Ghazi Barotha Hydropower Station from Kreditanstalt für Wiederaufbau, Frankfurt an
Main (KfW) by the GoP and further re-lent to WAPDA Hydroelectric. This carries mark up @ 14% (2019: 14%) per
annum inclusive of interest rate of 11% (2019: 11%) plus 3% (2019: 3%) "Exchange Risk Cover" which is charged on
principal amount. This loan is secured through GoP guarantee in favor of KfW and WAPDA Hydroelectric is
responsible for repayment to the GoP.

15.1.1.3 This loan has been obtained for Ghazi Barotha Hydropower Station from Overseas Economic Cooperation Fund (Fund)
by the GoP and further re-lent to WAPDA Hydroelectric. This carries mark up @ 17% (2019: 17%) per annum inclusive
of interest rate of 11% (2019: 11%) plus 6% (2019: 6%) "Exchange Risk Cover" which is charged on principal amount.
This loan is secured through GoP guarantee in favor of Fund and WAPDA Hydroelectric is responsible for repayment to
the GoP.

F-39 Page 36 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

15.1.1.4 This loan has been obtained for Chashma Hydropower Station from Citi Bank by the GoP and further re-lent to WAPDA
Hydroelectric. This carries mark up @ 11% (2019: 11%) per annum inclusive of interest rate of 8% (2019: 8%) plus 3%
(2019: 3%) "Exchange Risk Cover" which is charged on principal amount. This loan is secured through GoP guarantee
in favor of the bank and WAPDA Hydroelectric is responsible for repayment to the GoP.

15.1.1.5 This represents Islamic Development Bank loan amounting to USD 150.200 million under Istisna's Financing
Agreement dated 01 December 2008 for Allai, Dubair and Khan Khwar Hydropower Projects obtained by the GoP. The
GoP has relent the loan to WAPDA Hydroelectric being executing agency of Khwar Projects. This carries mark up @
17% (2019: 17%) per annum inclusive of interest rate of 11% (2019: 11%) plus 6% (2019: 6%) "Exchange Risk Cover"
which is charged on principal amount. The loan will be repaid in 15 years including 3 years of grace period.

15.1.1.6 This represents Agence Française de Développement (AFD) loan amounting to EURO 26.500 million under Subsidiary
Loan Agreement dated 13 December 2010 for Jabban Power Station taken by the GoP. The GoP has relent the loan to
WAPDA Hydroelectric being executing agency for the Jabban Power Station. This carries mark up @ 15% (2019: 15%)
per annum inclusive of interest rate of 8.2% (2019: 8.2%) plus 6.8% (2019: 6.8%) "Exchange Risk Cover" which is
charged on principal amount. The loan will be repaid in 18 years including 3 years of grace period.

15.1.1.7 This represents Kuwait Fund loan amounting to Kuwaiti Dinar 11 million under Subsidiary Loan Agreement dated 05
September 2008 for Golen Gol Hydropower Project taken by the GoP. The disbursement of loan started in 2014. The
GoP has relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up @ 17%
(2019: 17%) per annum inclusive of interest rate of 11% (2019: 11%) plus 6% (2019: 6%) "Exchange Risk Cover"
which is charged on principal amount. The loan will be repaid in 15 years including 2 years of grace period.

15.1.1.8 This represents Saudi Fund loan amounting to Saudi Riyals 150 million under Subsidiary Loan Agreement dated 05
September 2008 for Golen Gol Hydropower Project taken by the GoP. The disbursement of loan started in 2011. The
GoP has relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up @ 17%
(2019: 17%) per annum inclusive of interest rate of 11% (2019: 11%) plus 6% (2019: 6%) "Exchange Risk Cover"
which is charged on principal amount. The loan will be repaid in 15 years including 2 years of grace period.

15.1.1.9 This represents Saudi Fund loan amounting to Saudi Riyals 216.750 million under Subsidiary Loan Agreement dated
28 April 2014 for Golen Gol Hydropower Project taken by the GoP. The disbursement of loan started in 2011. The GoP
has relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up @ 15%
(2019: 15%) per annum inclusive of interest rate of 8.2% (2019: 8.2%) plus 6.8% (2019: 6.8%) "Exchange Risk Cover"
which is charged on principal amount. The loan will be repaid in 20 years including 5 years of grace period.

15.1.1.10 These represent Organization of Petroleum Exporting Country (OPEC) fund loans amounting to USD 15 million each
under relending arrangement dated 05 June 2017 for Golen Gol Hydropower Project taken by the GoP. The
disbursement of Portion-1 and Portion-2 has been started in 2016 and 2018 respectively. The GoP has relent the loan
to WAPDA Hydroelectric being executing agency for the project. These carry mark up @ 17% (2019: 17%) per annum
inclusive of interest rate of 11% (2019: 11%) plus 6% (2019: 6%) "Exchange Risk Cover" which is charged on principal
amount. Portion-1 and Portion-2 will be repaid in 11 and 10 years respectively. WAPDA Hydroelectric has started
repayment of Portion-1 and Portion-2 from 2018 and 2019, respectively, pursuant to the direction of the GoP.

15.1.1.11 This represents International Development Association (IDA) loan, amounting to USD 440 million under Subsidiary
Loan Agreement dated 12 April 2012 obtained for Tarbela 4th Extension Hydropower Project by the GoP. The GoP has
relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up @ 15% (2019:
15%) per annum inclusive of interest rate of 8.2% (2019: 8.2%) and 6.8% (2019: 6.8%) "Exchange Risk Cover" which
are charged on both principal and interest amount separately. The loan will be repaid in 25 years including 5 years of
grace period.

For the year Cumulative

Loan utilization 2020 2019 2020 2019
--------------------------------- PKR '000' ---------------------------------
Opening balance 803,924 374,656 - -
Withdrawal of loan 244,148 2,668,857 18,831,671 18,587,523
1,048,072 3,043,513 18,831,671 18,587,523
Less: utilization of funds (770,826) (2,239,589) (18,554,425) (17,783,599)
Closing balance 277,246 803,924 277,246 803,924

F-40 Page 37 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

15.1.1.12 This represents International Bank for Reconstruction and Development (IBRD) loan of USD 400 million under
Subsidiary Loan Agreement dated 12 April 2012 for Tarbela 4th Extension Hydropower Project taken by the GoP. The
GoP has relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up @ 15%
(2019: 15%) per annum inclusive of interest rate of 8.2% (2019: 8.2%) plus 6.8% (2019: 6.8%) "Exchange Risk Cover"
which is charged on both principal and interest amount separately. The loan will be repaid in 19 years including 7 years
of grace period.

For the year Cumulative

Loan Utilization 2020 2019 2020 2019
--------------------------------- PKR '000' ---------------------------------
Opening balance 488,769 590,993 - -
Withdrawal of loan 912,265 1,373,995 42,624,819 41,712,554
1,401,034 1,964,988 42,624,819 41,712,554
Less: utilization of funds (1,401,034) (1,476,219) (42,624,819) (41,223,785)
Closing balance - 488,769 - 488,769

15.1.2 Development project loans

Outstanding
Rate of Repayment
semi annual
interest commence-
Loan name Note installments 2020 2019
per ment /
as on
annum maturity
30 June 2020
----------------- PKR '000' -----------------
Keyal Khwar
KfW-320517 15.1.2.1 15.00% 77 2019/2059 503,466 516,543
KfW-3003374 15.1.2.1 15.00% 57 2019/2049 128,336 132,839
631,802 649,382
Dasu Hydro
IDA Credit No. 5498-PK 15.1.2.2 15.00% 38 2020/2039 26,529,027 22,823,983

Warsak Rehabilitation (Phase 2)

AFD Credit Facility 15.1.2.3 15.00% 27 2022/2036 1,013,918 981,049
KfW-15568024 15.1.2.4 15.00% 60 2027/2056 40,671 40,671
1,054,589 1,021,720
Mangla Refurbishment Project
AFD Credit Facility 15.1.2.5 12.00% 30 2023/2037 3,676,065 1,914,289

Tarbela 4th / 5th Extension

IBRD Loan No.8646-PK 15.1.2.6 12.00% 28 2023/2036 1,331,057 755,949
AIIB Loan No.LN 0005-PAK 15.1.2.7 12.00% 28 2023/2036 443,874 310,461
1,774,931 1,066,410
Mohmand Dam
CPK 1028-01-W 15.1.2.8 15.00% 20 2019/2028 877,679 -
34,544,093 27,475,784

15.1.2.1 This represents Frankfurt am Main (KfW) loan amounting to EURO 97.080 million, to be disbursed in two tranches.
Under Tranche - 1 (KfW 320517) - Euro 4.415 million will be disbursed that will be repaid in 48 years including 8 years
of grace period. Under Tranche - 2 (KfW 3003374), Euro 92.664 million will be disbursed that will be repaid in 34 years
including 4 years of grace period. The loan taken by the GoP has been relent under Subsidiary Loan Agreement dated
27 December 2011 for Keyal Khwar Hydropower Project. The disbursement of loan for second tranche started in 2015.
These carry mark up @ 15% (2019: 15%) per annum inclusive of interest rate of 8.2% (2019: 8.2%) plus 6.8% (2019:
6.8%) "Exchange Risk Cover" which is charged on principal amount.

15.1.2.2 This represents relent loan from International Development Association (IDA), amounting to USD 588.4 million under
subsidiary loan agreement dated 13 October 2014 for Dasu Hydropower Project taken by the GoP. The GoP has relent
the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up @ 15% (2019: 15%) per
annum inclusive of interest rate of 8.2% (2019: 8.2%) plus 6.8% (2019: 6.8%) "Exchange Risk Cover" which is charged
on principal amount. WAPDA Hydroelectric will disburse USD 15 million to National Transmission and Despatch
Company (NTDC) for feasibility study and detail design of transmission lines. WAPDA Hydroelectric has disbursed
USD 4.045 million (2019: USD 2.796 million) to NTDC as of reporting date. The loan will be repaid in 25 years including
5 of years of grace period.

F-41 Page 38 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

For the year Cumulative

Loan utilization 2020 2019 2020 2019
--------------------------------- PKR '000' ---------------------------------
Opening balance 1,836,259 1,836,259 - -
Withdrawal of loan 4,458,235 4,828,611 27,282,218 22,823,983
6,294,494 6,664,870 27,282,218 22,823,983
Less: utilization of funds (5,116,997) (4,828,611) (26,104,721) (20,987,724)
Closing balance 1,177,497 1,836,259 1,177,497 1,836,259

15.1.2.3 This represents Agence Française de Développement (AFD) loan amounting to EURO 41.5 million under Subsidiary
Loan Agreement dated 22 September 2015 for Warsak Rehabilitation Hydropower Project (Phase-2) taken by the GoP.
The GoP has relent the loan to WAPDA Hydroelectric being executing agency for the Warsak Rehabilitation Project.
This carries mark up @ 15% (2019: 15%) per annum inclusive of interest rate of 8.2% (2019: 8.2%) plus 6.8% (2019:
6.8%) "Exchange Risk Cover" which is charged on principal amount. The loan will be repaid in 20 years including 6
years of grace period.

15.1.2.4 This represents Frankfurt am Main (KfW) loan of EURO 40 million, to be disbursed in two portions. Under Portion-1,
EURO 30 million will be disbursed that will be repaid in 38 including grace period of 8 years. Under Portion-2, EURO 10
million will be disbursed that will be repaid after 10 years from the availability of Portion-2 over a period of 15 years. The
disbursement of loan for Portion-1 started in 2018. The loan taken by the GoP has been relent under Subsidiary Loan
Agreement dated 22 September 2015 for Rehabilitation of Warsak Hydropower Plant Project. This carries mark up @
15% (2019: 15%) per annum inclusive of interest rate of 8.2% (2019: 8.2%) plus 6.8% (2019: 6.8%) "Exchange Risk
Cover" which is charged on principal amount. The loan will be repaid in 38 years including 8 years of grace period.

15.1.2.5 This represents Agence Française de Développement (AFD) loan amounting to EURO 90 million under Subsidiary
Loan Agreement dated 20 July 2017 for Rehabilitation of Mangla Hydropower Project taken by the GoP. The GoP has
relent the loan to WAPDA Hydroelectric being executing agency for the Mangla Hydropower Project. This carries mark
up @ 12% (2019: 12%) per annum inclusive of interest rate of 6.9% (2019: 6.9%) plus 5.1% (2019: 5.1%) "Exchange
Risk Cover" which is charged on principal amount. The loan will be repaid in 20 years including a grace period of 5
years.

15.1.2.6 This represents International Bank for Reconstruction (IBRD) loan amounting to USD 390 million under Subsidiary
Loan Agreement dated 18 January 2017 for additional financing of Tarbela 4th Extension Hydropower Project taken by
the GoP. The loan is also being utilized for Tarbela 5th Extension Hydropower Project. The GoP has relent the loan to
WAPDA Hydroelectric being executing agency for the project. The GoP has relent the loan to WAPDA Hydroelectric
being executing agency for the project. This carries mark up @ 12% (2019: 12%) per annum inclusive of interest rate of
6.9% (2019: 6.9%) plus 5.1% (2019: 5.1%) "Exchange Risk Cover" which is charged on both principal and interest
amount separately. The loan will be repaid in 19 years including a grace period of 5 years.

15.1.2.7 This represents Asian Infrastructure Investment Bank (AIIB) loan amounting to USD 300 million under Subsidiary Loan
Agreement dated 18 January 2017 for Tarbela 5th Extension Hydropower Project taken by the GoP. The GoP has
relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up @ 12% (2019:
12%) per annum inclusive of interest rate of 6.9% (2019: 6.9%) plus 5.1% (2019: 5.1%) "Exchange Risk Cover" which
is charged on both principal and interest amount separately. The loan will be repaid in 19 years including a grace period
of 5 years.

15.1.2.8 This represents Agence Française de Développement (AFD) loan amounting to EURO 11 million under Subsidiary
Loan Agreement dated 30 September 2014 to finance the first tranche of the project including detailed design studies,
preparatory works and additional needed consultancy services taken for Mohmand Dam Project taken by the GoP. The
GoP has relent the loan to WAPDA Hydroelectric being executing agency for the Mohmand Dam Project. This carries
mark up @ 15% per annum inclusive of interest rate of 8.2% plus 6.8% "Exchange Risk Cover" which is charged on
both principal and interest amount separately. The loan will be repaid in 15 years including a grace period of 5 years.

2020 2019
15.2 Foreign direct loans - secured: Note ----------------- PKR '000' -----------------

Operational power station loans 15.2.1 - 2,009,460

Development project loans 15.2.2 58,923,690 57,134,630
58,923,690 59,144,090

F-42 Page 39 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Rate of Installments Repayment

interest outstanding commence-
Loan name Note 2020 2019
per as on ment /
annum 30 June 2020 maturity

----------------- PKR '000' -----------------

Operational power station loan
Jinnah
Chinese Supplier Credit 15.2.1 5.00% - 2010/2020 - 2,009,460

Development project loan

Dasu
Pakistan Water and
Power (06/17) - Global 15.2.2 5.34% 8 2023/2027 58,923,690 57,134,630
58,923,690 59,144,090

15.2.1 Operational project loan - Dongfang Electric Corporation

This represents supplier's credit facility from Exim Bank of China, amounting to Nil (2019: USD 12.308 million) for the
construction of Jinnah Hydropower Project, a turn key project against the sanctioned limit of USD 123.097 million. The
loan is repayable in fourteen years inclusive of four years grace period, in 20 semi annually installments starting from
18 August 2010. Rate of mark-up is 5% annually. The loan is secured through stand by letter of credit to back issuance
of 20 promissory notes issued at the time of commencement of the project in 2006. WAPDA Hydroelectric has repaid
the entire loan. The loan was secured through guarantee given by the GoP.

2020 2019 2020 2019

----------------- USD '000' -----------------
----------------- PKR '000' -----------------

Outstanding balance as at 01 July 12,308 24,618 2,009,460 2,994,554

Exchange (gain) / loss for the year - - (80,158) 634,189
12,308 24,618 1,929,302 3,628,743
Less: repayments during the year (12,308) (12,310) (1,929,302) (1,619,283)
Outstanding balance as at 30 June - 12,308 - 2,009,460

15.2.2 Development project loan - Credit Suisse AG, Singapore

This represents loan amounted USD 350 million (2019: USD 350 million) obtained from Credit Suisse AG, for the
construction of Dasu Hydropower Project. The loan is repayable in ten years inclusive of six years grace period, in 8
semi annual installments starting from 30 June 2023. Rate of mark-up is 5.34% per annum. The loan is secured
through guarantees given by the GoP and International Development Association (IDA).

As per section 23.2 of the loan agreement with the Credit Suisse Bank, WAPDA Hydroelectric was required to maintain
tangible net worth at or above Rs. 500,000 million, at all time prior to the payment of the uncovered interest amount. In
prior years, this loan was classified as current as the tangible net worth of WAPDA Hydroelectric was less than required
amount. As at 30 June 2020, the entire uncovered interest amount has been repaid, resultantly, related financial
covenant became redundant and loan has been reclassified as non-current.

2020 2019 2020 2019

----------------- USD '000' -----------------
----------------- PKR '000' -----------------

Outstanding balance as at 01 July 350,000 350,000 57,134,630 42,571,795

Exchange loss for the year - - 1,789,060 14,562,835
350,000 350,000 58,923,690 57,134,630
Add: loan received during the year - - - -
Outstanding balance as at 30 June 350,000 350,000 58,923,690 57,134,630

F-43 Page 40 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2020 2019
15.3 Cash development loans from the GoP - unsecured: Note ----------------- PKR '000' -----------------

Operational power station loans 15.3.1 5,809,714 6,207,924

Development project loans 15.3.2 82,196,053 82,878,242
88,005,767 89,086,166

15.3.1 Operational power station loans

Rate of Installments Repayment

Power station and interest outstanding commence-
Note 2020 2019
year of disbursement per as on ment /
annum 30 June 2020 maturity
----------------- PKR '000' -----------------
Ghazi Barotha
2005-06 15.3.1.1 9.79% 11 2012/2031 4,994,647 5,242,936

Jabban
2007-08 15.3.1.1 10.14% 13 2014/2033 26,125 27,083
2009-10 15.3.1.1 12.59% 15 2016/2035 89,378 91,409
115,503 118,492
Tarbela (HPS)
1997-98 15.3.1.2 17.50% 3 2004/2023 426,046 528,023
1998-99 15.3.1.2 17.50% 4 2005/2024 273,518 318,473
699,564 846,496
5,809,714 6,207,924

15.3.1.1 These loans have been obtained for Ghazi Barotha and Jabban projects from the GoP for construction of the projects.
The loans will be repaid in 25 years including 5 years of grace period.

15.3.1.2 The loan have been obtained for Tarbela hydel power station from the GoP for payment of net hydel profit to provincial
Government of Khyber Pakhtunkhwa. The loan will be repaid in 25 years including 5 years of grace period.

15.3.2 Development project loans

Rate of Installments Repayment

Project and interest outstanding commence-
Note 2020 2019
year of disbursement per as on ment /
annum 30 June 2020 maturity
----------------- PKR '000' -----------------
Harpo
2009-10 15.3.2.1 12.59% 15 2016/2035 35,751 36,564

Bashoo
2007-08 15.3.2.1 10.14% 13 2014/2033 13,834 14,342
2009-10 15.3.2.1 12.59% 15 2016/2035 23,834 24,376
37,668 38,718
Diamer Bhasha
2007-08 15.3.2.2 10.14% 13 2014/2033 253,055 262,338
2009-10 15.3.2.2 12.59% 15 2016/2035 916,702 937,526
2011-12 15.3.2.2 12.64% 17 2018/2037 11,188,205 11,379,462
2012-13 15.3.2.2 10.65% 18 2019/2038 3,655,732 3,723,634
2013-14 15.3.2.2 11.79% 19 2020/2039 27,108,940 27,500,000
2014-15 15.3.2.2 10.53% 20 2021/2040 15,000,000 15,000,000
2015-16 15.3.2.2 7.37% 20 2022/2041 10,000,000 10,000,000
2016-17 15.3.2.2 6.54% 20 2023/2042 14,000,000 14,000,000
82,122,634 82,802,960
82,196,053 82,878,242

15.3.2.1 These loans have been obtained from the GoP for feasibility studies of hydel development projects. The loans will be
repaid in 25 years including 5 years of grace period.

15.3.2.2 The loan have been obtained from the GoP for the land acquisition of Diamer Bhasha Dam project. The loan will be
repaid in 25 years including 5 years of grace period.

F-44 Page 41 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

15.4 WAPDA Hydroelectric has entered into agreements with Habib Bank Limited lead consortium of seven banks on 29
March 2017 for financing of Dasu Hydropower Project amounting to Rs. 144,000 million for the period of fifteen (15)
years including five (5) years grace period. This loan has the following structure of facilities:

GoP Guarantee Backed Assets Backed Financing

Financing (GBF) Facilities (ABF) Facilities
Total
Sukuk Diminishing Commercial
TFCs
(musharakah) musharakah facility
---------------------------------------------- PKR '000' ----------------------------------------------

Total amount of facilities 52,800,000 35,200,000 33,600,000 22,400,000 144,000,000

Un-availed balance of facilities 37,800,000 25,200,000 33,600,000 22,400,000 119,000,000
at 01 July 2019

Availed during the year - - - - -

Un-availed balance of facilities
at 30 June 2020 37,800,000 25,200,000 33,600,000 22,400,000 119,000,000

Total availed balance of facilities

at 30 June 2020 15,000,000 10,000,000 - - 25,000,000

Face value per certificate (Rs.) 10,000 10,000 - - -

Principal repayment will commence 8 November 2022 - - -

6 month
KIBOR +
6 month KIBOR + margin of margin of 200
Profit on rental payments - -
1.45% payable semi annually basis points
p.a

Musharakah assets share 62.72% - 37.28% - 100%

15.4.1 The Sukuk and TFCs are secured by way of guarantee of the GoP to the Pak Brunei Investment Company Limited
(Trustee) whereas Mangla Dam's land amounting to Rs. 103,244 million is being used as Musharakah Assets. Further
Power Generation Plant Assets of Ghazi Barotha and Tarbela HPP amounting to Rs. 77,106 million have been
hypothecated in favor of Security Trustee for securing Islamic and Commercial Asset Backed Facilities. WAPDA
Hydroelectric has injected equity amounted Rs. 32,998 million (2019: Rs. 18,106 million) as at reporting date for the
construction of Dasu Hydropower Project.

As per clause 22 of schedule 8 of DASU syndicated facilities, WAPDA Hydroelectric shall maintain Financial Services
Coverage Ratio (FSCR) and Current Ratio at least 1.25:1 and 1:1 respectively; any breach will trigger an event of
default. As described in Note 15.6, WAPDA Hydroelectric classified the loans from the GoP as current; resultantly
WAPDA Hydroelectric was unable to maintain the required FSCR and Current Ratio as of reporting date. hence, the
entire outstanding loan amounted Rs. 25,000 million (2019: Rs. 25,000 million) has been classified as current.

2020 2019
15.5 Diminishing Musharakah - secured Note ----------------- PKR '000' -----------------

Habib Bank Limited 15.5.1 - 38,120,000

15.5.1 This represents Shirkat-ul-milk facility amounting to Rs. 38,120 million obtained from Habib Bank Limited for meeting
WAPDA Hydroelectric's working capital requirements (payment of net hydel profits of WAPDA). The principal is
repayable at the end of two years in the form of a bullet repayment. Profit is payable semi-annually in arrears at the
rate of six months KIBOR minus 50 bps. The facility is secured by unconditional and irrevocable first demand
guarantee covering principal and profit from the GoP. WAPDA Hydroelectric has repaid the entire loan during the
year.

15.6 As described in Note 20.2, WAPDA Hydroelectric did not repay the installments of certain Foreign relent loans (FRLs)
and cash development loans (CDLs) as per agreed repayment schedules. WAPDA Hydroelectric does not have
unconditional right to defer the settlement of these loans for at least twelve months after the reporting date. As a result
of being in default of these loans, the management has classified the FRLs and CDLs amounting to Rs. 92,173 million
(2019: Rs. 31,799 million) and Rs. 47,547 million (2019: Rs. 21,506 million), respectively, as current liabilities.

F-45 Page 42 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2020 2019
16. DEFERRED GRANTS Note ----------------- PKR '000' -----------------

Balance as on 01 July 32,479,003 8,499,955

Add: grants received during the year 71,740,293 24,298,519
Less: grants amortized during the year 28.2 (246,283) (319,471)
Balance as on 30 June 16.1 103,973,013 32,479,003
Less: current portion shown under current liabilities (246,283) (246,283)
103,726,730 32,232,720

Grants related to capital Grants related to operating

work in progress fixed assets
2020 2019 2020 2019
Note
-------------------------------------------- PKR '000' --------------------------------------------
16.1 This relates to:
- Gomal Zam 16.1.1 - - 2,123,362 2,218,736
- Mangla Dam Rehabilitation Project 16.1.2 7,458,948 4,726,143 - -
- Hydropower Training Institute 228,872 228,872 - -
- Golen Gol 16.1.3 - - 4,225,500 3,542,622
- Glacier Monitoring Network 33,681 26,559 - -
- Diamer Bhasha Dam 16.1.4 64,017,077 4,736,070 - -
- Mohmand Dam 16.1.5 25,510,036 17,000,000 - -
- Warsak Rehabilitation Project 16.1.6 30,684 - - -
- Tarbela Rehabilitation Project 16.1.7 344,852 - - -
- Land granted by GoGB 16.1.8 1 1 - -
97,624,151 26,717,645 6,348,862 5,761,358

16.1.1 The grant was received from United States Agency for International Development (USAID) for the construction of Gomal
Zam project consisting construction of civil works and purchase of electronic and mechanical equipment and is being
amortized over 50 years and 25 years respectively which are useful lives of the respective assets of the project.

16.1.2 The grant for Mangla Refurbishment Project is received from USAID to enhance the total installed capacity of Mangla
Power Station by 310 Mega Watts (MW) from the current 1,000 MW to 1,310 MW. The grant is also being used for
refurbishing and upgrading units 5 and 6 of Mangla Power Station along with related plant facility enhancements.

16.1.3 This represents grant received from USAID for the construction of Golen Gol Hydropower project with a total installed
capacity of 108 MW. Consequential to capitalization of Golan Gol Hydropower Project during the year it is now being
amortized over 30 years which is the useful life of the plant and equipment of the project.

16.1.4 The grant is received under Public Sector Development Program (PSDP), from the GoP for the construction of Diamer
Bhasha Dam having total installed capacity of 4,500 MW.

16.1.5 The grant is received under Public Sector Development Program (PSDP), from the GoP for the construction Mohmand
Dam having total installed capacity of 800 MW.

16.1.6 This grant is received from AFD for rehabilitation of Warsak to improve operational practices by enhancing the operation
capacity of power station from 190 MW to 243 MW and maintenance capacity and to support it in climate change
adoption activities (flood etc.).

16.1.7 This grant is received from USAID for the design, manufacturing, supply, erecting, testing and commissioning of parts
related to rehabilitation of Tarbela power project.

16.1.8 This pertains to the nominal value assigned as per WAPDA Hydroelectric's accounting policy for non-monetary grants to
the land measuring 17,214 acres granted by Government of Gilgit Baltistan (GoGB) free of cost for the construction of
Diamer Bhasha Dam.

F-46 Page 43 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

17. EMPLOYEE RETIREMENT AND OTHER BENEFITS

2020
Free Free
Particulars Compensated
medical electricity Pension Total
absences
facility facility
--------------------------------------------- PKR '000' ---------------------------------------------
Liabilities recognized in the
statement of financial position 1,055,457 3,770,759 2,843,106 55,983,891 63,653,213

Changes in the
present value of obligations:

Opening balance 857,073 3,645,650 2,261,928 47,219,670 53,984,321

Service cost 38,986 98,582 54,193 989,465 1,181,226
Interest cost 126,136 519,231 259,450 6,762,814 7,667,631
Benefits paid (3,823) (250,877) (107,685) (2,740,162) (3,102,547)
Actuarial loss / (gain) 37,085 (241,827) 375,220 3,752,104 3,922,582
Closing balance 1,055,457 3,770,759 2,843,106 55,983,891 63,653,213

2019
Free Free
Particulars Compensated
medical electricity Pension Total
absences
facility facility
--------------------------------------------- PKR '000' ---------------------------------------------
Liabilities recognized in the
statement of financial position 857,073 3,645,650 2,261,928 47,219,670 53,984,321

Changes in the
present value of obligations:

Opening balance 643,871 3,403,426 2,222,753 38,987,168 45,257,218

Service cost 36,165 91,784 52,556 918,074 1,098,579
Interest cost 75,655 382,737 256,146 4,442,407 5,156,945
Benefits paid - (292,172) (85,581) (2,358,902) (2,736,655)
Actuarial loss / (gain) 101,382 59,875 (183,946) 5,230,923 5,208,234
Closing balance 857,073 3,645,650 2,261,928 47,219,670 53,984,321

17.1 Charge for the year in statement of profit or loss

2020
Free Free
Particulars (Note 25.2) Compensated
medical electricity Pension Total
absences
facility facility
--------------------------------------------- PKR '000' ---------------------------------------------
Current service cost 38,986 98,582 54,193 989,465 1,181,226
Interest cost 126,136 519,231 259,450 6,762,814 7,667,631
Actuarial loss 37,085 - - - 37,085
202,207 617,813 313,643 7,752,279 8,885,942

2019
Free Free
Particulars (Note 25.2) Compensated
medical electricity Pension Total
absences
facility facility
--------------------------------------------- PKR '000' ---------------------------------------------
Current service cost 36,165 91,784 52,556 918,074 1,098,579
Interest cost 75,655 382,737 256,146 4,442,407 5,156,945
Actuarial loss 101,382 - - - 101,382
213,202 474,521 308,702 5,360,481 6,356,906

F-47 Page 44 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2020
17.2 Key assumptions Free Free
Compensated
medical electricity Pension
absences
facility facility
Medical cost growth rate - 10.25% - -
Cash medical allowance growth rate - 5.00% - -
Discount rate 10.25% 10.25% 10.25% 10.25%
Salary growth rate 9.25% - - 9.25%
Pension growth rate - - - 5.25%
Electricity cost growth rate - - 9.25% -
Average expected remaining working life 9 years 10 years 10 years 10 years
Average duration of liabilities 9 years 23 years 23 years 23 years

2019
Free
Compensated Free medical
electricity Pension
absences facility
facility
Medical cost growth rate - 14.75% - -
Cash medical allowance growth rate - 5.00% - -
Discount rate 14.75% 14.75% 14.75% 14.75%
Salary growth rate 13.75% - - 13.75%
Pension growth rate - - - 9.75%
Electricity cost growth rate - - 13.75% -
Average expected remaining working life 9 Years 10 Years 10 Years 10 Years
Average duration of liabilities 9 Years 23 Years 23 Years 23 Years

2020
17.3 Quantitative sensitivity analyses Free Free
Compensated
medical electricity Pension
absences
facility facility
--------------------------------------------- PKR '000' ---------------------------------------------
Medical cost increase + 1% - 650,757 - -
Medical cost increase - 1% - (554,976) - -
Discount rate + 1% (90,418) (586,839) (442,470) (8,712,714)
Discount rate - 1% 98,881 694,967 523,997 10,318,071
Salary increase + 1% 98,882 - - 4,038,477
Salary increase - 1% (90,411) - - (3,766,705)
Pension increase rate + 1% - - - 3,654,634
Pension increase rate - 1% - - - (3,163,626)
Electricity cost increase + 1% - - 490,663 -
Electricity cost increase - 1% - - (418,445) -

2019
Free
Compensated Free medical
electricity Pension
absences facility
facility
--------------------------------------------- PKR '000' ---------------------------------------------
Medical cost increase + 1% - 629,166 - -
Medical cost increase - 1% - (536,562) - -
Discount rate + 1% (73,423) (567,369) (352,021) (7,348,748)
Discount rate - 1% 80,295 671,909 416,883 8,702,788
Salary increase + 1% 80,296 - - 3,406,258
Salary increase - 1% (73,417) - - (3,177,031)
Pension increase rate + 1% - - - 3,082,505
Pension increase rate - 1% - - - (2,668,364)
Electricity cost increase + 1% - - 390,363 -
Electricity cost increase - 1% - - (332,908) -

F-48 Page 45 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2020 2019
18. RETENTION MONEY PAYABLES Note ----------------- PKR '000' -----------------

Opening balance 3,531,488 3,118,496

Add:
- Retention held during the year 1,352,178 663,493
- Exchange loss 119,471 429,461
1,471,649 1,092,954
Less:
- Payments made during the year (297,504) (679,962)
Closing balance 4,705,633 3,531,488
Less: current portion shown under current liabilities 1,968,236 258,805
2,737,397 3,272,683

19. TRADE AND OTHER PAYABLES

Payables to contractors and consultants 4,561,471 4,123,167

Due to other wings of WAPDA 19.1 1,441,901 1,453,164
Due to statutory authorities 398,373 436,958
Security deposits 306,312 367,845
Accrued liabilities 37,922 38,758
Other liabilities 19.2 1,049,907 849,954
7,795,886 7,269,846

19.1 Due to other wings of WAPDA

WAPDA Coordination Wing 263,978 84,255

WAPDA Water Wing 1,177,923 1,368,909
1,441,901 1,453,164

19.2 This includes payable to related parties (mainly, entities under control of WAPDA) amounted Rs. 401 million (2019: Rs.
372 million).

19.3 Terms and conditions of the above financial liabilities:

- Payable to contractors and consultants are non-interest bearing and are normally settled on 30-60 days terms.
- Other payables are non-interest bearing and have an average term of three to six months.

2020 2019
20. SHORT TERM BORROWINGS Note ----------------- PKR '000' -----------------

Power Sector Investment (PSI) 20.1 7,625,544 96,229

Payable to the GoP 20.2 71,965,776 40,956,678
79,591,320 41,052,907

20.1 This represent unsecured and interest free loan obtained during the year from PSI (entity under common control of
WAPDA) to meet the working capital requirements and is payable on demand.

20.2 This represents the overdue balances of installments and related interest accrued on foreign relent and cash
development loans, which is not paid as per the respective repayment schedules. The outstanding balances and the
related interest accrued are payable on demand and will be settled upon specific instructions from Economic Affair
Division (EAD), the GoP. No interest is charged on the outstanding balance, after their due dates.

F-49 Page 46 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2020 2019
21. PAYABLE AGAINST HYDEL LEVIES Note ----------------- PKR '000' -----------------

NHP payable to Government of Punjab (GoPb) 8.1.1 48,803,511 32,758,962

NHP payable to Government of KPK (GoKPK) 8.1.2 36,840,397 30,088,008
WUC payable to Government of AJ&K (GoAJ&K) 8.1.3 89,145 74,509
WMC payable to IRSA 8.1.4 45,103 35,788
85,778,156 62,957,267

21.1 Movement in payable against hydel levies during the year is as follows:

WUC
NHP payable NHP payable WMC payable
payable to Total
to GoPb to GoKPK to IRSA
GoAJ&K
----------------------------------------------- PKR '000' -----------------------------------------------
Balance as at 01 July 2018 - (Un-audited) 265,417 16,906,235 48,700 45,884 17,266,236
Billed during the year 63,864,308 39,214,104 570,417 135,980 103,784,809
Adjusted with unbilled NHP (31,370,763) (6,032,331) - - (37,403,094)
Paid during the year - (20,000,000) (544,608) (146,076) (20,690,684)
Balance as at 30 June 2019 32,758,962 30,088,008 74,509 35,788 62,957,267
Billed during the year 23,544,549 23,252,389 688,399 161,475 47,646,812
Paid during the year (7,500,000) (16,500,000) (673,763) (152,160) (24,825,923)
Balance as at 30 June 2020 48,803,511 36,840,397 89,145 45,103 85,778,156

22. ACCRUED INTEREST

This represents interest accrued on foreign relent loans received during the year from the GoP.

23. CONTINGENCIES AND COMMITMENTS

23.1 Contingencies

There are no significant contingencies to disclose at the reporting date (2019: Nil).

23.2 Commitments

23.2.1 Capital commitments contracted for but not incurred as at 30 June 2020 amounted to Rs. 569,929 million (2019: Rs.
693,770 million).

23.2.2 Commitments under letter of credit amounts to Rs. 3,137 million. (2019: Rs. 2,586 million).

23.2.3 The commitments in respect of Ijarah rentals payable to WAPDA Third Sukuk Company Limited are described below:

2020 2019
--------------- PKR '000'----------------

Not later than one year 1,496,251 1,780,126

Later than one year and not later than five years 726,868 2,223,119
2,223,119 4,003,245

23.2.4 The commitment in respect of arrears of net hydel profit payable to the Government of Punjab at reporting date is Nil
(2019: Rs. 14,860 million)

2020 2019
24. REVENUE FROM CONTRACT WITH CUSTOMER - NET Note --------------- PKR '000'----------------

Sale of electricity
- Variable charges 24.1 2,857,525 2,197,509
- Fixed charges 59,906,011 63,946,024
24.3 62,763,536 66,143,533

24.1 The amount is net of sale tax amounting to Rs. 485.779 million (2019: Rs. 373.577 million).

F-50 Page 47 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2020 2019
24.2 Timing of revenue recognition Note --------------- PKR '000'----------------

Revenue recognized over time 62,763,536 66,143,533

24.3 Plant wise disaggregated revenue information

Tarbela 13,170,144 15,932,772

Ghazi Barotha 13,974,482 15,141,585
Tarbela 4th Extension 6,293,127 5,066,201
Mangla 7,777,522 8,538,740
Khan Khwar 2,104,029 2,146,763
Chashma 3,240,412 3,390,727
Warsak 1,747,787 1,936,541
Duber Khwar 4,397,165 4,495,930
Golen Gol 1,410,675 586,042
Jinnah Hydel 2,161,629 2,248,731
Allai Khwar 3,126,470 3,221,811
Jabban 827,456 844,175
Rasul 211,530 232,010
Dargai 210,025 227,128
Gomal Zam 1,410,252 1,392,624
Nandipur 194,302 205,710
Shadiwal 164,070 178,211
Chichoki 152,927 163,292
Kurram Garhi 91,665 94,608
Chitral 52,882 53,991
Renala Khurd 44,985 45,941
62,763,536 66,143,533

25. COST OF REVENUE

Salaries, wages and benefits 25.1 5,786,846 5,445,618

Retirement and other benefits 25.2 8,885,942 6,356,906
Sukuk III Ijarah rentals 1,780,126 1,834,072
Repairs and maintenance 904,281 832,137
Depreciation 5.1.1 7,642,768 7,655,469
Dams inspection and monitoring cost 701,713 943,715
Power, gas and water 432,430 358,392
NEPRA fee 140,547 125,863
Insurance 25.3 49,389 55,046
Consultancy charges 88 71
Fuel charges 22,203 29,648
Return on assets to provinces 12,972 12,972
Sundry expenses 2,152 22,839
26,361,457 23,672,748

25.1 Salaries, wages and benefits

Pay and allowances 4,209,350 4,312,354

Other benefits 1,577,496 1,133,264
5,786,846 5,445,618

F-51 Page 48 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2020 2019
25.2 Retirement and other benefits Note ------------------ PKR '000' ------------------

Pension 17.1 7,752,279 5,360,481

Free electricity facility 17.1 313,643 308,702
Free medical facility 17.1 617,813 474,521
Compensated absences 17.1 202,207 213,202
8,885,942 6,356,906

25.3 As per the WAPDA Equipment Protection Scheme (WEPS), WAPDA Hydroelectric's equipment of power
houses has been provided insurance coverage based on net book value of equipment.

2020 2019
26. OPERATING EXPENSES Note ------------------ PKR '000' ------------------

Management service charges 993,378 698,953

R&D - Survey and Investigation 26.1 292,244 329,924
Vehicle running expenses 221,617 217,098
Outside services employed 68,789 48,105
Travelling expenses 80,721 81,087
Office expenses 23,803 20,178
Advertisement and periodicals 15,328 19,746
Legal and professional charges 17,227 12,717
Communication 13,800 12,196
Rent, rates and taxes 3,111 2,762
Others 9,225 1,649
1,739,243 1,444,415

26.1 R&D - Survey and investigation includes research and development expenses of projects which cannot be
developed due to financial or technical reasons and the projects which are not to be developed by WAPDA
Hydroelectric (i.e. the feasibility is either transferred to Federal or Provincial Government, any organization or
expensed).

2020 2019
27. FINANCE AND OTHER COSTS Note ------------------ PKR '000' ------------------

Finance costs 27.1 30,305,277 36,063,545

Other costs 27.2 2,116,217 2,231,018
32,421,494 38,294,563
27.1 Finance costs

27.1.1 Development hydel projects

Interest on foreign relent loans 5.2.2 11,280,044 14,371,510
Interest on foreign direct loans 5.2.2 3,085,324 2,861,535
Dasu syndicated term finance facility 5.2.2 3,324,539 2,577,273
Interest on cash development loans 5.2.2 8,463,043 8,494,423
26,152,950 28,304,741
27.1.2 Operational hydel stations
Interest on foreign relent loans 15.1.1 1,042,968 1,916,993
Interest on foreign direct loans 15.2.1 38,704 124,777
Interest on cash development loans 15.3.1 675,675 720,013
Interest on diminishing musharakah 27.1.2.1 2,394,980 4,997,021
4,152,327 7,758,804
30,305,277 36,063,545

27.2 Other costs

Bank charges 326,281 15,954
Other charges 27.2.1 1,789,936 2,215,064
2,116,217 2,231,018

F-52 Page 49 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

27.1.2.1 This represents markup accrued on diminishing musharakah facility, obtained for payment of NHP to the
Governments of KPK and Punjab.

27.2.1 This mainly includes net exchange loss on foreign currency loan and payment of foreign currency invoices of
designated contractors and consultants.

2020 2019
28. OTHER INCOME Note ------------------ PKR '000' ------------------

28.1 Income from financial assets

Profit on bank balances 10.3 1,746,532 2,623,118

Interest income - investments 219,641 1,443,723
Interest income - long term loans to employees 1,199 835
Interest income - bridge financing 706,068 392,731
2,673,440 4,460,407
28.2 Income from non-financial assets

Amortization of grant 16 246,283 319,471

Income from guest houses and others 99,786 121,137
Sale of scrap 286 29,270
Gain on disposal of operating fixed assets 9,324 104,867
Income from non - utility operation 9,507 3,558
Sale of stores 101,706 1,972
Miscellaneous income 89,031 176,204
555,923 756,479
3,229,363 5,216,886

29. FINANCIAL RISK MANAGEMENT

29.1 Financial risk factors

WAPDA Hydroelectric financial liabilities comprise of interest bearing long term financing, short term borrowings,
trade and other payables (excluding statutory payables), accrued interest and retention money payables. The main
purpose of these financial liabilities is to raise finances for Hydroelectric operations. Hydroelectric financial assets
includes receivables from the customer, long term loans to employees and deposits, other receivables and bank
balances that arise directly from its operations.

Risk management is carried out by WAPDA Authority (which comprise of a Chairman and 3 Members) for WAPDA
Hydroelectric. WAPDA Authority provides principles for overall risk management, as well as policies covering
specific areas such as currency risk, interest rate risk, credit risk and liquidity risk.

WAPDA Hydroelectric activities expose it to a variety of financial risks: market risk (including currency risk, interest
rate risk and other price risk), credit risk and liquidity risk. WAPDA Hydroelectric overall risk management
programme focuses on the liquidity crisis and seeks to minimize potential adverse effects on the financial
performance.

29.1.1 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices will affect WAPDA Hydroelectric’s income or the value of its holdings of financial instruments. The objective
of market risk management is to manage and control market risk exposures within acceptable parameters, while
optimizing the return on risk.

(a) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or
receivables and payables that exist due to transactions in foreign currencies.

WAPDA Hydroelectric is exposed to currency risk arising from currency exposure to the United States Dollar
(USD). Currently, WAPDA Hydroelectric's foreign exchange risk exposure is restricted to the repayment of
foreign direct loans, retention money payables, payables to contractors and consultants and bank balances
held in foreign currency.

F-53 Page 50 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Exposure to foreign currency risk

WAPDA Hydroelectric’s exposure to foreign currency risk was as follows based on following amounts:

2020 2019
------------------------ USD '000' ------------------------
Long term financing - foreign direct loan 350,000 362,308
Bank balances - foreign currency 263,598 300,569
Payables to contractors and consultants 3,887 2,139
Retention money payables 3,798 8,561

The following significant exchange rates applied during the year:

Annual average rate Reporting date spot rate

2020 2019 2020 2019
US $ 158.26 136.27 168.05 160.05

Sensitivity analysis

WAPDA Hydroelectric's exposure to foreign currency risk arise on the projects which are under development
mainly due to the foreign currency balances mentioned above. The translation differences on the foreign
currency loan and related foreign currency bank balances are capitalized in pursuant to the SECP exemption
regarding capitalization of exchange differences, whereas fluctuation in the functional currency against USD
on other balances would not be having any significant impact on the profit of the Hydroelectric.

(b) Interest rate risk

The interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the
market interest rates. Sensitivity to interest rate risk arises from mismatches of financial assets and liabilities
that mature in a given period.

WAPDA Hydroelectric has no significant long-term interest-bearing assets. WAPDA Hydroelectric interest
rate risk arises from interest bearing loans and borrowings. Borrowings obtained at variable rates expose
Hydroelectric to cash flow interest rate risk.

At the statement of financial position date the interest rate profile of WAPDA Hydroelectric’s interest bearing
financial instruments is:

2020 2019
Fixed rate instruments ----------------- PKR '000'------------------
Financial liabilities:
Cash development, foreign relent and direct loans 253,794,093 257,893,162

Financial assets:
Short term investments - 3,000,000
Bridge financing to other Wings 5,606,348 2,981,293

Floating rate instruments

Financial liabilities:
Syndicated term finance facility 25,000,000 25,000,000
Diminishing musharakah - 38,120,000

Financial assets:
Bank balances - deposit accounts 9,080,001 15,274,446

F-54 Page 51 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Fair value sensitivity analysis for fixed rate instruments

WAPDA Hydroelectric does not account for any fixed rate financial assets and liabilities at fair value through
profit or loss. Therefore, a change in interest rate at the statement of financial position date would not affect
profit for the year of WAPDA Hydroelectric.

Fair value sensitivity analysis for floating rate instruments

If floating interest rates on financial instruments at the year end date, fluctuate by 1% higher / lower with all
other variables held constant, profit for the year would have decreased / increased by Rs. 166 million (2019:
Rs. 312 million) mainly as a result of higher / lower interest expense in the year ended 30 June 2020. This
analysis is prepared assuming the amount of floating rate instruments outstanding at the statement of
financial position dates were outstanding for the whole year.

(c) Other price risk

Other price risk is a risk that fair value or future cash flows of a financial instruments will fluctuate because of
changes in the market prices (other than those arising from currency risk and interest rate risk), whether
those changes are caused by specific to the individual financial instruments or its issuer, or factors effecting
all similar instruments traded in the market.

As at 30 June 2020, WAPDA Hydroelectric is not exposed to any significant price risk. (2019: Nil)

29.1.2 Credit risk

Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party
by failing to discharge its obligation. WAPDA Hydroelectric is exposed to credit risk from its operating activities
(primarily for trade receivable) loans to related parties and employees and from its financing activities, including
deposits with banks and financial institutions and other financial instruments.

The maximum risk positions of financial assets which are generally subject to credit risk are equal to their carrying
amounts. Following table shows the maximum risk positions.

2020 2019
At amortized cost: PKR '000' Exposure % PKR '000' Exposure %
Long term loans to employees 722,676 0.25% 660,796 0.24%
Long term deposits 2,053 0.00% 1,956 0.00%
Receivable from the customer 219,548,184 76.32% 192,282,954 70.64%
Short term investments - 0.00% 3,000,000 1.10%
Other receivables 8,900,694 3.09% 4,572,935 1.68%
Bank balances 58,507,159 20.34% 71,677,455 26.34%
287,680,766 100.00% 272,196,096 100.00%

At 30 June 2020, WAPDA Hydroelectric has only one customer, the CPPA-G (a Government owned entity) that
owed WAPDA Hydroelectric amounted Rs. 105,115 million (2019: Rs. 67,677 million) and Rs. 114,433 million
(2019: Rs. 124,606 million) against sale of electricty and hydel levies, respectively.

SRO No. 985(1)/2019 issued by SECP on 2 September 2019 in respect of the companies holding financial assets
due from GoP, the requirements contained in "IFRS 9 (Financial instrument) with respect to application of ECL"
shall not be applicable till 30 June 2021. Accordingly, no ECL is recorded on the receivables from the CPPA-G as
at 30 June 2020.

Further, due to WAPDA Hydroelectric's long standing business relationships with the CPPA-G and considering that
it is a Government owned entity, management does not expect to recognize the provision against receivables from
the CPPA-G. Accordingly, the credit risk is minimal.

Other receivables mainly includes balances from other segments of WAPDA or other Government controlled
entities. The management has assessed that ECL allowance on these receivable from related parties, is not
significant as the balances have been acknowledged by respective counter party and they have financial ability to
settle the amount.

WAPDA Hydroelectric deals with banks having credit ratings in the top categories therefore, considers these as low
risk and does not expect credit loss to arise on the balances. Following are the credit ratings of banks with balances
and short term investments are held at reporting date:

F-55 Page 52 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Rating
Bank 2020 2019
Short term Long term Agency
-------------------- PKR '000' --------------------
Bank balances
National Bank of Pakistan A1+ AAA PACRA 50,751,014 55,743,095
Habib Bank Limited A1+ AAA JCR-VIS 2,571,521 7,484,398
Askari Bank Limited A1+ AA+ PACRA 1,918,096 1,896,848
MCB Bank Limited A1+ AAA PACRA 1,075,505 2,028,992
United Bank Limited A1+ AAA JCR-VIS 949,375 979,615
Allied Bank Limited A1+ AAA PACRA 868,938 844,883
Habib Metropolitan Bank A1+ AA+ PACRA 315,942 2,005,821
Bank Alfalah Limited A1+ AA+ PACRA 52,628 434,944
Soneri Bank Limited A1+ AA- PACRA 4,136 258,855
Standard Chartered Bank A1+ AAA PACRA 4 4
58,507,159 71,677,455
Short term investments
Bank Alfalah Limited A1+ AA+ PACRA - 1,500,000
Habib Metropolitan Bank A1+ AA+ PACRA - 1,500,000
- 3,000,000
58,507,159 74,677,455

29.1.3 Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial
liabilities.

WAPDA Hydroelectric's approach to managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to Hydroelectric's reputation. Despite, presentation of various loans as
current as mentioned in Notes 15.4.1 and 15.6, WAPDA Hydroelectric expects to pay these loans in accordance
with original loan schedules.

The table below analyses WAPDA Hydroelectric's financial liabilities into relevant maturity groupings based on the
remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in
the table are the contractual undiscounted cash flows, the liabilities have been disclosed on the basis of earliest
date on which WAPDA Hydroelectric is required to pay these liabilities.

2020
Between
Carrying Contractual Less than Over 5
1 and 5
Amount cash flows 1 year years
years
------------------------------------------------------------------------------------------------ PKR '000' -------------------------------------------------------------------------
As at 30 June 2020
Long term financing 278,794,093 367,285,291 201,770,754 59,340,241 106,174,296
Short term borrowings 79,591,320 79,591,320 79,591,320 - -
Trade and other payables 7,397,513 7,397,513 7,397,513 - -
Payable against hydel levies 85,778,156 85,778,156 85,778,156 - -
Retention money payable 4,705,633 4,705,633 1,968,236 2,513,720 223,677
Accrued Interest 861,386 861,386 861,386 - -
457,128,101 545,619,299 377,367,365 61,853,961 106,397,973

2019
Between
Carrying Contractual Less than Over 5
1 and 5
Amount cash flows 1 year years
years
------------------------------------------------------------------------------------------------ PKR '000' -------------------------------------------------------------------------
As at 30 June 2019
Long term financing 321,013,162 435,666,064 209,512,697 101,249,162 124,904,205
Short term borrowings 41,052,907 41,052,907 41,052,907 - -
Trade and other payable 6,832,888 6,832,888 6,832,888 - -
Payable against hydel levies 62,957,267 62,957,267 62,957,267 - -
Retention money payable 3,531,488 3,531,488 258,805 3,272,683 -
Accrued Interest 1,161,323 1,161,323 1,161,323 - -
436,549,035 551,201,937 321,775,887 104,521,845 124,904,205

F-56 Page 53 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

29.1.4 Fair values estimation

Financial instruments comprise financial assets and financial liabilities. The fair values of the financial assets and
liabilities are included at the amount at which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. WAPDA Hydroelectric's financial assets consist of
receivables from the customer, long term loans and deposits, other receivables and bank balances and short term
investments. Its financial liabilities consist of long term financing, short term borrowings, trade and other payables
(excluding statutory payable), retention money payables and payable against hydel levies. The above financial
assets and liabilities (except non-current portion of long term loans and deposits, long term financing and retention
money payables) approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of non-current portion of long term loans and deposits and long term financing is not significantly
different to its carrying value as these financial instruments bear interest at floating rates which gets re-priced at
regular intervals. Management has concluded that carrying value of retention money payable approximates its fair
value.

29.1.5 Financial instruments by categories

2020 2019
Financial assets at amortized cost ------------------- PKR '000' -------------------
Long term loans and security deposits 724,729 662,752
Receivable from the customer 219,548,184 192,282,954
Short term investments - 3,000,000
Other receivables 8,900,694 4,572,935
Bank balances 58,507,159 71,677,455
287,680,766 272,196,096

Financial liabilities measured at amortized cost

Long term financing 278,794,093 321,013,162
Short term borrowings 79,591,320 41,052,907
Trade and other payables 7,397,513 6,832,888
Payable against hydel levies 85,778,156 62,957,267
Retention money payables 4,705,633 3,531,488
Accrued Interest 861,386 1,161,323
457,128,101 436,549,035

29.1.6 Capital risk management

WAPDA Hydroelectric’s objectives when managing capital are to safeguard Hydroelectric’s ability to continue as a
going concern. Hydroelectric manages its capital structure and make adjustments to it, in the light of the changes in
economic conditions.

Hydroelectric monitors capital using gearing ratio, which is net debt divided by equity plus net debt. Debt represent
long term loans (including current portion) obtained by Hydroelectric. Total equity includes accumulated profits and
equity investment by the GoP plus net debt.

The gearing ratios as at 30 June 2020 and 30 June 2019 are as follows:

2020 2019
Note ------------------- PKR '000' -------------------

Long term financing including current portion 15 278,794,093 321,013,162

Short term borrowing 20 79,591,320 41,052,907
Less: Bank balances 12 (58,507,159) (71,677,455)
Net debt 299,878,254 290,388,614

Equity 222,596,020 211,231,448

Net debt 299,878,254 290,388,614
Equity and net debt 522,474,274 501,620,062

Gearing ratio 57% 58%

F-57 Page 54 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

30. CHANGES IN LIABILITIES ARISING FROM FINANCING

ACTIVITIES INCLUDING CURRENT PORTION

Short term borrowings Long term financing

2020 2019 2020 2019
Note ------------------------------------------- PKR '000'------------------------------------------

As on 01 July 41,052,907 26,806,982 321,013,162 343,189,468

Cash flows 3,500,000 100,051 (31,378,634) (32,105,706)
Foreign exchange - - 1,708,902 15,197,024
Others 30.1 & 30.2 35,038,413 14,145,874 (12,549,337) (5,267,624)
As on 30 June 79,591,320 41,052,907 278,794,093 321,013,162

30.1 The others pertains to the interest on FRLs and CDLs and overdue installments of principal of FRL and CDL
transferred from long term financing, payable to the GoP.

30.2 The others pertains to the overdue installments of principal of FRLs and CDLs transferred into payable to the GoP
under short-term borrowings.

31. INSTALLED CAPACITY AND NET ELECTRIC OUTPUT 2020 2019

Installed Capacity (Mega Watts) 8,420 8,348

Net Electric Output (Giga Watt) 32,294 27,196

32. NUMBER OF EMPLOYEES ---------------------- Number ----------------------

Active employees 8,026 9,135

Pensioners 8,461 8,882

33. TRANSACTIONS WITH RELATED PARTIES

WAPDA Hydroelectric is part of WAPDA, which is fully owned by the GoP, therefore entities which are owned and / or
controlled by the GoP, or where the GoP may exercise significant influence, are related parties of WAPDA
Hydroelectric. WAPDA Hydroelectric in the ordinary course of business enters into transaction with Government-
related entities. Related parties comprise GoP and its associated departments and entities being commonly controlled
by GoP, associated undertakings, key management personnel and entities in which key management personnel are
office holders / members. Using the exemption granted under IAS 24, WAPDA Hydroelectric has disclosed only the
significant related parties transactions entered into during the year. Balances due from and due to related parties are
shown in their respective notes. Details of significant related parties transactions during the year are as follows:

Name of related
Nature of transaction 2020 2019
party & relationship
--------------- PKR '000'--------------
Government of Pakistan

- Economic Affair Division Receipt of disbursements against FRL 8,670,675 11,549,543

Adjustment of financing with trade debts - 16,238,071
Adjustment of financing with prepayments - 1,361,868
Adjustment of financing with PSI 4,029,325 -
Payment of guarantee fee - Exim Bank 9,740 13,990
Payment of guarantee fee - Credit Suisse 12,950 52,350
Receipt of Government grants 67,791,043 21,736,070

Associated undertakings
due to common control

- CPPA-G Sale of electricity including related to tests run 62,763,536 67,229,632

Billing of hydel levies 47,646,812 103,784,809
Adjustment of borrowing with trade debts - 16,238,071
Interest on loan obtained for payment of NHP 1,062,119 -
Receipts against sale of electricity and hydel levies 83,630,897 62,919,450

F-58 Page 55 of 57
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Name of related
Nature of transaction 2020 2019
party & relationship
--------------- PKR '000'--------------
Associated undertakings
due to common control

- Government of Punjab Payment of 4% return on assets 9,284 9,284

Hydel levies adjustment / payment 7,500,000 31,370,763

- Government of Sindh Payment of 4% return on assets 257 257

- Government of Khyber Payment of 4% return on assets 3,430 3,430

Pakhtunkhwa Hydel levies adjustment / payment 16,500,000 26,032,331

- WAPDA Equipment Insurance premium 49,389 55,046

Protection Scheme

- WAPDA Third Payment of Ijarah rentals 1,780,126 1,834,072

Sukuk Company

- Government of Azad Payment of water usage charges 673,763 544,608

Jammu and Kashmir

- Indus River Payment of water management charges 152,160 146,076

System Authority

- WAPDA Water Wing Bridge financing - net 1,816,282 334,916

Dams inspection and monitoring charges 701,713 943,715
Transfer of loan for Mohmand Dam 877,679 -
Long term advance for technical services 1,601,939 106,562
Interest on bridge financing 613,326 369,886

- WAPDA Coordination Wing Bridge financing - net 220,447 446,164

Authority overhead 359,574 287,521
Interest on bridge financing 92,743 22,845

- NEPRA NEPRA fee 140,547 125,863

- Power Services & Short term borrowings obtained 3,500,000 100,000

Investments (PSI) Adjustment of long term finance 4,029,325 -

- Land Acquisition Collectors Advance provided for land acquisition 16,045,715 1,882,271

- National Highway Authority Advance paid to NHA for relocation and

(NHA) upgradation of Karakoram Highway 1,167,123 4,299,161

- National Transmission & Payment made against the upgradation of - 225,080

Despatch Company (NTDC) transmission line and switch yard of Tarbela

- Chief Resident Advance against foreign purchase of plant, 1,343,507 494,408

Representative Karachi machinery, stores and spares - net
(CRRK)

Key management personnel

The Members of WAPDA Authority are the key management personnel of WAPDA Hydroelectric. The salaries
and other benefits of key management personnel are recorded and paid by WAPDA Coordination Wing. WAPDA
Coordination Wing charges these amounts to WAPDA Hydroelectric as part of authority overhead, disclosed
above.

F-59 Page 56 of 57
F-60
EY Ford Rhodes Tel: +9242 3577 8402-11
Chartered Accountants Fax:+9242 3577 8412-13
96-B-I, 4th Floor, Pace Mall Building ey.lhr@pk.ey.com
M. M. Alam Road, Gulberg-II ey.com/pk
P.O. Box 104, Lahore-54660

F-61


F-62
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F-66
PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
2019 2018
(Un-audited)
Operating activities --------------------------------
Note PKR '000' --------------------------------

Profit for the year before net movements in

regulatory deferral account debit balances 7,948,693 10,172,771

Adjustments to reconcile profit for the year before net movements

in regulatory deferral account debit balances to net cash flows:

Depreciation of operating fixed assets 5.1.1 7,655,469 4,785,425

Finance and other costs 27 38,294,563 31,176,977
Sukuk Ijarah rentals 25 1,834,072 2,571,259
Provision of employee retirement and other benefits 17.1 6,356,906 4,619,986
Income from financial assets 28.1 (4,460,407) (4,104,668)
Gain on disposal of operating fixed assets 28.2 (104,867) (10,607)
Amortization of deferred grants 28.2 (319,471) (144,065)
49,256,265 38,894,307
57,204,958 49,067,078
Working capital adjustments:

(Increase) / decrease in current assets:

Stores, spare and loose tools (425,773) (400,646)
Receivable from the customer against sale of electricity (35,665,693) (37,260,275)
Receivable from the customer against hydel levies (35,414,460) (46,706,883)
Advances (1,467,421) (2,978,572)
Prepayments 10,678 (4,086,364)
Other receivables (1,689,364) (395,308)

(Decrease) / increase in current liabilities:

Trade and other payables (2,739,730) (6,283,119)
Payable against hydel levies 45,691,031 (140,287)
(31,700,732) (98,251,454)
Net cash flows from / (used in) operations 25,504,226 (49,184,376)

Payment of Sukuk Ijarah rentals (1,834,072) (2,571,259)

Long term loans, advances and deposits given (136,189) (84,565)
Payment of employee retirement and other benefits 17 (2,736,655) (2,253,257)
(4,706,916) (4,909,081)
Net cash flows from / (used in) operating activities 20,797,310 (54,093,457)

Investing activities

Purchase of operating fixed assets and capital stores (2,465,341) 303,174

Capital expenditure incurred on capital work in progress (42,100,698) (27,684,991)
Proceeds from sale of operating fixed assets 107,841 10,607
Investments made during the year (46,000,000) (48,000,000)
Investments realized during the year 74,000,000 19,000,000
Interest and other income received 4,291,692 4,104,668
Grants received 16 24,298,519 4,791,928
Net cash flows from / (used in) investing activities 12,132,013 (47,474,614)

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PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019

1. LEGAL STATUS AND OPERATIONS

1.1 Pakistan Water and Power Development Authority (WAPDA) is a body corporate, created under the Pakistan
Water and Power Development Authority Act, 1958 (West Pakistan Act No. XXXI of 1958), commonly known
as WAPDA Act and is fully owned by the Government of Pakistan (GoP) through Ministry of Water and Power
(now Ministry of Water Resources). The registered office of WAPDA is situated at WAPDA House, Shahrah-e-
Quaid-e-Azam, Lahore, Pakistan.

The statutory mandate of WAPDA is to develop and utilize the water and power resources of Pakistan on a
unified and multipurpose basis. The mandate of WAPDA also included generation, transmission and
distribution of power and the construction, maintenance and operation of power houses and grids, till the year
1998. Thereafter, in line with the strategic plan approved by the GoP, WAPDA Power Wing was restructured
where by assets and liabilities relating to power distribution activities were transferred to 8 Distribution
Companies (DISCOs) on 01 July 1998, generation activities (other than hydel generation activities) were
transferred to 4 Generation Companies (GENCOs) and transmission activities were transferred to National
Transmission and Dispatch Company (NTDC) on 01 March 1999.

WAPDA decided to segregate the operation and development of hydel power generation activities (WAPDA
Hydroelectric - NEPRA regulated business) from its non core activities (non-regulated business) under
NEPRA Rules, 2009. The regulated business comprises activities purely related to the hydel power
generation and development.

These financial statements only represent the financial information of WAPDA Hydroelectric - NEPRA
regulated business (''WAPDA Hydroelectric'', ''Hydroelectric'' or ''the entity'') and have been prepared in
accordance with the accounting and financial reporting framework described in Note 2.2.

1.2 Generation license

National Electric Power Regulatory Authority (NEPRA) has issued Generation License no. GL(Hydel) /05
/2004 to WAPDA on 03 November 2004 valid for Thirty (30) years up to 2034 under section 30 of NEPRA Act
1997 for its Hydel power stations. Management expects that the generation license would be renewed upon
its expiry.

1.3 Operational hydel power stations

WAPDA Hydroelectric is currently generating electricity from 21 hydropower stations, which have been
described below along with their installed capacity as per the generation license:

Installed Installed
Power Station Province Capacity Power Station Province Capacity
(MW) (MW)
- Tarbela KPK* 3,478 - Jabban KPK 22
- Ghazi Barotha Punjab 1,450 - Rasul Punjab 22
- Tarbela 4th Extension KPK 1,410 - Dargai KPK 20
- Mangla AJK** 1,000 - Gomal Zam KPK 17
- Warsak KPK 243 - Nandipur Punjab 14
- Chashma Punjab 184 - Shadiwal Punjab 14
- Duber Khwar KPK 130 - Chichoki Punjab 13
- Allai Khwar KPK 121 - Kurram Garhi KPK 4
- Golen Gol KPK 108 - Chitral KPK 1
- Jinnah Hydel Punjab 96 - Renala Khurd Punjab 1
- Khan Khwar KPK 72

* Khyber Pakhtunkhwa ** Azad Jammu and Kashmir

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 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

1.4 Projects under development

Following major projects are under development as at reporting date:

1 Diamer Bhasha Dam 4 Mangla Refurbishment

2 Mohmand Dam 5 Keyal Khwar
3 Dasu Hydropower Project

2. BASIS OF PREPARATION

2.1 Carve-out methodology

WAPDA Hydroelectric is not a separate legal entity but meets the definition of a reporting entity under
International Financial Reporting Standards (IFRS) under the Conceptual Framework for IFRS. IFRS defines
a reporting entity as an entity that is required, or chooses, to prepare financial statements.

WAPDA Hydroelectric is part of WAPDA Power Wing, which is a segment of WAPDA and is in the business
of generation and sale of hydroelectricity, which represent its economic activities. All the operating activities of
WAPDA Hydroelectric are clearly defined and separately managed from the other businesses of WAPDA and
accounting records are maintained on this basis. The assets of WAPDA Hydroelectric are used solely by
WAPDA Hydroelectric and are registered in the name of WAPDA. The liabilities relate to the activities of
WAPDA Hydroelectric.

Although the reporting boundary is defined above, the assets and liabilities presented within the reporting
boundary remain the assets and liabilities of WAPDA and are not legally separable from WAPDA’s other
assets and liabilities. As such legally, the assets of WAPDA Hydroelectric may be available to the other
claims of WAPDA.

All revenues and costs associated with WAPDA Hydroelectric's business activities are included in these
financial statements.

These carve out financial statements do not constitute statutory financial statements within the meaning of
Section 223 of the Companies Act, 2017. WAPDA Hydroelectric elected to apply those IFRSs, which are
applicable to companies registered under the Companies Act, 2017 in Pakistan. The IFRSs applicable to
companies are notified by the SECP and accordingly WAPDA Hydroelectric has applied these accounting
and reporting standards as applicable in Pakistan including the relevant exemptions granted by SECP in the
preparation of these financial statements.

2.2 Statement of compliance

These carved out financial statements have been prepared in accordance with the accounting and reporting
standards as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise
of:

- International Financial Reporting Standards (IFRS) issued by the International Accounting Standards
Board (IASB) and notified under the Act by the SECP.

- Islamic Financial Accounting Standards, (IFAS) issued by the Institute of Chartered Accountants of
Pakistan (ICAP) as are notified under the Act.

- Directives issued under the Act.

Where the directive issued under the Act differs from the IFRSs, the directives issued under the Act, have
been followed.
For all periods up to and including the year ended 30 June 2018, WAPDA Hydroelectric prepared its financial
statements in accordance with Special Purpose Framework which is stated as follows:
- International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards
Board (IASB) as notified and adopted by the Institute of Chartered Accountants of Pakistan (ICAP),
except for various disclosure requirements of IFRS;
- the provisions of and directives issued by NEPRA and WAPDA in respect of accounting and financial
reporting of the entity; and
- where provisions of and directives issued by NEPRA and WAPDA differ from IFRSs, the provisions of
and directives issued by NEPRA and WAPDA have been followed.

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 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

These financial statements for the year ended 30 June 2019 are the first financial statements of WAPDA
Hydroelectric prepared in accordance with accounting and reporting standards applicable in Pakistan
(General Purpose Framework) as described above. The comparative statement of financial position,
statement of profit or loss, statement of comprehensive income, statement of cash flows, statement of
changes in equity are unaudited and has been prepared as per accounting and reporting standards applicable
in Pakistan for the purpose of comparative information.

IFRS 1 - First-time Adoption of International Financial Reporting Standards has not adopted by the SECP in
Pakistan, hence these financial statements doesn't include the transitional provisions and the disclosures
required by IFRS 1.

2.3 Exemptions from applicability of certain standards and interpretation to standards

- The SECP, through its S.R.O no. 985(I)/2019, dated 02 September 2019, has exempted the
requirements contained in IFRS 9 (Financial Instruments) related to application of Expected Credit
Losses (ECL) method till 30 June 2021, in respect of financial assets due or ultimately due from the
GoP, provided that such companies shall follow relevant requirements of IAS 39 – Financial
Instruments: Recognition and Measurement, in respect of above referred financial assets during the
exemption period.

The major financial assets of WAPDA Hydroelectric include receivable from the Central Power
Purchasing Agency (CPPA-G). Accordingly, ECL under IFRS 9 is not applicable on these receivable,
however, the management has assessed incurred losses under IAS 39.

- The SECP through its S.R.O. no.24(I)/2012 dated 16 January, 2012 has granted waiver exemption from
certain requirements of International Financial Reporting Standards (IFRS), as follows:
i) IFRIC - 4 "Determining whether an arrangement contains a lease" and IFRIC - 12 "Service
Concession Arrangements" to all companies including Power Sector Companies; and
ii) International Accounting Standard 21 to the extent of requirements in respect of accounting
principle of capitalization of exchange difference, to Power Sector Companies only.

WAPDA has entered into the Power Purchase Agreement (PPA) with the CPPA-G on 24 January 2011.
Under the PPA, WAPDA Hydroelectric is obligated to sell and deliver all output of its power plants in
accordance with provisions of PPA. WAPDA Hydroelectric's arrangement with CPPA-G falls under the
IFRIC 4 for which WAPDA Hydroelectric is availing the exemption granted by the SECP.

Furthermore, pursuant to the SECP exemption for capitalization of exchange differences under IAS 21,
the exchange gain / loss on translation of foreign currency loan and related bank balances of under
development hydropower projects is capitalized as part of capital work in progress.

2.4 Functional and presentation currency

These financial statements are presented in Pakistani Rupees ("PKR" or "Rs.") which is also WAPDA
Hydroelectric' s functional currency. All values have been rounded to the nearest thousands of rupees, except
when otherwise indicated.

2.5 Basis of measurement

These financial statements have been prepared under the historical cost convention except for recognition of
employee retirement and other benefits at present value.

2.6 Use of estimates and judgments

The preparation of financial statements in conformity with accounting and reporting standards, as applicable
in Pakistan, requires management to make judgments, estimates and assumptions that affect the application
of accounting policies and reported amounts of assets and liabilities, income and expenses. Uncertainty about
these assumptions and estimates could result in outcomes that require a material adjustment to the carrying
amount of assets or liabilities affected in future periods.
The estimates and associated assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results of which form the basis of making
judgment about carrying value of assets and liabilities that are not readily available from other sources. Actual
results may differ from these estimates.

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 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which estimates are revised if the revision affects only that period, or
in the period of the revision and future periods if the revision affects both current and future periods.
Judgments made by the management in the application of accounting and reporting standards, as applicable
in Pakistan that have significant effect on the financial statements and estimates with a significant risk of
material adjustment in the next year are documented in the following accounting policies and notes, and relate
primarily to:
Note
- Renewal of generation license 1.2
- Useful lives, impairment and method
of depreciation of operating fixed assets 4.1.1.4
- Allowance against stores and spares 4.5
- Impairment allowance against financial assets 4.6.1
- Regulatory deferral account 4.9
- Employee retirement and other benefits 4.11.1

3. STANDARDS, INTERPRETATIONS AND AMENDMENTS TO ACCOUNTING AND REPORTING

STANDARDS THAT ARE NOT YET EFFECTIVE

The standards and interpretations with respect to the accounting and reporting standards as applicable in
Pakistan that are issued, but not yet effective, up to the date of issuance of Hydroelectric's financial
statements are disclosed below. Hydroelectric intends to adopt these standards, if applicable, when they
become effective.

Standard or Interpretation

- IFRS 16 - Leases
IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an
Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the
Substance of transactions Involving the Legal Form of a Lease.

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases
and requires lessees to account for all leases under a single on-balance sheet model similar to the
accounting for finance leases under IAS 17.

The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g.,
personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less).

At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e.,
the lease liability) and an asset representing the right to use the underlying asset during the lease term
(i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on
the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events
(e.g., a change in the lease term, a change in future lease payments resulting from a change in an
index or rate used to determine those payments). The lessee will generally recognize the amount of the
remeasurement of the lease liability as an adjustment to the right-of-use asset.
IFRS 16 is effective in Pakistan for annual reporting periods beginning on or after 1 January 2019.
Management of WAPDA Hydroelectric has assessed the impact of IFRS 16 on these financial
statements and identified that only one of WAPDA arrangement, its Power Purchase Agreement (PPA),
dated 24 January 2011, with the CPPA-G, contain a lease with significant impact on financial
statements, as of 01 July 2019. Under the PPA, WAPDA Hydroelectric is obligated to deliver all output
of hydroelectricity generation units, during whole of their economic life. Accordingly, management has
determined that WAPDA Hydroelectric is lessor under PPA and that it is a finance lease arrangement.
This determination is consistent with management determination under IFRIC 4 ''Determining whether
an arrangement contains a lease'', which has been replaced by IFRS 16 with effect from 01 July 2019.
Under IFRS 16, WAPDA Hydroelectric would derecognize its hydroelectricity generation units, as they
are made available to CPPA-G. Instead, WAPDA Hydroelectric would recognize is required to
recognize lease receivable, equal to lease payments discounted at interest rate implicit in the
arrangement.

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NOTES TO THE FINANCIAL STATEMENTS

Standard or Interpretation

WAPDA Hydroelectric would then recognize finance income over the lease term of a finance lease,
based on a pattern reflecting a constant periodic rate of return on the net investment. Accounting by a
lessor has remained consistent with those requires by IAS 17 - Leases.

The SECP has, however, via S.R.O 986(I)/2019, dated 2 September 2019, granted exemption from
requirements of IFRS 16 to all companies that have executed their power purchase agreements before
01 January 2019. Resultantly, upon adopting said exemption, adoption of IFRS 16 didn’t have any
impact on WAPDA Hydroelectric. Currently, the same exemption was granted to power sector
companies through S.R.O. no.24(I)/2012 dated 16 January 2012 against application of IFRIC 4.

WAPDA Hydroelectric continue to recognize net book value of hydroelectricity generation units and
recognize lease payments as revenue, under IFRS 15 - Revenue from Contracts with Customers (refer
to Notes 4.1.1 and 4.17.1, for accounting policy adopted for hydroelectricity generation units and
revenue recognition).

Under accounting and reporting standards as applicable in Pakistan, ijarah arrangements are
accounted for as per Islamic Financial Accounting Standard (IFAS) 2 "IJARAH". IFRS 16 will be applied
on all other leases arrangements, except for Ijarah and arrangements against which exemption have
been granted by the SECP. Accordingly, as per the management's assessment, adoption of IFRS 16
would not have any impact on accounting of its Ijarah arrangements.

- IAS 19 - Plan Amendment, Curtailment or Settlement (Amendments)

The amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement
occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or
settlement occurs during the annual reporting period, an entity is required to:
- Determine current service cost for the remainder of the period after the plan amendment,
curtailment or settlement, using the actuarial assumptions used to remeasure the net defined
benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that
event.
- Determine net interest for the remainder of the period after the plan amendment, curtailment or
settlement using: the net defined benefit liability (asset) reflecting the benefits offered under the
plan and the plan assets after that event; and the discount rate used to remeasure that net defined
benefit liability (asset).
The amendments also clarify that an entity first determines any past service cost, or a gain or loss on
settlement, without considering the effect of the asset ceiling. This amount is recognized in profit or
loss.

An entity then determines the effect of the asset ceiling after the plan amendment, curtailment or
settlement. Any change in that effect, excluding amounts included in the net interest, is recognized in
other comprehensive income. The amendment is effective for annual reporting periods beginning on or
after 1 January 2019. This amendment will have no impact on the financial statements of Hydroelectric.
- IFRS 9 - Prepayment Features with Negative Compensation - (Amendments)
Under IFRS 9, a debt instrument can be measured at amortized cost or at fair value through other
comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and
interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the
appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial
asset passes the SPPI criterion regardless of the event or circumstance that causes the early
termination of the contract and irrespective of which party pays or receives reasonable compensation
for the early termination of the contract. The amendments are effective for annual reporting periods
beginning on or after 1 January 2019. These amendments will have no material impact on the financial
statements of Hydroelectric.

- IAS 28 - Long-term Interests in Associates and Joint Ventures – (Amendments)

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint
venture to which the equity method is not applied but that, in substance, form part of the net investment
in the associate or joint venture (long-term interests). This clarification is relevant because it implies that
the expected credit loss model in IFRS 9 applies to such long-term interests.

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NOTES TO THE FINANCIAL STATEMENTS

Standard or Interpretation

The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of
the associate or joint venture, or any impairment losses on the net investment, recognized as
adjustments to the net investment in the associate or joint venture that arise from applying IAS 28
Investments in Associates and Joint Ventures. The amendment is effective for annual reporting periods
beginning on or after 1 January 2019. This amendment will have no material impact on Hydroelectric.

- IFRS 3 - Definition of a Business (Amendments)

The amendment to IFRS 3 Business Combinations clarifies that to be considered a business, an
integrated set of activities and assets must include, at a minimum, an input and a substantive process
that, together, significantly contribute to the ability to create output. Furthermore, it clarifies that a
business can exist without including all of the inputs and processes needed to create outputs. The
amendments are effective for annual reporting periods beginning on or after 1 January 2020. These
amendments will have no impact on the financial statements of Hydroelectric, unless Hydroelectric
enters into any business combinations.

- IAS 12 - Income Taxes - Income tax consequences of payments on financial instruments

classified as equity
The amendments clarify that the income tax consequences of dividends are linked more directly to past
transactions or events that generated distributable profits than to distributions to owners. Therefore, an
entity recognizes the income tax consequences of dividends in profit or loss, other comprehensive
income or equity according to where the entity originally recognized those past transactions or events.
The amendment is effective for annual reporting periods beginning on or after 1 January 2019. This
amendment has no impact on the financial statements of Hydroelectric.

- IFRS 3 - Business Combinations - Previously held Interests in joint operation - (Amendments)

The amendments clarify that, when an entity obtains control of a business that is a joint operation, it
applies the requirements for a business combination achieved in stages, including remeasuring
previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the
acquirer remeasures its entire previously held interest in the joint operation. The amendment is effective
for annual reporting periods beginning on or after 1 January 2019. This amendment is not applicable to
Hydroelectric.

- IFRS 11 - Joint Arrangements - Previously held interests in a joint operation

A party that participates in, but does not have joint control of, a joint operation might obtain joint control
of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS
3. The amendments clarify that the previously held interests in that joint operation are not remeasured.
The amendment is effective for annual reporting periods beginning on or after 1 January 2019. This
amendment is not applicable to Hydroelectric.

- IFRIC 23 - Uncertainty over Income Tax Treatments

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty
that affects the application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12,
nor does it specifically include requirements relating to interest and penalties associated with uncertain
tax treatments. The Interpretation specifically addresses the following:
- Whether an entity considers uncertain tax treatments separately
- The assumptions an entity makes about the examination of tax treatments by taxation authorities
- How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates
- How an entity considers changes in facts and circumstances
An entity has to determine whether to consider each uncertain tax treatment separately or together with
one or more other uncertain tax treatments. The approach that better predicts the resolution of the
uncertainty should be followed. The amendment is effective for annual reporting periods beginning on
or after 1 January 2019. This amendment has no impact on the financial statements of Hydroelectric.

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NOTES TO THE FINANCIAL STATEMENTS

Standard or Interpretation

- Amendments to IAS 1 and IAS 8 Definition of Material

The amendments provide a new definition of material that states, “information is material if omitting,
misstating or obscuring it could reasonably be expected to influence decisions that the primary users of
general purpose financial statements make on the basis of those financial statements, which provide
financial information about a specific reporting entity.” The amendments clarify that materiality will
depend on the nature or magnitude of information, either individually or in combination with other
information, in the context of the financial statements.

A misstatement of information is material if it could reasonably be expected to influence decisions made

by the primary users. The amendments are effective for annual reporting periods beginning on or after 1
January 2020. These amendments will have no impact on the financial statements of, nor is there
expected to be any future impact to, Hydroelectric.

- Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform

The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a
number of reliefs, which apply to all hedging relationships that are directly affected by interest rate
benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainty about the
timing and/or amount of benchmark-based cash flows of the hedged item or the hedging instrument.
The amendments are effective for annual reporting periods beginning on or after 1 January 2020. These
amendments will have no impact on the financial statements of Hydroelectric as it does not have any
interest rate hedge relationships.

- The changes in Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16)
The amendments provide temporary reliefs which address the financial reporting effects when an
interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR).
The amendments include the following practical expedients:
- A practical expedient to require contractual changes, or changes to cash flows that are directly
required by the reform, to be treated as changes to a floating interest rate, equivalent to a
movement in a market rate of interest.
- Permit changes required by IBOR reform to be made to hedge designations and hedge
documentation without the hedging relationship being discontinued.
- Provide temporary relief to entities from having to meet the separately identifiable requirement
when an RFR instrument is designated as a hedge of a risk component.
The amendments are effective for annual reporting periods beginning on or after 1 January 2021. These
amendments will have no impact on the financial statements of WAPDA Hydroelectric.

- Reference to the Conceptual Framework – Amendments to IFRS 3

In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the
Conceptual Framework. The amendments are intended to replace a reference to the Framework for the
Preparation and Presentation of Financial Statements, issued in 1989, with a reference to the
Conceptual Framework for Financial Reporting issued in March 2018 without significantly changing its
requirements.
The Board also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential
‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of
IAS 37 or IFRIC 21 Levies, if incurred separately.
At the same time, the Board decided to clarify existing guidance in IFRS 3 for contingent assets that
would not be affected by replacing the reference to the Framework for the Preparation and Presentation
of Financial Statements.
The amendments are effective for annual reporting periods beginning on or after 1 January 2022 and
are apply prospectively. The amendments are not expected to have a material impact on the financial
statements of Hydroelectric.

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NOTES TO THE FINANCIAL STATEMENTS

Standard or Interpretation

- Amendments to IFRS 16 Covid-19 Related Rent Concessions

On 28 May 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16
Leases The amendments provide relief to lessees from applying IFRS 16 guidance on lease
modification accounting for rent concessions arising as a direct consequence of the Covid-19
pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent
concession from a lessor is a lease modification. The amendment is effective for annual reporting
periods beginning on or after 1 June 2020. This amendment will have no impact on the financial
statements of Hydroelectric.

- Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37

In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include
when assessing whether a contract is onerous or loss-making.
The amendments apply a “directly related cost approach”. The costs that relate directly to a contract to
provide goods or services include both incremental costs and an allocation of costs directly related to
contract activities. General and administrative costs do not relate directly to a contract and are excluded
unless they are explicitly chargeable to the counterparty under the contract.

The amendments are effective for annual reporting periods beginning on or after 1 January 2022.
Considering the nature of operation of Hydroelectric, these amendments are not expected to have a
material impact on the financial statements of Hydroelectric.

- IAS 41 Agriculture – Taxation in fair value measurements

As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued amendment
to IAS 41 Agriculture. The amendment removes the requirement in paragraph 22 of IAS 41 that entities
exclude cash flows for taxation when measuring the fair value of assets within the scope of IAS 41.

An entity applies the amendment prospectively to fair value measurements on or after the beginning of
the first annual reporting period beginning on or after 1 January 2022 with earlier adoption permitted.
These amendments are not applicable to Hydroelectric.

- Amendments to IAS 1: Classification of Liabilities as Current or Non-current

In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the
requirements for classifying liabilities as current or non-current. The amendments clarify:
- What is meant by a right to defer settlement.
- That classification is unaffected by the likelihood that an entity will exercise its deferral right.
- That only if an embedded derivative in a convertible liability is itself an equity instrument would the
terms of a liability not impact its classification.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and
must be applied retrospectively. Hydroelectric expects that these amendments will have no impact on
financial statements as their current practice is already in line with the proposed amendments.

- IFRS 9 Financial Instruments – Fees in the "10 per cent" test for derecognition of financial
liabilities
As part of its 2018-2020 annual improvements to IFRS standards process the IASB issued amendment
to IFRS 9. The amendment clarifies the fees that an entity includes when assessing whether the terms
of a new or modified financial liability are substantially different from the terms of the original financial
liability. These fees include only those paid or received by the borrower and the lender, including fees
paid or received by either the borrower or lender on the other’s behalf. The amendments are effective
for annual reporting periods beginning on or after 1 January 2022. An entity applies the amendment to
financial liabilities that are modified or exchanged on or after the beginning of the annual reporting
period in which the entity first applies the amendment. The amendments are not expected to have a
material impact on the financial statements of Hydroelectric.

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Standard or Interpretation

- IFRS 1 First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-

time adopter
As part of its 2018-2020 annual improvements to IFRS standards process, the IASB issued an
amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards. The
amendment permits a subsidiary that elects to apply paragraph D16(a) of IFRS 1 to measure
cumulative translation differences using the amounts reported by the parent, based on the parent’s date
of transition to IFRS. This amendment is also applied to an associate or joint venture that elects to apply
paragraph D16(a) of IFRS 1. The amendment is effective for annual reporting periods beginning on or
after 1 January 2022. The amendments is not applicable to Hydroelectric.

- Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16
In May 2020, the IASB issued Property, Plant and Equipment — Proceeds before Intended Use, which
prohibits entities from deducting from the cost of an item of property, plant and equipment, any
proceeds from selling items produced while bringing that asset to the location and condition necessary
for it to be capable of operating in the manner intended by management. Instead, an entity recognizes
the proceeds from selling such items, and the costs of producing those items, in profit or loss.
The amendment is effective for annual reporting periods beginning on or after 1 January 2022 and must
be applied retrospectively to items of property, plant and equipment made available for use on or after
the beginning of the earliest period presented when the entity first applies the amendment. The
amendments are not expected to have a material impact on the financial statements of Hydroelectric.

- IAS 23 - Borrowing Costs - Borrowing costs eligible for capitalization

The amendments clarify that an entity treats as part of general borrowings any borrowing originally
made to develop a qualifying asset when substantially all of the activities necessary to prepare that
asset for its intended use or sale are complete. The amendment is effective for annual reporting periods
beginning on or after 1 January 2019. This amendment will have no significant impact on Hydroelectric.

- IFRS 10 - and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture (Amendment)
The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of
a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the
gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in
IFRS 3, between an investor and its associate or joint venture, is recognized in full. Any gain or loss
resulting from the sale or contribution of assets that do not constitute a business, however, is
recognized only to the extent of unrelated investors’ interests in the associate or joint venture.
The IASB has deferred the effective date of these amendments indefinitely, but an entity that early
adopts the amendments must apply them prospectively. These amendments are not applicable to
Hydroelectric.
IFRS 14 - Regulatory Deferral Accounts
IFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to
continue applying most of its existing accounting policies for regulatory deferral account balances upon
its first-time adoption of IFRS. The SECP has adopted IFRS 14 and Hydroelectric has determined that,
although it is not applying IFRS for the first-time, IFRS 14 is applicable as it forms part of accounting
and reporting standards as applicable in Pakistan.

Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the
statement of financial position and present movements in these account balances as separate line
items in the statement of profit or loss and Other Comprehensive Income (OCI).

The standard requires disclosure of the nature of, and risks associated with, the entity’s rate-regulation
and the effects of that rate-regulation on its financial statements.

IFRS 14 is effective in Pakistan for annual reporting periods beginning on or after 1 July 2019. WAPDA
Hydroelectric has earlier adopted regulatory deferral accounting, in accordance with the guidance
available in IAS 8 and local industry practice, which is in line with the IFRS 14 requirements. Hence,
management believes that adoption of IFRS 14 would not have any material effect on the financial
statements.

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The IASB has also issued the revised Conceptual Framework for Financial Reporting (the Conceptual
Framework) in March 2018 which is effective for annual periods beginning on or after 1 January 2020 for
preparers of financial statements who develop accounting policies based on the Conceptual Framework. The
revised Conceptual Framework is not a standard, and none of the concepts override those in any standard or
any requirements in a standard. The purpose of the Conceptual Framework is to assist IASB in developing
standards, to help preparers develop consistent accounting policies if there is no applicable standard in place
and to assist all parties to understand and interpret the standards.

Further, the following new standards have been issued by IASB which are yet to be notified by the SECP for
the purpose of applicability in Pakistan:

Standard or Interpretation

- IFRS 1 - First-time Adoption of International Financial Reporting Standards

- IFRS 17 – Insurance Contracts

In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new
accounting standard for insurance contracts covering recognition and measurement, presentation and
disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts (IFRS 4) which was issued
in 2005. IFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-
insurance), regardless of the type of entities that issue them, as well as to certain guarantees and
financial instruments with discretionary participation features. A few scope exceptions will apply. The
overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more
useful and consistent for insurers. In contrast to the requirements in IFRS 4, which are largely based on
grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for
insurance contracts, covering all relevant accounting aspects. The core of IFRS 17 is the general
model, supplemented by:
- A specific adaptation for contracts with direct participation features (the variable fee approach)
- A simplified approach (the premium allocation approach) mainly for short-duration contracts
IFRS 17 is effective for reporting periods beginning on or after 1 January 2023, with comparative figures
required. Early application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or
before the date it first applies IFRS 17. This standard is not applicable to Hydroelectric.

4. SIGNIFICANT ACCOUNTING POLICIES

Following significant accounting policies which have been adopted in the preparation of financial statements
of WAPDA Hydroelectric.

4.1 Property, plant and equipment

4.1.1 Operating fixed assets

4.1.1.1 Cost
Operating fixed assets are stated at cost less accumulated depreciation and any impairment loss. The cost
comprises of purchase price, including import duties, non-recourse purchase taxes and other related costs of
bringing the asset to its present working condition and location for its intended use.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
WAPDA Hydroelectric and the cost of the item can be measured reliably. All other repair and maintenance
costs are charged to profit or loss during the period in which they are incurred.

Major spare parts and standby equipment are classified as property, plant and equipment rather than stores,
spares and loose tools when they meet the definition of operating fixed assets. Major spare parts and standby
equipment available for use are depreciated over their useful lives, or the remaining life of principal asset,
whichever is lower.

4.1.1.2 Derecognition
An item of operating fixed assets is derecognized upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and carrying amount of the asset) is included in the profit or
loss in the year the asset is derecognized.

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4.1.1.3 Depreciation
Depreciation is charged to profit or loss on straight-line method so as to write off the cost of operating fixed
assets, over their estimated remaining useful lives at the rates specified below. However, depreciation
charged on assets that directly relates to construction and acquisition of other assets is included in the cost of
such assets. Depreciation on addition to operating fixed assets is charged from the month in which the asset
is available for use and continued till the month of disposal.

Depreciation for the year is recognized on a straight line basis over the estimated useful life of each
component of an item of operating fixed assets. Significant components of individual assets are assessed and
if a component has a useful life that is different from the remainder of that asset, that component is
depreciated separately. Depreciation is not charged to fully depreciated assets. Lands are not depreciated.

The useful lives and methods of depreciation of each component of operating fixed assets are reviewed at
each reporting date and adjusted prospectively, if appropriate.

Following depreciation rates, based on the estimated useful lives of the assets, are generally applied:

Depreciation
Sr.
Description of assets rates
no
2019 2018
1 Building and civil works 2% 2%
Power generation plant assets
a. Turbines 2.86-4% 2.86-4%
b. Generators (Class - F insulation) 2.86% 2.86%
c. Generators (Class - B insulation) 3.33% 3.33%
d. Gas Insulated Switch (GIS) Gear 4.00% 4.00%
e. Switchyard equipment 4.00% 4.00%
Medium and Low Voltage (MV/LV) Switch gear Control and
2 f. 4.00% 4.00%
Protection Equipment
g. Telecommunication and SCADA equipment 5.00% 5.00%
h. Cranes 3.33% 3.33%
i. Trash Rack and Cleaning Machines 3.33% 3.33%
j. Truck Trailer 5.00% 5.00%
k. High Voltage (HV) Circuit Breaker Air Blast Type 4.00% 4.00%
l. High Voltage (HV) Circuit Breaker SF-6 Type 3.33% 3.33%
3 Transmission line equipment 4.00% 4.00%
4 Dams and reservoirs 1-1.25% 1-1.25%
5 General / plant assets 10% 10%
6 Office equipment 10-25% 10-25%
7 Furniture and fixtures 10% 10%
8 Transportation equipment 20% 20%

4.1.1.4 Useful lives, impairment and method of depreciation of operating fixed assets

WAPDA Hydroelectric reviews the useful lives of operating fixed assets on regular basis. The depreciation
method and the useful life of each part of operating fixed assets that is significant in relation to the total cost
of the asset are reviewed, and adjusted if appropriate, at each reporting date.

WAPDA Hydroelectric assesses at each reporting date whether there is any indication that assets excluding
inventory may be impaired. In making these assessment, WAPDA Hydroelectric uses the technical resources
available inside/outside WAPDA Hydroelectric, as appropriate. If such indication exists, the carrying amounts
of such assets are reviewed to assess whether they are recorded in excess of their recoverable amounts.
Where the carrying value exceeds the recoverable amount, assets are written down to the recoverable
amount and the difference is charged to the statement of profit or loss.

4.1.2 Capital work-in-progress

Capital work in progress is stated at cost less accumulated impairment losses, if any. Projects of capital work
in progress are transferred to operational offices (hereinafter referred as "formations") of WAPDA
Hydroelectric when 100% progress is certified by the consultants and verified by WAPDA Hydroelectric's own
engineers.

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Capital work in progress mainly includes direct cost, netted with respective test run revenue, incurred on the
development projects including incurred on land acquisition, salaries of personnel deployed at respective
development projects and mobilization advances given to designated contractors and consultants.

4.2 Borrowing costs

Interest during construction directly attributable to the construction of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, is not capitalized and
instead charged to profit or loss as the same is reimbursed by NEPRA as part of tariff which is being billed
and recognized as revenue. Correspondingly investment income earned on the temporary investment of
specific borrowings pending their expenditure on qualifying assets is also credited to profit or loss.

4.3 Retention money payables

A retention is a percentage of the contract payment value which is held by WAPDA Hydroelectric of
designated contractors and consultants. Retention money is released following the expiry of a defects liability
period, being part of normal credit terms under such agreements. Retention money payable is recognized at
the consideration to be paid at the expiry of the defects liability period.

4.4 Impairment of non-financial assets

The carrying amounts of non-financial assets other than stores, spares and loose tools are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, then
the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is
the higher of its value in use and its fair value less costs to sell. In assessing value in use, the estimated
future cash flows are discounted to their present value using a discount rate that reflects current market
assessment of the time value of money and the risks specific to the asset. For the purpose of impairment
testing, assets that cannot be tested individually are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or
groups of assets (the “cash-generating unit, or CGU”).

WAPDA Hydroelectric's corporate assets do not generate separate cash inflows. If there is an indication that
a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the
corporate asset belongs. An impairment loss is recognized if the carrying amount of an asset or its CGU
exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss.

Impairment loss recognized in prior periods is assessed at each reporting date for any indications that the
loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortization, if no impairment loss had been recognized.

4.5 Stores, spare parts and loose tools

These are valued at weighted average cost, while items considered obsolete are carried at nil value. Items in
transit are valued at cost comprising invoice value plus other direct charges paid thereon till the reporting
date. WAPDA Hydroelectric reviews stores and spare parts for possible impairment on an annual basis and
provision is made for obsolescence, based on management’s best estimate.

4.6 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.

4.6.1 Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value
through other comprehensive income (OCI), and fair value through profit or loss.

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The classification of financial assets at initial recognition depends on the financial asset’s contractual cash
flow characteristics and Hydroelectric’s business model for managing them. With the exception of trade
receivables that do not contain a significant financing component or for which Hydroelectric has applied the
practical expedient, Hydroelectric initially measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain
a significant financing component or for which Hydroelectric has applied the practical expedient are measured
at the transaction price.

In order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it
needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal
amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or
loss, irrespective of the business model.

Hydroelectric’s business model for managing financial assets refers to how it manages its financial assets in
order to generate cash flows. The business model determines whether cash flows will result from collecting
contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at
amortized cost are held within a business model with the objective to hold financial assets in order to collect
contractual cash flows while financial assets classified and measured at fair value through OCI are held within
a business model with the objective of both holding to collect contractual cash flows and selling.

Purchases or sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the
date that Hydroelectric commits to purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:
- Financial assets at amortized cost (debt instruments)
- Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt
instruments)
- Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses
upon derecognition (equity instruments)
- Financial assets at fair value through profit or loss

Financial assets at Financial assets at amortized cost are subsequently measured using the
amortized cost effective interest rate (EIR) method and are subject to impairment. Gains and
(debt instruments) losses are recognized in profit or loss when the asset is derecognized, modified
or impaired.

Hydroelectric’s financial assets at amortized cost includes receivables from the

customer, other receivables, short term investments and long term loans and
deposits.

Financial assets at fair
value through OCI
(debt instruments)
For debt instruments at fair value through OCI, interest income, foreign
exchange revaluation and impairment losses or reversals are recognized in the
statement of profit or loss and computed in the same manner as for financial
assets measured at amortized cost. The remaining fair value changes are
recognized in OCI. Upon derecognition, the cumulative fair value change
recognized in OCI is recycled to profit or loss.

Hydroelectric doesn't have any financial assets measured at fair value through
OCI.

Financial assets
designated at fair
value through OCI
(equity instruments)
Upon initial recognition, Hydroelectric can elect to classify irrevocably its equity
investments as equity instruments designated at fair value through OCI when
they meet the definition of equity under IAS 32 Financial Instruments:
Presentation and are not held for trading. The classification is determined on an
instrument-by instrument basis.

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Gains and losses on these financial assets are never recycled to profit or loss.
Dividends are recognized as other income in the statement of profit or loss
when the right of payment has been established, except when Hydroelectric
benefits from such proceeds as a recovery of part of the cost of the financial
asset, in which case, such gains are recorded in OCI. Equity instruments
designated at fair value through OCI are not subject to impairment assessment.

Hydroelectric hasn't elected to classify any financial assets under this category.

Financial assets at fair Financial assets at fair value through profit or loss are carried in the statement
value through profit or of financial position at fair value with net changes in fair value recognized in the
loss statement of profit or loss.

Hydroelectric doesn't have any financial assets measured at fair value through
profit or loss.

Impairment of financial assets

WAPDA Hydroelectric recognizes an allowance for ECLs for all debt instruments (excluding receivable from
the CPPA-G) not held at fair value through profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all the cash flows that Hydroelectric expects
to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will
include cash flows from the sale of collateral held or other credit enhancements that are integral to the
contractual terms.

ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase
in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that
are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has
been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

The trade receivable of WAPDA Hydroelectric represents amounts due from CPPA-G (a Government owned
entity) against sale of electricity and hydel levies. SRO No. 985(1)/2019 issued by the SECP on 2 September
2019 in respect of the companies holding financial assets due from GOP, the requirements contained in
"IFRS 9 (Financial instrument) with respect to application of expected credit losses method" shall not be
applicable till 30 June 2021. Accordingly, no impairment charge is recorded on the trade receivables.
However, receivables from the CPPA-G are assessed at each reporting date to determine whether there is
any objective evidence that it is impaired as per IAS 39. A financial asset is considered to be impaired if
objective evidence indicates that one or more events have had a negative effect on the estimated future cash
flows of that asset.

4.6.2 Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss,
loans and borrowings, or payables, as appropriate.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.

WAPDA Hydroelectric's financial liabilities include trade and other payables (excluding due to statutory
authorities), loans and borrowings, retention money payables, short term borrowings and interest payable.

Subsequent measurement

For the purposes of subsequent measurement, financial liabilities are classified in two categories:

- Financial liabilities at fair value through profit or loss

- Financial liabilities at amortized cost (loans and borrowings)

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Financial liabilities at Financial liabilities at fair value through profit or loss include financial liabilities
fair value through held for trading and financial liabilities designated upon initial recognition as at
profit or loss fair value through profit or loss.

Financial liabilities are classified as held for trading if they are incurred for the
purpose of repurchasing in the near term. Gains or losses on liabilities held for
trading are recognized in the statement of profit or loss. Financial liabilities
designated upon initial recognition at fair value through profit or loss are
designated at the initial date of recognition, and only if the criteria in IFRS 9 are
satisfied. WAPDA Hydroelectric has not designated any financial liability as at
fair value through profit or loss.

Financial liabilities at
amortized cost (loans
and borrowings)
This is the category most relevant to WAPDA Hydroelectric. After initial
recognition, interest-bearing loans and borrowings are subsequently measured
at amortized cost using the Effective Interest Rate (EIR) method. Gains and
losses are recognized in profit or loss when the liabilities are derecognized as
well as through the EIR amortization process.

Amortized cost is calculated by taking into account any discount or premium on

acquisition and fees or costs that are an integral part of the EIR. The EIR
amortization is included as finance costs in the statement of profit or loss.

4.6.3 Derecognition

4.6.3.1 Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)
is primarily derecognized (i.e., removed from the statement of financial position) when:
- The rights to receive cash flows from the asset have expired; or
- Hydroelectric has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-
through’ arrangement; and either (a) Hydroelectric has transferred substantially all the risks and
rewards of the asset, or (b) Hydroelectric has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.

When Hydroelectric has transferred its rights to receive cash flows from an asset or has entered into a pass-
through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor
transferred control of the asset, Hydroelectric continues to recognize the transferred asset to the extent of its
continuing involvement. In that case, Hydroelectric also recognizes an associated liability. The transferred
asset and the associated liability are measured on a basis that reflects the rights and obligations that
Hydroelectric has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower
of the original carrying amount of the asset and the maximum amount of consideration that Hydroelectric
could be required to repay.

4.6.3.2 Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original liability and the recognition of a new liability. The
difference in the respective carrying amounts is recognized in the statement of profit or loss.

4.6.4 Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the entity currently has a legally enforceable right to set off the amounts and it
intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

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4.7 Hydel levies

The Article 161 (2) of the Constitution of Islamic Republic of Pakistan provides that the net profits earned by
the Federal Government, or any undertaking established or administered by the Federal Government i.e.
WAPDA as determined by the Presidential Order no. 3 of June 1991, from the bulk generation of power at a
hydroelectric station shall be paid to the provinces in which hydroelectric stations are situated.

Hydel levies mainly comprise of Net Hydel Profits (NHP) attributable to the Governments of Punjab (GoPb)
and Khyber Pakhtunkhwa (GoKPK) as per instructions of the GoP and also include Water Usage Charges
(WUC) payable to the Government of Azad, Jammu and Kashmir (GoAJ&K) and Water Management Charges
(WMC) payable to the Indus River System Authority (IRSA). These levies are billed to the CPPA-G at Federal
Government notified rates and recognized in the statement of financial position as receivable and unpaid
amount of levies is recognized as payable against hydel levies.

4.8 Cash and bank balances

Cash and bank balances comprise of cash in hand and cash at banks and other highly liquid financial assets
which are held for the purpose of meeting short-term cash commitments with original maturities of less than
three months which are subject to insignificant risk of changes in their fair value.

For the purpose of the statement of cash flows, cash and bank balances consist of cash and short-term
deposits and balances with banks, as defined above, as they are considered an integral part of WAPDA
Hydroelectric’s cash management.

4.9 Regulatory deferral account

A regulatory deferral account balance is defined as the balance of any expense (or income) account that
would not be recognized as an asset or a liability in accordance with other Standards, but that qualifies for
deferral because it is included, or is expected to be included, by the rate regulator in establishing the rates
that can be charged to customers.

As mentioned in Note 1.1, WAPDA was formed under the WAPDA Act, which prescribes that rate of sale of
electricity shall be so fixed as to provide for recovering the operating costs, interest charges, depreciation of
assets and return on regulatory asset base (average carrying value of property, plant and equipment).
WAPDA Hydroelectric submits its tariff petition after every two years with the NEPRA (regulator for
determining the tariff of electricity in the country and also a related party of WAPDA Hydroelectric), on the
basis of management's best estimate of the expected cost and the difference of actual cost incurred versus
the estimate of cost considered by the NEPRA in determining the previous tariffs. The NEPRA determines the
next tariff based upon the tariff petitions filed by WAPDA Hydroelectric. The regulatory deferral balances arise
due to this rate regulation process. The management is confident that no significant risks exits as of reporting
date in respect of rate regulation.

WAPDA Hydroelectric initially recognizes deferral account balance at historic cost, without accounting for the
effect of time value of money, based on the management's best estimate considering the tariff structure under
the WAPDA Act and tariff determinations of the NEPRA. Such amounts are expected to be recovered through
tariff from the CPPA-G, in future periods and these are transferred from regulatory deferral account to
receivable from the customer. At each reporting date, the outstanding balance of deferral amount is assessed
for probability of recovery, considering decisions of the NEPRA. An impairment charge is also recognized, if
recoverable amount, without accounting for the effect of time value of money is less than their carrying value.

4.10 Government / deferred grants

Grants are recognized where there is reasonable assurance that the grant will be received and all attached
conditions will be complied with. WAPDA Hydroelectric receives two type of grants: against specific expenses
or for specific assets. When the grant relates to an expense item, it is recognized as income over the period
necessary to match the costs that it is intended to compensate. Where the grant relates to an asset, it is
recognized as deferred income and charged to profit or loss over the expected useful life of the related asset.

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Monetary grant:
If grant is in the form of cash, it is measured at the amount of cash received or receivable.

Non-monetary grant:
When WAPDA Hydroelectric receives grants of non-monetary assets, the asset and the grant are recorded at
nominal amounts.

4.11 Employee retirement and other benefits

WAPDA Hydroelectric operates following retirement and other long term schemes for its employees.

a) Pension:
WAPDA Hydroelectric offers post employment pension scheme to its eligible employees and their
dependents. Under the unfunded scheme all such employees are entitled for lifetime pension based on
“Pensionable Salary” as defined in the pension scheme rules of WAPDA. After the death of the
employee, their spouse and minor children (if any) are also eligible for 75% of pension benefit.

No benefits under this scheme are available to any employee who either resigned from the service
before 25 years or who is dismissed / terminated from the service of Hydroelectric due to misconduct.

b) Free medical facility:

WAPDA Hydroelectric provides free medical benefits to its pensioners. The level of post-retirement
medical benefit for a retiree (or beneficiaries) depends on whether the retiree opts for cash medical
allowance during service or not. Pensioners eligible for full medical benefits are allowed to use all
medical and surgical facilities available at WAPDA Hospitals and Dispensaries. Specialist consultation
is also provided if considered necessary by WAPDA Medical Officer.

The retirees can opt to take cash medical allowance in accordance with their basic pay scale.

c) Free electricity facility:

WAPDA Hydroelectric offers free electricity benefit to its eligible employees and their dependents.
Under the unfunded scheme all such employees are entitled for lifetime free electricity benefit based on
their last served employment scale, starting from the date of retirement. After the death of the
employee, their spouse and minor children (if any) are also eligible for the 50% of the free electricity
benefit.

No benefits under this scheme are available to any employee who either resigned from the service
before 25 years or who is dismissed / terminated from the service of WAPDA Hydroelectric due to
misconduct.

d) Compensated absences:
WAPDA Hydroelectric provides leave encashment benefit to its employees. Employees of WAPDA
Hydroelectric are entitled to receive 48 days leave per annum. The un-utilized leave are accumulated
subject to a maximum of 365 days. The un-utilized accumulated leave are en-cashed at the time of
leaving the service.

The employees are also entitled to take Leave Preparatory to Retirement (LPR) of one year retirement.
A general practice of the employees is to take leave encashment benefit on monthly/quarterly/semi-
annually basis in the last year before retirement which is equivalent to rendering additional service
during LPR.

Due to materially different risks associated with each benefit plan the entity has disaggregated the above
benefits for disclosure purposes. The entity underwrites the actuarial risk associated with the above benefits
and determines the defined benefit liabilities by consulting an qualified independent actuary.

F-85 Page 23 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

The entity recognizes the defined benefit liabilities in the statement of financial position. The cost of providing
benefits under the defined benefit plan is determined by an independent qualified actuary using the projected
unit credit method. Actuarial valuation is conducted every year. Re-measurements, comprising of actuarial
gains and losses from changes in actuarial and experience assumptions for pension, free electricity and free
medical benefits are recognized immediately in the statement of financial position with a corresponding debit
or credit to accumulated profits through other comprehensive income in the period in which they occur,
whereas actuarial gain and loss from changes in actuarial and experience assumptions for compensated
absences is recognized in statement of profit or loss. Re-measurement of defined benefit liabilities recognized
in other comprehensive income shall not be reclassified to profit or loss in subsequent periods.

Past service costs are recognized in the profit or loss on earlier of; the date of the plan amendment or
curtailment, and the date when entity recognizes related restructuring cost. Net interest is calculated by
applying the discount rate to the defined benefit liabilities. The entity recognizes the current service cost, past
service cost, gains and losses on curtailments, non-routine settlements and net interest expense or income
changes in the defined benefit obligations in the statement of profit or loss.

4.11.1 Estimates and judgments

The cost of employee retirement and other benefits are determined using actuarial valuations. An actuarial
valuation involves making various assumptions that may differ from actual developments in the future. These
includes the determination of the discount rate, future salary increases, mortality rates, future pension
increases, future increase in medical costs and future increase in electricity costs. Due to the complexities
involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in
these assumptions. All assumptions are reviewed at each reporting date. WAPDA Hydroelectric uses the
valuation performed by an independent actuary as the present value of its defined benefit obligations.
Actuarial valuation is conducted every year and is based on assumptions as mentioned in notes to these
financial statements.
4.11.2 Risks associated with defined benefit plans
Pension
- WAPDA Hydroelectric provides pension benefits to all of its regular employees.
- The pension scheme is an un-funded scheme. There is no minimum funding requirement for a pension
scheme which leads to relatively less secured pension benefits.
- The pension scheme is a defined benefit scheme with benefits based on service and last drawn salary.
Therefore, the liabilities of the scheme are sensitive to the salary increases and pension increases.

Medical
- WAPDA Hydroelectric provides post-retirement medical benefits to all of its regular employees.
- The post-retirement medical benefits scheme is an un-funded scheme. In general, there is no practice
in the local market to have a funded post-employment medical benefit scheme.
- There is no minimum funding requirements for a post-retirement medical benefit scheme which leads to
relatively less secured post-retirement medical benefits.
- The post-retirement medical benefit scheme is categorized as a post-employment defined benefit
scheme in accordance with the provisions of IAS-19. The liabilities of the scheme are sensitive to the
increases in medical cost incurred by retirees in future.

Electricity
- WAPDA Hydroelectric provides post-retirement free electricity to all of its regular employees.
- The post-retirement free electricity scheme is an un-funded scheme. This mean that the cost incurred
by WAPDA Hydroelectric on providing this benefit is not paid from any fund.
- The post-retirement free electricity scheme is categorized as a post-employment defined benefit
scheme in accordance with the provisions of IAS-19. The liabilities of the scheme are sensitive to the
increases in electricity cost in future.

Leave Encashment / Compensated Absences

- WAPDA Hydroelectric provides leave encashment benefit to all of its regular employees.
- The leave encashment benefit scheme is an un-funded Scheme. This mean that the cost incurred by
WAPDA Hydroelectric on providing this benefit is not paid from any fund.
- The leave encashment benefit scheme is categorized as other long term employee benefit in
accordance with the provisions of IAS-19. The benefit is based on the last drawn salary. Therefore,
liabilities of the scheme are sensitive to the increases in salaries.

F-86 Page 24 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

4.12 Provisions

Provisions are recognized when Hydroelectric has a present obligation (legal or constructive) as a result of a
past event, it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation. When Hydroelectric
expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset, but
only when the reimbursement is virtually certain. The expense relating to a provision is presented in the
statement of profit or loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that
reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the
provision due to the passage of time is recognized as a finance cost.

WAPDA Hydroelectric has no legal or constructive obligation regarding dismantling and removal of the power
generation plants and restoration of the related sites.

4.13 Current versus non-current classification

Hydroelectric presents assets and liabilities in the statement of financial position based on current/non-current
classification. An asset is current when it is:
- Expected to be realized or intended to be sold or consumed in the normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realized within twelve months after the reporting period; or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period
All other assets are classified as non-current.

A liability is current when:

- It is expected to be settled in the normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period; or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the
reporting period
The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of
equity instruments do not affect its classification. Hydroelectric classifies all other liabilities as non-current.

4.14 Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based on
the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability; or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by Hydroelectric.
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant
that would use the asset in its highest and best use.
Hydroelectric uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the
use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
- Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
- Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable

F-87 Page 25 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

For assets and liabilities that are recognized in the financial statements at fair value on a recurring basis,
Hydroelectric determines whether transfers have occurred between levels in the hierarchy by re-assessing
categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at
the end of each reporting period.
As at reporting date, WAPDA Hydroelectric has no financial or non-financial assets for which fair value
modelling is required (2018: Nil).

4.15 Events after the reporting period

If Hydroelectric receives information after the reporting period, but prior to the date of authorization for issue,
about conditions that existed at the end of the reporting period, Hydroelectric will assess if the information
affects the amounts that it recognizes in Hydroelectric’s financial statements. Hydroelectric will adjust the
amounts recognized in its financial statements to reflect any adjusting events after the reporting period and
update the disclosures that relate to those conditions in the light of the new information. For non-adjusting
events after the reporting period, Hydroelectric will not change the amounts recognized in its financial
statements but will disclose the nature of the non-adjusting event and an estimate of its financial effect, or a
statement that such an estimate cannot be made, if applicable.

4.16 Foreign currencies

Transactions in foreign currencies are initially recorded by Hydroelectric at its functional currency spot rates at
the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
spot rates of exchange at the reporting date.

Differences arising on settlement or translation of monetary items are recognized in profit or loss with the
exception of exchange differences on translation of foreign currency loan and related foreign currency bank
balances related to projects under development, which is being capitalized to the extent they are eligible for
capitalization, up to the date of commissioning of the projects, in pursuant to the exemption granted by the
SECP as disclosed in Note 2.3. All other exchange differences are charged to statement of profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial transactions. There are no non-monetary items measured at fair
value in a foreign currency.

In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or
part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance
consideration, the date of the transaction is the date on which Hydroelectric initially recognizes the non-
monetary asset or non-monetary liability arising from the advance consideration. If there are multiple
payments or receipts in advance, Hydroelectric determines the transaction date for each payment or receipt of
advance consideration.

4.17 Revenue from contract with customer

Revenue is measured based on the consideration to which Hydroelectric expects to be entitled in a contract
with a customer and excludes amounts collected on behalf of third parties. Hydroelectric recognize revenue
when it transfers control of a product or service to a customer.

4.17.1 Sale of electricity

WAPDA signed its PPA with the CPPA-G, the sole customer of WAPDA Hydroelectric on 24 January 2011.

Performance obligations
Under the PPA, WAPDA Hydroelectric is obligated to:
- sell and deliver all Net Electric Output (NEO) of all power stations of WAPDA Hydroelectric; and
- make available the installed capacity of power stations to the CPPA-G.

F-88 Page 26 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Since, the CPPA-G simultaneously receives and consumes the benefits provided by Hydroelectric, hence
performance obligations are satisfied over time. However, Hydroelectric applies the practical expedient of
right to invoice to recognize the revenue under IFRS 15. There is no significant financing component and
significant variable consideration. The individual components of consideration is billed on monthly basis in
accordance with terms of the PPA. The invoices are raised to the CPPA-G on monthly basis and are payable
within 25 days from the date of invoice.

The power sale invoice comprises of payments for a fixed charge and a variable charge. Fixed charge
payments are computed by multiplying the fixed charge rate with the installed capacity and variable charge
payments are computed by multiplying the variable charge rate with the net electrical output in the month to
which the relevant invoice relates. The fixed charge rate and the variable charge rate for each agreement year
are approved by NEPRA and notified by the Federal Government in the official Gazette.

4.17.2 Grant income

- Grant related to operating fixed assets are taken to income over the useful life of the operating assets in
order to match with the corresponding depreciation expense.

- Grant for operating expenditures are amortized on the basis of expenditure incurred in accordance with
the terms attached to the respective grants.

4.17.3 Sale of scrap and store items

- Revenue from sale of scrap and store items is recognized when control of items passes to buyers which
is generally on dispatch of goods.

4.18 Ijarah

ljarah is a contract whereby the owner of an asset, other than consumable, transfers its usufruct to another
person for an agreed period for an agreed consideration. All Ijarah agreements are treated as operating lease.

Sales and lease back under Ijarah

A sale and leaseback transaction involves the sale of an asset by the vendor and the leasing of the same
asset back to the vendor. When an asset is sold with an intention to enter into an ljarah arrangement, any
profit or loss based on the asset’s fair value should be recognized immediately. If the sale price is below fair
value, any profit or loss should be recognized immediately except that, if the loss is compensated by future
lease payments at below market price, it should be deferred and amortized in proportion to the lease
payments over the period for which the asset is expected to be used. If the sale price is above fair value, the
excess over fair value should be deferred and amortized over the period for which the asset is expected to be
used.

WAPDA have Ijarah agreements with WAPDA Second and Third Sukuk Companies, whereby certain power
generation plant assets of Tarbela have been sold to above Sukuk Companies and WAPDA Hydroelectric has
leased the subject assets back at agreed rentals from the Sukuk Companies.

Ijarah rentals payable under Ijarah arrangement are charged to profit or loss on a straight line basis over the
term of the Ijarah lease arrangement as per the Islamic Financial Accounting Standard - 2 IJARAH. At the end
of Ijarah term, Sukuk Companies would gift the leased assets back to WAPDA Hydroelectric, which would be
recognized at nominal value.

4.19 Taxation
Income of WAPDA is exempt from income tax as per provisions of Clause 66 (xvi) Part-I of Second Schedule
to the Income Tax Ordinance, 2001. Interest income u/s 151, property income u/s 155 and cash withdrawals
from bank u/s 231A of the Income Tax Ordinance, 2001 are also exempt. Exemption certificates in these
regards are issued by Commissioner Income Tax on yearly basis. As mentioned in Note 2.1, WAPDA
Hydroelectric, being a segment of WAPDA, falls under the exemptions granted under the Income Tax
Ordinance 2001.

F-89 Page 27 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

5. PROPERTY, PLANT AND EQUIPMENT 2019 2018

(Un-audited)
Note ------------------------ PKR '000' ------------------------
Operating fixed assets 5.1 266,137,486 177,349,253
Capital Work In Progress (CWIP) 5.2 173,583,127 223,506,927
439,720,613 400,856,180
5.1 Operating fixed assets

2019
Cost Accumulated depreciation
Closing Net book value
Asset class Opening balance Disposals Depreciation Opening balance Disposals during Closing balance
Transferred from balance Charge for the as at
as at Direct additions during the year / rates as at the year / as at
CWIP as at year 30 June 2019
01 July 2018 adjustments 01 July 2018 adjustments 30 June 2019
30 June 2019
--------------------------------------------------------------------- PKR '000' ---------------------------------------------------------------------% --------------------------------------------------------------------- PKR '000' ---------------------------------------------------------------------

Land 5,698,714 10,329 199,052 (2,904) 5,905,191 - - - - - 5,905,191

Building and civil works 53,428,867 357,366 22,785,005 (319) 76,570,919 2 15,311,924 1,533,530 (175) 16,845,279 59,725,640
Power generation plant assets 68,848,628 1,092,398 43,850,334 (123,988) 113,667,372 2.86-5 30,534,495 3,807,110 (8,909) 34,332,696 79,334,676
Transmission line equipment 5,644,096 292 9,164,279 - 14,808,667 4 1,047,898 592,511 - 1,640,409 13,168,258
Dams and reservoirs 113,077,114 1,013,304 15,991,987 - 130,082,405 1-1.25 23,727,016 1,296,475 117 25,023,608 105,058,797
General / plant assets 1,179,992 55,118 1,990,678 (2,993) 3,222,795 10 579,827 293,210 (1,013) 872,024 2,350,771
Office equipment 196,900 23,629 - - 220,529 10-25 107,615 27,845 - 135,460 85,069
Furniture and fixtures 682,206 9,090 - - 691,296 10 584,934 32,423 - 617,357 73,939
Transportation equipment 2,318,617 71,610 - (6,941) 2,383,286 20 1,832,172 122,215 (6,246) 1,948,141 435,145

F-90
251,075,134 2,633,136 93,981,335 (137,145) 347,552,460 73,725,881 7,705,319 (16,226) 81,414,974 266,137,486

2018 - (Un-audited)
Cost Accumulated depreciation
Net book value
Asset class Opening balance Disposals during Closing balance as Depreciation Opening balance Disposals during Closing balance as
Transferred from Charge for the as at
as at Direct additions the year / at rates as at the year / at
CWIP year 30 June 2018
01 July 2017 adjustments 30 June 2018 01 July 2017 adjustments 30 June 2018

--------------------------------------------------------------------- PKR '000' ---------------------------------------------------------------------% --------------------------------------------------------------------- PKR '000' ---------------------------------------------------------------------

Land 5,696,596 2,118 - - 5,698,714 - - - - - 5,698,714

Building and civil works 52,774,849 659,178 - (5,160) 53,428,867 2 14,138,731 1,173,193 - 15,311,924 38,116,943
Power generation plant assets 67,586,895 1,313,709 - (51,976) 68,848,628 2.86-5 28,506,956 2,027,735 (196) 30,534,495 38,314,133
Transmission line equipment 5,644,096 - - - 5,644,096 4 794,648 253,250 - 1,047,898 4,596,198
Dams and reservoirs 113,010,284 66,830 - - 113,077,114 1-1.25 22,593,828 1,133,188 - 23,727,016 89,350,098
General / plant assets 967,948 212,210 - (166) 1,179,992 10 453,612 126,215 - 579,827 600,165
Office equipment 162,692 34,376 - (168) 196,900 10-25 83,843 23,772 - 107,615 89,285
Furniture and fixtures 656,622 25,644 - (60) 682,206 10 578,212 6,722 - 584,934 97,272
Transportation equipment 2,082,961 239,650 - (3,994) 2,318,617 20 1,742,640 89,532 - 1,832,172 486,445
248,582,943 2,553,715 - (61,524) 251,075,134 68,892,470 4,833,607 (196) 73,725,881 177,349,253

2019 2018
5.1.1 Deprecation charge for the year has been allocated as follows: (Un-audited)
Note ------------------------- PKR '000' --------------------------
Cost of revenue 25 7,655,469 4,785,425
Transferred to CWIP 49,850 48,182
7,705,319 4,833,607

Page 28 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS
5.1.2 Operating fixed assets by power station

2019
Cost Accumulated depreciation
Opening balance Closing Opening balance Closing Net book value
Power stations Additions / Disposals Disposals
as at balance as at Charge for the balance as at
transfers during during the year / during the year /
01 July 2018 as at 01 July 2018 year as at 30 June 2019
the year adjustments adjustments
(Un-audited) 30 June 2019 (Un-audited) 30 June 2019
----------------------------------------------------------------------------------------------------------- PKR '000' -----------------------------------------------------------------------------------------------------------

Tarbela 21,624,210 742,819 (2,904) 22,364,125 15,588,384 417,872 - 16,006,256 6,357,869

Ghazi Barotha 96,201,646 152,744 (1,457) 96,352,933 29,776,493 1,631,611 (1,310) 31,406,794 64,946,139
Mangla 32,763,471 1,152,434 (1,326) 33,914,579 6,422,446 636,776 (1,193) 7,058,029 26,856,550
Warsak 3,425,574 19,407 (776) 3,444,205 2,184,001 72,198 (699) 2,255,500 1,188,705
Chashma 20,940,222 94,021 (922) 21,033,321 9,689,387 461,413 (830) 10,149,970 10,883,351
Rasul 369,932 13,137 - 383,069 100,263 6,477 - 106,740 276,329
Dargai 155,433 2,250 (320) 157,363 61,797 4,184 (175) 65,806 91,557
Nandipur 120,642 1,697 - 122,339 72,184 3,169 - 75,353 46,986
Shadiwal 107,070 7,974 (189) 114,855 49,584 4,444 (170) 53,858 60,997

F-91
Chichoki 73,661 28,379 (525) 101,515 37,880 3,878 (473) 41,285 60,230
Kurram Garhi 57,805 608 - 58,413 15,793 1,759 - 17,552 40,861
Renala Khurd 27,651 4,800 - 32,451 9,151 965 - 10,116 22,335
Chitral 81,712 189 - 81,901 57,283 1,496 - 58,779 23,122
Khan Khwar 9,633,412 8,734 - 9,642,146 1,412,131 183,978 - 1,596,109 8,046,037
Allai Khwar 15,200,891 2,251 (799) 15,202,343 2,726,881 265,447 (719) 2,991,609 12,210,734
Gomal Zam 7,519,486 518 - 7,520,004 833,251 141,819 - 975,070 6,544,934
Jinnah Hydel 17,346,208 928,224 - 18,274,432 2,049,927 426,954 - 2,476,881 15,797,551
Jabban 4,016,529 9,055 (126,981) 3,898,603 644,708 116,436 (9,790) 751,354 3,147,249
Duber Khwar 20,836,313 1,273 - 20,837,586 1,679,793 346,136 - 2,025,929 18,811,657
Tarbela 4th Extension 168,482 66,445,427 - 66,613,909 75,221 2,264,751 - 2,339,972 64,273,937
Golen Gol 7,538 26,930,744 - 26,938,282 6,328 660,297 (15) 666,610 26,271,672
Others 397,246 67,786 (946) 464,086 232,995 53,259 (852) 285,402 178,684
2019 251,075,134 96,614,471 (137,145) 347,552,460 73,725,881 7,705,319 (16,226) 81,414,974 266,137,486
2018 - (Un-audited) 248,582,943 2,553,715 (61,524) 251,075,134 68,892,470 4,833,607 (196) 73,725,881 177,349,253

Page 29 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2019 2018
(Un-audited)
5.2 Capital Work In Progress (CWIP) Note ----------------- PKR '000' -----------------

Opening balance as at 01 July: 223,506,927 194,735,483

Additions during the year 5.2.3 44,057,535 28,771,444
Transferred to operating fixed assets (93,981,335) -
Closing balance as at 30 June 5.2.1 173,583,127 223,506,927

5.2.1 Projects breakup movement

2019
Dasu
Diamer Tarbela 4th Hydropower Keyal Mangla Mohmand Warsak 2nd Other
Golen Gol Total
Bhasha Dam Extension Project Khwar Upgradation Dam Rehabilitation Projects
(5.2.3)
----------------------------------------------------------------------------------------------------------- PKR '000' -----------------------------------------------------------------------------------------------------------

Opening balance as at 01 July 2018 - (Un-audited) 77,201,695 66,606,173 26,924,253 38,848,272 2,801,429 4,425,880 - 1,021,346 5,677,879 223,506,927

Movement in CWIP during the year:

Additions / (adjustments) during the year 8,484,806 2,326,634 3,667,767 10,503,371 366,598 2,467,551 16,709,162 13,377 (481,731) 44,057,535
Transferred to operating fixed assets - (66,426,175) (26,924,254) - - - - - (630,906) (93,981,335)

F-92
8,484,806 (64,099,541) (23,256,487) 10,503,371 366,598 2,467,551 16,709,162 13,377 (1,112,637) (49,923,800)
Closing balance as at 30 June 2019 85,686,501 2,506,632 3,667,766 49,351,643 3,168,027 6,893,431 16,709,162 1,034,723 4,565,242 173,583,127

2018 - (Un-audited)
Dasu
Diamer Bhasha Keyal
Tarbela 4th Hydropower Mangla Warsak 2nd Other
Dam Golen Gol Khwar Total
Extension Project Upgradation Rehabilitation Projects
(5.2.3)
----------------------------------------------------------------------------------------------------------- PKR '000' ----------------------------------------------------------------------------------------------------------

Opening balance as at 01 July 2017 - (Un-audited) 73,297,363 54,959,617 19,600,687 34,612,535 2,984,096 1,788,767 962,732 6,529,686 194,735,483

Movement in CWIP during the year:

Additions / (adjustments) during the year 3,904,332 11,646,556 7,323,566 4,235,737 (182,667) 2,637,113 58,614 (851,807) 28,771,444
Closing balance as at 30 June 2018 - (Un-audited) 77,201,695 66,606,173 26,924,253 38,848,272 2,801,429 4,425,880 1,021,346 5,677,879 223,506,927

5.2.2 The project-wise break up of Interest During Construction (IDC) charged to profit or loss is as follows.
IDC till 1 July 2017 - (Un-audited) 24,415,200 11,481,852 4,227,505 3,368,671 528,532 - 142,572 - 44,164,332
IDC for the year 8,506,485 7,798,779 2,000,861 5,815,415 125,952 33,557 147,459 - 24,428,508
IDC till 30 June 2018 - (Un-audited) 32,921,685 19,280,631 6,228,366 9,184,086 654,484 33,557 290,031 - 68,592,840
IDC for the year 8,485,098 8,896,598 2,096,314 8,262,820 96,829 193,498 153,258 120,326 28,304,741
IDC till 30 June 2019 41,406,783 28,177,229 8,324,680 17,446,906 751,313 227,055 443,289 120,326 96,897,581

Page 30 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

5.2.3 This includes net exchange loss of Rs. 1,973 million (2018: Rs. 1,597 million) which arose on translation
of foreign direct loan and foreign currency bank balance, directly related to Dasu Hydropower project.

2019 2018
(Un-audited)
6. LONG TERM LOANS, ADVANCES Note --------------------- PKR '000' ---------------------
AND DEPOSITS

Loans to employees - secured 6.1 594,207 567,982

Advance to WAPDA Water Wing 6.2 106,562 -
Security deposits 1,956 1,670
702,725 569,652

6.1 Long term loans to employees against purchase of:

- House buildings 199,081 181,428

- Plots 456,614 446,754
- Vehicles 4,962 2,603
- Others 139 670
6.1.1 660,796 631,455
Less: current portion shown under current assets
- House buildings 19,908 18,143
- Plots 45,661 44,675
- Vehicles 992 521
- Others 28 134
66,589 63,473
594,207 567,982

6.1.1 These represent loans provided to the permanent employees and are recoverable in 120 monthly
installments in respect of purchase of plot and house buildings and in 60 monthly installments for other
loans. Loans against plot are secured against the mortgage of land in favor of WAPDA, whereas other
loans are secured against employees' balances in General Provident Fund maintained with WAPDA.
Most of these loans are interest free and the management considers that discounting impact of these
loans would be insignificant.

6.2 This advance has been given to WAPDA Water Wing for providing of technical services for hydro
development projects.

2019 2018
(Un-audited)
7. STORES, SPARES AND LOOSE TOOLS Note --------------------- PKR '000' ---------------------

Stores and spares 5,184,714 4,742,237

Loose tools 335,917 352,621
5,520,631 5,094,858

8. RECEIVABLE FROM THE CUSTOMER

Unsecured, considered good

Receivable from CPPA-G - related party:

- against sale of electricity 67,677,164 48,249,542
- against hydel levies 8.1 124,605,790 89,191,330
8.2 192,282,954 137,440,872

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 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
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NOTES TO THE FINANCIAL STATEMENTS

2019 2018
(Un-audited)
8.1 Receivable against hydel levies Note --------------------- PKR '000' ---------------------

Billed:
NHP - Government of Punjab 8.1.1 77,279,939 24,582,684
NHP - Government of KPK 8.1.2 46,399,684 26,592,563
WUC - Government of AJ&K 8.1.3 769,003 518,492
WMC - IRSA 8.1.4 157,164 94,497
124,605,790 51,788,236
Un-billed:
NHP - Government of Punjab 8.1.5.1 - 6,032,331
NHP - Government of KPK 8.1.5.2 - 31,370,763
- 37,403,094
124,605,790 89,191,330

8.1.1 This represents NHP receivable from CPPA-G against bulk generation of power from hydro-electric
stations situated in Punjab by WAPDA Hydroelectric and is paid / payable to the Government of Punjab,
in accordance with GoP notification S.R.O. 290 (I)/2018 dated 23 February 2018.

8.1.2 This represents NHP receivable from CPPA-G against bulk generation of power from hydro-electric
stations situated in KPK by WAPDA Hydroelectric and is paid / payable to the Government of Khyber
Pakhtunkhwa, in accordance with GoP notification S.R.O. 290 (I)/2018 dated 23 February 2018.

8.1.3 This represents Water Usage Charges (WUC) receivable from CPPA-G and is paid / payable to the
Government of Azad Jammu and Kashmir, in accordance with GoP notification S.R.O. 290 (I)/2018
dated 23 February 2018.

8.1.4 This represents Water Management Charges (WMC) receivable from CPPA-G and is paid / payable to
the Indus River System Authority (IRSA), in pursuant to letter no. A-II-6/10/2010-IRSA dated 25 August
2011 i.e. 01 July 2011 and S.R.O. 290 (I)/2018 dated 23 February 2018.

8.1.5 Unbilled Net Hydel Profits (NHP)

This represented unbilled portion of NHP receivable from CPPA-G against the amount paid to the
GoKPK and the GoPb.

8.1.5.1 Government of Punjab (GoPb)

In the light of Council of Common Interest (CCI), GoP decision dated 16 December 2016, the Federal
Government through WAPDA Hydroelectric was directed to pay arrears of Rs. 82,700 million against
NHP to the GoPb in 4 installments in FY 2016 to FY 2019 as a full and final payment of NHP arrears
since inception till June 2016. WAPDA Hydroelectric has invoiced NHP arrears related to GoPb
amounting Rs. 67,840 million to CPPA-G till financial year ended 30 June 2019.

The CCI, GoP has allowed WAPDA Hydroelectric to recover the total arrears payable as above through
its tariff petition. NEPRA has allowed to charge Rs. 2,878.344 per kW/month of the installed capacity of
all power stations located in Punjab for the electricity sold to CPPA-G in accordance with the GoP
notification S.R.O.290(I)/2018 dated 23 February 2018.

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 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
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NOTES TO THE FINANCIAL STATEMENTS

8.1.5.2 Government of Khyber Pakhtunkhwa (GoKPK)

In pursuant to Memorandum of Understanding (MoU) signed on 25th February 2016, between the GoP
and the GoKPK, regarding the settlement of past arrears of NHP, the CCI, GoP gave concurrence to the
MoU during its 28th meeting held on 29th February 2016. Under the MoU a total amount of Rs. 70,000
million was agreed to be paid by WAPDA Hydroelectric on account of arrears of NHP to GoKPK as full
and final settlement of NHP since inception till February 2016, in 4 installments in FY 2016 to FY 2019.
WAPDA Hydroelectric has invoices NHP arrears related to GoKPK amounting Rs. 70,000 million to
CPPA-G till financial year ended 30 June 2019.

The CCI, GoP has allowed WAPDA Hydroelectric to recover the total arrears payable as above through
its tariff petition. WAPDA Hydroelectric has been allowed by NEPRA to charge Rs. 181.0964 per
kW/month from 07 March 2016 to 22 February 2018 and Rs. 305.549 per kW/month of the installed
capacity of all power stations located in Khyber Pakhtunkhwa for the electricity sold to CPPA-G in
accordance with the GoP notification S.R.O.290(I)/2018 dated 23 February 2018.

2019 2018
(Un-audited)
8.2 Aging of trade debts --------------------- PKR '000' ---------------------

Not past due: 10,660,327 15,782,808

Past due:
- 30 days 10,461,178 14,475,795
- 31 - 60 days 8,863,374 13,833,458
- More than 60 days 162,298,075 93,348,811
192,282,954 137,440,872

As discussed in Note 29.1.2, receivable from the customer of WAPDA Hydroelectric represents amounts
due from CPPA-G (a Government owned entity) against sale of electricity and hydel levies. In pursuant
with the SRO No. 985(1)/2019 issued by SECP on 2 September 2019 in respect of the companies
holding financial assets due from GOP, the requirements contained in ''IFRS 9 (Financial instrument)
with respect to application of expected credit losses method (ECL)'' shall not be applicable till 30 June
2021.

Amounts receivable from CPPA-G has been acknowledged by CPPA-G, a fellow Government owned
entity, which has direct access to cashflows of electricity distribution entities; accordingly, the
management is confident that there is no objective evidence that any significant credit loss has incurred.
Accordingly, no allowance in this regard has been created.

2019 2018
(Un-audited)
9. SHORT TERM INVESTMENTS Note --------------------- PKR '000' ---------------------

Amortized cost:
Investment in Term Deposit Receipt (TDR) 9.1 3,000,000 31,000,000
Innovative Investment Bank Limited 9.2 261,000 261,000
3,261,000 31,261,000
Less: allowance for expected credit loss (261,000) (261,000)
3,000,000 31,000,000

9.1 These are term deposit receipts from commercial banks having maturity up to six months. These carry
mark-up at the rate of 11% to 13.5% (2018: 6.4% to 8.9%) per annum.

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 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
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NOTES TO THE FINANCIAL STATEMENTS

9.2 This represents investment made in the Innovative Investment Bank Limited (the Bank). On maturity, the
balance remained unpaid, hence the case was lodged with the Honorable Lahore High Court (LHC) for
the recovery of the said amount. The Honorable Lahore High Court decided the case in favor of WAPDA
and attached the property with forced sale value of Rs. 220 million and appointed Court Auctioneers for
recovery of this amount.

Further, Securities and Exchange Commission of Pakistan (SECP) obtained stay order from LHC and
initiated voluntary winding-up of the Bank by court. The LHC first appointed Provisional Manager to run
the affairs of the Bank and there after Joint Official Liquidators (JOLs) for winding-up of the Bank.
WAPDA lodged its formal claim as preferential claimant being the entity owned by the GoP before JOLs
of the Bank under liquidation. JOLs through decision dated 09 September 2020 rejected WAPDA’s claim
as to preferential claimant and against that JOLs' decision, WAPDA filed an appeal before LHC which is
pending for adjudication. WAPDA Hydroelectric has recognized the expected credit loss against the said
investment in it's financial statements.

2019 2018
(Un-audited)
10. OTHER RECEIVABLES Note --------------------- PKR '000' ---------------------

Bridge financing to:

- WAPDA Water Wing 10.1 2,520,604 2,185,688
- WAPDA Coordination Wing 10.2 460,689 9,300
2,981,293 2,194,988
Receivable from Power Sector Investment 10.3 - 3,822
Interest receivable on bridge financing to:
- WAPDA Water Wing 641,056 271,170
- WAPDA Coordination Wing 22,961 116
664,017 271,286
Others:
- Considered good 10.4 927,625 248,582
- Considered doubtful 1,286,558 1,286,558
2,214,183 1,535,140
Provision against doubtful receivable 10.5 (1,286,558) (1,286,558)
927,625 248,582
4,572,935 2,718,678

10.1 This represents unsecured bridge financing extended to WAPDA Water Wing for Kurram Tangi Dam and
Kachi Canal Project. The loan carries interest at the rate of 14.91% per annum (2018: 14.91% per
annum). These are expected to be recovered in next twelve months.

10.2 This represents unsecured bridge financing extended to WAPDA Coordination Wing to meet its working
capital requirements. The loan carries interest at the rate of 14.91% per annum (2018: 14.91% per
annum). These are expected to be recovered in next twelve months.

10.3 This represented receivable from associated undertaking against Debt Service Liability (DSL) related to
foreign relent loans paid to GoP for financial years 2014-15, 2015-16 and 2016-17 on behalf of Kot Addu
Power Company Limited (KAPCO) and Neelum Jhelum Hydropower Company (Private) Limited.

10.4 This includes Rs. 495 million receivable in respect of interest income from Land Acquisition Collectors of
Hazro and Ghazi against advances given for land acquisition for Ghazi Barotha Hydropower Project.

10.5 This represents provision against unreconciled balance with CPPA-G.

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 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2019 2018
(Un-audited)
11. LOANS AND ADVANCES Note --------------------- PKR '000' ---------------------

Advances to: considered good

- Employees against expense 381,841 795,961
- Chief Resident Representative Karachi 11.1 3,449,460 2,955,053
- Suppliers and others 1,992,631 605,497
5,823,932 4,356,511
Current portion of long term loans 6.1 66,589 63,473
5,890,521 4,419,984

11.1 This advance has been given to the Chief Resident Representative Karachi (CRRK), (a segment of
WAPDA) against import of stores and spare parts.

2019 2018
(Un-audited)
12. CASH AND BANK BALANCES Note --------------------- PKR '000' ---------------------

Cash in hand - 43,555

Direct working capital balances
Balance with the banks:
- current accounts
Hydroelectric's own balance 1,536,177 2,895,417

Balances held for specific utilizations

Balance with the banks:
- current accounts
un-utilized balance of loans and grants 12.1 54,866,832 41,097,974
- deposit accounts
un-utilized balance of loans and grants 12.2 5,364,488 12,346,871
Hydroelectric's own balance 12.3 9,909,958 13,302,789
15,274,446 25,649,660
Total bank balances 71,677,455 69,643,051
Total cash and bank balances 71,677,455 69,686,606

12.1 Un-utilized balance of loans and grants

Held in current accounts:

IDA relent loan for Dasu hydropower project 15.1.2.2 1,836,259 1,836,259
Foreign direct loan for Dasu hydropower project 15.2.1 49,065,464 37,025,648
IDA relent loan for Tarbela 4th extension project 15.1.1.13 803,924 374,656
IBRD relent loan for Tarbela 4th extension project 15.1.1.14 488,769 590,993
USAID grant for Mangla refurbishment project 16.1.2 1,330,345 1,270,418
AFD relent loan for Mangla refurbishment project 15.1.2.5 745,947 -
IBRD relent loan for Tarbela 5th extension project 15.1.2.6 346,131 -
USAID grant for Golen Gol hydropower project 16.1.3 249,993 -
54,866,832 41,097,974

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 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2019 2018
(Un-audited)
12.2 Un-utilized balance of loans and grants Note --------------------- PKR '000' ---------------------

Held in deposit accounts:

Syndicated local facility for
Dasu hydropower project 15.4 5,364,488 12,346,870

12.3 Deposit accounts carry interest at the rate ranging from 9.8% to 11.75% (2018: 4.25% to 6.30%) per
annum.

13. REGULATORY DEFERRAL

ACCOUNT DEBIT BALANCES
Operating
Interest on
costs and
loans Total
others
(Note 13.1)
(Note 13.2)
------------------------------------------ PKR '000' ------------------------------------------

Balance as at 01 July 2017 - (Un-audited) 1,442,898 4,185,176 5,628,074

Balances arising in the year 3,298,721 7,441,695 10,740,416
Recovery / reversal (Note 13.3) - (3,008,000) (3,008,000)
Net movement 3,298,721 4,433,695 7,732,416
Balance as at 30 June 2018 - (Un-audited) 4,741,619 8,618,871 13,360,490
Balances arising in the year 3,887,300 (382,798) 3,504,502
Recovery / reversal (Note 13.3) - (5,560,000) (5,560,000)
Net movement 3,887,300 (5,942,798) (2,055,498)
Balance as at 30 June 2019 8,628,919 2,676,073 11,304,992

13.1 This regulatory deferral account debit balance represents the interest on loans obtained by WAPDA
Hydroelectric for payment of NHP to the Provincial Governments and management expects that this
would be recovered within 36 months from the reporting date.

13.2 This regulatory deferral account debit balance represents the operating and maintenance cost,
depreciation and return on regulatory asset base. The management expects that this would be recovered
within 36 months from the reporting date.

13.3 This represents the transfer from regulatory deferral account debit balance to receivable from the
customer.

13.4 As described in Note 4.19, income of WAPDA Hydroelectric is exempt from tax, accordingly there are no
tax implications on regulatory deferred account debit balance.

13.5 For detail regarding rate regulatory process, refer to Note 4.9.

14. GOVERNMENT OF PAKISTAN'S INVESTMENT

This represents equity investment of the GoP in WAPDA Hydroelectric.

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 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
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NOTES TO THE FINANCIAL STATEMENTS

2019 2018
(Un-audited)
15. LONG TERM FINANCING - interest bearing Note --------------------- PKR '000' ---------------------

Foreign loans:
- relent from the GoP in PKR - unsecured (FRL) 15.1 109,662,906 102,771,331
- direct - secured 15.2 59,144,090 45,566,349
168,806,996 148,337,680
Local loans:
- cash development loans from the GoP - unsecured 15.3 89,086,166 89,699,788
- syndicated term finance facility - secured 15.4 25,000,000 25,000,000
- diminishing musharakah - secured 15.5 38,120,000 80,152,000
152,206,166 194,851,788
321,013,162 343,189,468
Less: current portion shown under current liabilities
- foreign relent loans 15.6 41,123,950 35,924,106
- foreign direct loans 15.2.2 59,144,090 44,069,106
- cash development loans 15.6 22,586,166 19,414,788
- syndicated term finance facility 15.4.1 25,000,000 25,000,000
- diminishing musharakah 15.5.1 38,120,000 38,120,000
185,974,206 162,528,000
135,038,956 180,661,468
15.1 Foreign relent loans from the GoP - unsecured:

Operational power station loans 15.1.1 82,187,122 81,820,665

Development project loans 15.1.2 27,475,784 20,950,666
109,662,906 102,771,331

15.1.1 Operational power station loans

Outstanding
Rate of Repayment
semi annual
interest commence- 2018
Loan name Note installments 2019
per ment / (Un-audited)
as on
annum maturity
30 June 2019

--------------------- PKR '000' ---------------------

Ghazi Barotha
ADB-1424-PAK 15.1.1.1 14.00% 4 2001/2021 941,629 1,412,442
KfW-9566316 15.1.1.2 14.00% 8 2003/2023 1,189,390 1,486,738
Pk-P-47 15.1.1.3 17.00% 2 2005/2020 569,427 1,138,851
2,700,446 4,038,031
Chashma
French Credit Bank 15.1.1.4 11.00% - 1999/2019 - 30,223
French State Bank 15.1.1.5 11.00% - 1999/2019 - 27,647
Citi Bank of Japan 15.1.1.6 11.00% 12 2005/2025 635,329 741,218
635,329 799,088
Allai, Dubair and Khan Khwar
projects
IDB-PAK-0117 15.1.1.7 17.00% 8 2014/2023 4,936,817 6,171,021

Jabban Power station

AFD Credit Facility 15.1.1.8 15.00% 18 2014/2028 1,775,835 1,973,150

F-99 Page 37 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Outstanding
Rate of Repayment
semi annual
interest commence- 2018
Loan name Note installments 2019
per ment / (Un-audited)
as on
annum maturity
30 June 2019

--------------------- PKR '000' ---------------------

Golen Gol
Kuwait Fund Loan No. 742 15.1.1.9 17.00% 12 2014/2025 2,663,746 3,107,704
Saudi Fund Loan No. 10/479 15.1.1.10 17.00% 12 2014/2025 2,155,384 2,514,614
Saudi Fund Loan No. 14/609 15.1.1.11 15.00% 29 2019/2034 5,349,047 4,720,436
OPEC Fund Loan No. 1205 15.1.1.12 17.00% 18 2018/2028 1,261,649 1,401,832
OPEC Fund Loan No. 1206 15.1.1.12 17.00% 18 2019/2028 937,211 837,564
12,367,037 12,582,150
Tarbela 4th Extension
IDA Credit No. 5079-PK 15.1.1.13 15.00% 35 2017/2037 18,059,104 15,918,666
IBRD 8144-PK 15.1.1.14 15.00% 23 2020/2031 41,712,554 40,338,559
59,771,658 56,257,225
82,187,122 81,820,665

15.1.1.1 This loan has been obtained for Ghazi Barotha Hydropower Station from Asian Development Bank (ADB) by the
GoP and further re-lent to WAPDA Hydroelectric. This carries mark up @ 14% (2018: 14%) per annum inclusive of
interest rate of 11% (2018: 11%) plus 3% (2018: 3%) "Exchange Risk Cover" which is charged on principal amount.
This loan is secured through GoP guarantee in favor of ADB and WAPDA Hydroelectric is responsible for repayment
to the GoP.

15.1.1.2 This loan has been obtained for Ghazi Barotha Hydropower Station from Kreditanstalt für Wiederaufbau, Frankfurt
an Main (KfW) by the GoP and further re-lent to WAPDA Hydroelectric. This carries mark up @ 14% (2018: 14%)
per annum inclusive of interest rate of 11% (2018: 11%) plus 3% (2018: 3%) "Exchange Risk Cover" which is
charged on principal amount. This loan is secured through the GoP guarantee in favor of KfW and WAPDA
Hydroelectric is responsible for repayment to the GoP.

15.1.1.3 This loan has been obtained for Ghazi Barotha Hydropower Station from Overseas Economic Cooperation Fund
(Fund) by the GoP and further re-lent to WAPDA Hydroelectric. This carries mark up @ 17% (2018: 17%) per
annum inclusive of interest rate of 11% (2018: 11%) plus 6% (2018: 6%) "Exchange Risk Cover" which is charged
on principal amount. This loan is secured through the GoP guarantee in favor of Fund and WAPDA Hydroelectric is
responsible for repayment to the GoP.

15.1.1.4 This loan has been obtained for Chashma Hydropower Station from French Credit Bank by the GoP and further re-
lent to WAPDA Hydroelectric. This carries mark up @ 11% (2018: 11%) per annum inclusive of interest rate of 8%
(2018: 8%) plus 3% (2018: 3%) "Exchange Risk Cover" which is charged on principal amount. This loan is secured
through GoP guarantee in favor of the bank and WAPDA Hydroelectric is responsible for repayment to the GoP.
WAPDA Hydroelectric has fully repaid the loan.

15.1.1.5 This loan has been obtained for Chashma Hydropower Station from French State Bank by the GoP and further re-
lent to WAPDA Hydroelectric. This carries mark up @ 11% (2018: 11%) per annum inclusive of interest rate of 8%
(2018: 8%) plus 3% (2018: 3%) "Exchange Risk Cover" which is charged on principal amount. This loan is secured
through GoP guarantee in favor of the bank and WAPDA Hydroelectric is responsible for repayment to the GoP.
WAPDA Hydroelectric has fully repaid the loan.

15.1.1.6 This loan has been obtained for Chashma Hydropower Station from Citi Bank by the GoP and further re-lent to
WAPDA Hydroelectric. This carries mark up @ 11% (2018: 11%) per annum inclusive of interest rate of 8% (2018:
8%) plus 3% (2018: 3%) "Exchange Risk Cover" which is charged on principal amount. This loan is secured through
the GoP guarantee in favor of the bank and WAPDA Hydroelectric is responsible for repayment to the GoP.

15.1.1.7 This represents Islamic Development Bank loan amounting to USD 150.200 million under Istisna's Financing
Agreement dated 01 December 2008 for Allai, Dubair and Khan Khwar Hydropower Projects obtained by the GoP.
The GoP has relent the loan to WAPDA Hydroelectric being executing agency of Khwar Projects. This carries mark
up @ 17% (2018: 17%) per annum inclusive of interest rate of 11% (2018: 11%) plus 6% (2018: 6%) "Exchange
Risk Cover" which is charged on principal amount. The loan will be repaid in 15 years including 3 years of grace
period.

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NOTES TO THE FINANCIAL STATEMENTS

15.1.1.8 This represents Agence Française de Développement (AFD) loan amounting to EURO 26.500 million under
Subsidiary Loan Agreement dated 13 December 2010 for Jabban Power Station taken by the GoP. The GoP has
relent the loan to WAPDA Hydroelectric being executing agency for the Jabban Power Station. This carries mark up
@ 15% (2018: 15%) per annum inclusive of interest rate of 8.2% (2018: 8.2%) plus 6.8% (2018: 6.8%) "Exchange
Risk Cover" which is charged on principal amount. The loan will be repaid in 18 years including 3 years of grace
period.

15.1.1.9 This represents Kuwait Fund loan amounting to Kuwaiti Dinar 11 million under Subsidiary Loan Agreement dated 05
September 2008 for Golen Gol Hydropower Project taken by the GoP. The disbursement of loan started in 2011.
The GoP has relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up
@ 17% (2018: 17%) per annum inclusive of interest rate of 11% (2018: 11%) plus 6% (2018: 6%) "Exchange Risk
Cover" which is charged on principal amount. The loan will be repaid in 15 years including 2 years of grace period.

15.1.1.10 This represents Saudi Fund loan amounting to Saudi Riyals 150 million under Subsidiary Loan Agreement dated 05
September 2008 for Golen Gol Hydropower Project taken by the GoP. The disbursement of loan started in 2011.
The GoP has relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up
@ 17% (2018: 17%) per annum inclusive of interest rate of 11% (2018: 11%) plus 6% (2018: 6%) "Exchange Risk
Cover" which is charged on principal amount. The loan will be repaid in 15 years including 2 years of grace period.

15.1.1.11 This represents Saudi Fund loan amounting to Saudi Riyals 216.750 million under Subsidiary Loan Agreement dated
28 April 2014 for Golen Gol Hydropower Project taken by the GoP. The disbursement of loan started in 2011. The
GoP has relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up @
15% (2018: 15%) per annum inclusive of interest rate of 8.2% (2018: 8.2%) plus 6.8% (2018: 6.8%) "Exchange Risk
Cover" which is charged on principal amount. The loan will be repaid in 20 years including 5 years of grace period.

15.1.1.12 These represent Organization of Petroleum Exporting Country (OPEC) fund loans amounting to USD 15 million each
under relending arrangement dated 05 June 2017 for Golen Gol Hydropower Project taken by the GoP. The
disbursement of Portion-1 and Portion-2 has been started in 2016 and 2018 respectively. The GoP has relent the
loan to WAPDA Hydroelectric being executing agency for the project. These carry mark up @ 17% (2018: 17%) per
annum inclusive of interest rate of 11% (2018: 11%) plus 6% (2018: 6%) "Exchange Risk Cover" which is charged
on principal amount. Portion-1 and Portion-2 will be repaid in 11 and 10 years respectively. WAPDA Hydroelectric
has started repayment of Portion-1 and Portion-2 from 2018 and 2019, respectively, pursuant to the direction of the
GoP.

15.1.1.13 This represents International Development Association (IDA) loan, amounting to USD 440 million under Subsidiary
Loan Agreement dated 12 April 2012 obtained for Tarbela 4th Extension Hydropower Project by the GoP. The GoP
has relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up @ 15%
(2018: 15%) per annum inclusive of interest rate of 8.2% (2018: 8.2%) and 6.8% (2018: 6.8%) "Exchange Risk
Cover" which are charged on both principal and interest amount separately. The loan will be repaid in 25 years
including 5 years of grace period.

For the year Cumulative

Loan utilization 2019 2018 2019 2018
(Un-audited) (Un-audited)
------------------------------------- PKR '000' -------------------------------------
Opening balance 374,656 99,295 - -
Withdrawal of loan 2,668,857 2,473,713 18,587,523 15,918,666
3,043,513 2,573,008 18,587,523 15,918,666
Less: utilization of funds (2,239,589) (2,198,352) (17,783,599) (15,544,010)
Closing balance 803,924 374,656 803,924 374,656

15.1.1.14 This represents International Bank for Reconstruction and Development (IBRD) loan of USD 400 million under
Subsidiary Loan Agreement dated 12 April 2012 for Tarbela 4th Extension Hydropower Project taken by the GoP.
The GoP has relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up
@ 15% (2018: 15%) per annum inclusive of interest rate of 8.2% (2018: 8.2%) plus 6.8% (2018: 6.8%) "Exchange
Risk Cover" which is charged on both principal and interest amount separately. The loan will be repaid in 19 years
including 7 years of grace period.

F-101 Page 39 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

For the year Cumulative

Loan Utilization 2019 2018 2019 2018
(Un-audited) (Un-audited)
------------------------------------- PKR '000' -------------------------------------
Opening balance 590,993 96,038 - -
Withdrawal of loan 1,373,995 11,285,585 41,712,554 40,338,559
1,964,988 11,381,623 41,712,554 40,338,559
Less: utilization of funds (1,476,219) (10,790,630) (41,223,785) (39,747,566)
Closing balance 488,769 590,993 488,769 590,993

15.1.2 Development project loans

Outstanding
Rate of Repayment
semi annual
interest commence- 2018
Loan name Note installments 2019
per ment / (Un-audited)
as on
annum maturity
30 June 2019
--------------------- PKR '000' ---------------------
Keyal Khwar
KfW-320517 15.1.2.1 15.00% 79 2019/2059 516,543 523,081
KfW-3003374 15.1.2.1 15.00% 59 2019/2049 132,839 101,923
649,382 625,004
Dasu Hydro
IDA Credit No. 5498-PK 15.1.2.2 15.00% 40 2020/2039 22,823,983 17,995,372

Warsak Rehabilitation (Phase 2)

AFD Credit Facility 15.1.2.3 15.00% 28 2022/2036 981,049 981,049
KfW-15568024 15.1.2.4 15.00% 60 2027/2056 40,671 40,671
1,021,720 1,021,720
Mangla Refurbishment Project
AFD Credit Facility 15.1.2.5 12.00% 30 2023/2037 1,914,289 1,308,570

Tarbela 4th / 5th Extension

IBRD Loan No.8646-PK 15.1.2.6 12.00% 28 2023/2036 755,949 -
AIIB Loan No.LN 0005-PAK 15.1.2.7 12.00% 28 2023/2036 310,461 -
1,066,410 -
27,475,784 20,950,666

15.1.2.1 This represents Frankfurt am Main (KfW) loan amounting to EURO 97.080 million, to be disbursed in two tranches.
Under Tranche - 1 (KfW 320517) - EURO 4.415 million will be disbursed that will be repaid in 48 years including 8
years of grace period. Under Tranche - 2 (KfW 3003374), EURO 92.664 million will be disbursed that will be repaid
in 34 years including 4 years of grace period. The loan taken by the GoP has been relent under Subsidiary Loan
Agreement dated 27 December 2011 for Keyal Khwar Hydropower Project. The disbursement of loan for second
tranche started in 2015. These carry mark up @ 15% (2018: 15%) per annum inclusive of interest rate of 8.2%
(2018: 8.2%) plus 6.8% (2018: 6.8%) "Exchange Risk Cover" which is charged on principal amount.

15.1.2.2 This represents relent loan from International Development Association (IDA), amounting to USD 588.4 million under
subsidiary loan agreement dated 13 October 2014 for Dasu Hydropower Project taken by the GoP. The GoP has
relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up @ 15% (2018:
15%) per annum inclusive of interest rate of 8.2% (2018: 8.2%) plus 6.8% (2018: 6.8%) "Exchange Risk Cover"
which is charged on principal amount. WAPDA Hydroelectric will disburse USD 15 million to National Transmission
and Despatch Company (NTDC) for feasibility study and detail design of transmission lines. WAPDA Hydroelectric
has disbursed USD 2.796 million (2018: USD 2.586 million) to NTDC as of reporting date. The loan will be repaid in
25 years including 5 of years of grace period.

F-102 Page 40 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

For the year Cumulative

Loan utilization 2019 2018 2019 2018
(Un-audited) (Un-audited)
------------------------------------- PKR '000' -------------------------------------
Opening balance 1,836,259 2,166,636 - -
Withdrawal of loan 4,828,611 447,123 22,823,983 17,995,372
6,664,870 2,613,759 22,823,983 17,995,372
Less: utilization of funds (4,828,611) (777,500) (20,987,724) (16,159,113)
Closing balance 1,836,259 1,836,259 1,836,259 1,836,259

15.1.2.3 This represents Agence Française de Développement (AFD) loan amounting to EURO 41.5 million under Subsidiary
Loan Agreement dated 22 September 2015 for Warsak Rehabilitation Hydropower Project (Phase-2) taken by the
GoP. The GoP has relent the loan to WAPDA Hydroelectric being executing agency for the Warsak Rehabilitation
Project. This carries mark up @ 15% (2018: 15%) per annum inclusive of interest rate of 8.2% (2018: 8.2%) plus
6.8% (2018: 6.8%) "Exchange Risk Cover" which is charged on principal amount. The loan will be repaid in 20 years
including 6 years of grace period.

15.1.2.4 This represents Frankfurt am Main (KfW) loan of EURO 40 million, to be disbursed in two portions. Under Portion-1,
EURO 30 million will be disbursed that will be repaid in 38 years including grace period of 8 years. Under Portion-2,
EURO 10 million will be disbursed that will be repaid after 10 years from the availability of Portion-2 over a period of
15 years. The disbursement of loan for Portion-1 started in 2018. The loan taken by the GoP has been relent under
Subsidiary Loan Agreement dated 22 September 2015 for Rehabilitation of Warsak Hydropower Plant Project. This
carries mark up @ 15% (2018: 15%) per annum inclusive of interest rate of 8.2% (2018: 8.2%) plus 6.8% (2018:
6.8%) "Exchange Risk Cover" which is charged on principal amount. The loan will be repaid in 38 years including 8
years of grace period.

15.1.2.5 This represents Agence Française de Développement (AFD) loan amounting to EURO 90 million under Subsidiary
Loan Agreement dated 20 July 2017 for Rehabilitation of Mangla Hydropower Project taken by the GoP. The GoP
has relent the loan to WAPDA Hydroelectric being executing agency for the Mangla Hydropower Project. This carries
mark up @ 12% (2018: 12%) per annum inclusive of interest rate of 6.9% (2018: 6.9%) plus 5.1% (2018: 5.1%)
"Exchange Risk Cover" which is charged on principal amount. The loan will be repaid in 20 years including a grace
period of 5 years.

15.1.2.6 This represents International Bank for Reconstruction (IBRD) loan amounting to USD 390 million under Subsidiary
Loan Agreement dated 18 January 2017 for additional financing of Tarbela 4th Extension Hydropower Project taken
by the GoP. The loan is also being utilized for Tarbela 5th Extension Hydropower Project. The GoP has relent the
loan to WAPDA Hydroelectric being executing agency for the project. The GoP has relent the loan to WAPDA
Hydroelectric being executing agency for the project. This carries mark up @ 12% (2018: 12%) per annum inclusive
of interest rate of 6.9% (2018: 6.9%) plus 5.1% (2018: 5.1%) "Exchange Risk Cover" which is charged on both
principal and interest amount separately. The loan will be repaid in 19 years including a grace period of 5 years.

15.1.2.7 This represents Asian Infrastructure Investment Bank (AIIB) loan amounting to USD 300 million under Subsidiary
Loan Agreement dated 18 January 2017 for Tarbela 5th Extension Hydropower Project taken by the GoP. The GoP
has relent the loan to WAPDA Hydroelectric being executing agency for the project. This carries mark up @ 12%
(2018: 12%) per annum inclusive of interest rate of 6.9% (2018: 6.9%) plus 5.1% (2018: 5.1%) "Exchange Risk
Cover" which is charged on both principal and interest amount separately. The loan will be repaid in 19 years
including a grace period of 5 years.

2019 2018
(Un-audited)
15.2 Foreign direct loans - secured: -------------------------------------
Note PKR '000' ------------------------------------
Operational power station loans 15.2.1 2,009,460 2,994,554
Development project loans 15.2.2 57,134,630 42,571,795
59,144,090 45,566,349

F-103 Page 41 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Rate of Installments Repayment

interest outstanding commence- 2018
Loan name Note 2019
per as on ment / (Un-audited)
annum 30 June 2019 maturity

------------------------------------- PKR '000' ------------------------------------

Operational power station loan
Jinnah
Chinese Supplier Credit 15.2.1 5.00% 2 2010/2020 2,009,460 2,994,554

Development project loan

Dasu
Pakistan Water and
Power (06/17) - Global 15.2.2 5.34% 8 2023/2027 57,134,630 42,571,795
59,144,090 45,566,349

15.2.1 Operational project loan - Dongfang Electric Corporation

This represents supplier's credit facility from Exim Bank of China, amounting to Nil (2018: USD 12.308 million) for
the construction of Jinnah Hydropower Project, a turn key project against the sanctioned limit of USD 123.097
million. The loan is repayable in fourteen years inclusive of four years grace period, in 20 semi annually installments
starting from 18 August 2010. Rate of mark-up is 5% annually. The loan is secured through stand by letter of credit
to back issuance of 20 promissory notes issued at the time of commencement of the project in 2006. The loan is
secured through guarantee given by the GoP.

2019 2018 2019 2018

(Un-audited) (Un-audited)
------------------------------------- USD-------------------------------------
'000' -------------------------------------
PKR '000' ------------------------------------
Outstanding balance as at 01 July 24,618 36,928 2,994,554 3,876,779
Exchange loss for the year - - 634,189 447,655
24,618 36,928 3,628,743 4,324,434
Less: repayments during the year (12,310) (12,310) (1,619,283) (1,329,880)
Outstanding balance as at 30 June 12,308 24,618 2,009,460 2,994,554

15.2.2 Development project loan - Credit Suisse AG, Singapore

This represents loan amounted USD 350 million (2018: USD 350 million) obtained from Credit Suisse, AG for the
construction of Dasu Hydropower Project. The loan is repayable in ten years inclusive of six years grace period, in 8
semi annual installments starting from 30 June 2023. Rate of mark-up is 5.34%. The loan is secured through
guarantees given by the GoP and International Development Association (IDA).

As per section 23.2 of the loan agreement with Credit Suisse Bank, WAPDA Hydroelectric is required to maintain
tangible net worth at or above Rs. 500,000 million, at all time prior to the payment of the uncovered interest amount.
Due to adoption of cost model for subsequent measurement of operating fixed assets, under the accounting and
reporting standards as applicable in Pakistan (with effect from 01 July 2018), WAPDA Hydroelectric's net worth is
less than the above-mentioned amount and WAPDA Hydroelectric didn't have the unconditional right to defer the
payment of loan for next 12 months, hence, the entire outstanding loan amounted Rs. 57,135 million (2018: Rs.
42,572 million) has been classified as current. Subsequent to the reporting date, the breach has been cured as
mentioned in Note 36.3.

2019 2018 2019 2018

(Un-audited) (Un-audited)
------------------------------------- USD-------------------------------------
'000' -------------------------------------
PKR '000' ------------------------------------

Outstanding balance as at 01 July 350,000 200,000 42,571,795 20,995,760

Exchange loss for the year - - 14,562,835 3,330,980
350,000 200,000 57,134,630 24,326,740
Add: loan received during the year - 150,000 - 18,245,055
Outstanding balance as at 30 June 350,000 350,000 57,134,630 42,571,795

F-104 Page 42 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2019 2018
(Un-audited)
15.3 Cash development loans from the GoP - unsecured: -------------------------------------
Note PKR '000' ------------------------------------

Operational power station loans 15.3.1 6,207,924 6,561,798

Development project loans 15.3.2 82,878,242 83,137,990
89,086,166 89,699,788

15.3.1 Operational power station loans

Rate of Installments Repayment

Power station and interest outstanding commence- 2018
Note 2019
year of disbursement per as on ment / (Un-audited)
annum 30 June 2019 maturity

------------------------------------- PKR '000' ------------------------------------

Ghazi Barotha
2005-06 15.3.1.1 9.79% 12 2012/2031 5,242,936 5,469,086
Jabban
2007-08 15.3.1.1 10.14% 14 2014/2033 27,083 27,953
2009-10 15.3.1.1 12.59% 16 2016/2035 91,409 93,213
118,492 121,166
Tarbela (HPS)
1997-98 15.3.1.2 17.50% 4 2004/2023 528,023 614,812
1998-99 15.3.1.2 17.50% 5 2005/2024 318,473 356,734
846,496 971,546
6,207,924 6,561,798

15.3.1.1 These loans have been obtained for Ghazi Barotha and Jabban projects from the GoP for construction of the
projects. The loans will be repaid in 25 years including 5 years of grace period.

15.3.1.2 The loan have been obtained for Tarbela hydel power station from the GoP for payment of net hydel profit to
provincial Government of Khyber Pakhtunkhwa. The loan will be repaid in 25 years including 5 years of grace period.

15.3.2 Development project loans

Rate of Installments Repayment

Project and interest outstanding commence- 2018
Note 2019
year of disbursement per as on ment / (Un-audited)
annum 30 June 2019 maturity
------------------------------------- PKR '000' ------------------------------------
Harpo
2009-10 15.3.2.1 12.59% 16 2016/2035 36,564 37,285
Bashoo
2007-08 15.3.2.1 10.14% 14 2014/2033 14,342 14,803
2009-10 15.3.2.1 12.59% 16 2016/2035 24,376 24,856
38,718 39,659
Diamer Bhasha
2007-08 15.3.2.2 10.14% 14 2014/2033 262,338 270,766
2009-10 15.3.2.2 12.59% 16 2016/2035 937,526 956,022
2011-12 15.3.2.2 12.64% 18 2018/2037 11,379,462 11,549,258
2012-13 15.3.2.2 10.65% 19 2019/2038 3,723,634 3,785,000
2013-14 15.3.2.2 11.79% 20 2020/2039 27,500,000 27,500,000
2014-15 15.3.2.2 10.53% 20 2021/2040 15,000,000 15,000,000
2015-16 15.3.2.2 7.37% 20 2022/2041 10,000,000 10,000,000
2016-17 15.3.2.2 6.54% 20 2023/2042 14,000,000 14,000,000
82,802,960 83,061,046
82,878,242 83,137,990

F-105 Page 43 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

15.3.2.1 These loans have been obtained from the GoP for feasibility studies of hydel development projects. The loans will
be repaid in 25 years including 5 years of grace period.

15.3.2.2 The loan have been obtained from the GoP for the land acquisition of Diamer Bhasha Dam project. The loan will be
repaid in 25 years including 5 years of grace period.

15.4 WAPDA Hydroelectric has entered into agreements with Habib Bank Limited lead consortium of seven banks on 29
March 2017 for financing of Dasu Hydropower Project amounting to Rs. 144,000 million for the period of 15.5 years
including 5.5 years as grace period. This loan has the following structure of facilities:

GoP Guarantee Backed Assets Backed Financing

Financing (GBF) Facilities (ABF) Facilities
Total
Sukuk Diminishing Commercial
TFCs
(musharakah) musharakah facility
--------------------------------------------------- PKR '000' ---------------------------------------------------

Total amount of facilities 52,800,000 35,200,000 33,600,000 22,400,000 144,000,000

Un-availed balance of facilities 37,800,000 25,200,000 33,600,000 22,400,000 119,000,000
at 01 July 2017 - (Un-audited)
Availed during the year - - - - -
Un-availed balance of facilities
at 30 June 2018 - (Un-audited) 37,800,000 25,200,000 33,600,000 22,400,000 119,000,000

Availed during the year - - - - -

Un-availed balance of facilities
at 30 June 2019 37,800,000 25,200,000 33,600,000 22,400,000 119,000,000

Total availed balance of facilities

at 30 June 2019 15,000,000 10,000,000 - - 25,000,000

Face value per certificate (Rs.) 10,000 10,000 - - -

Principal repayment will commence 8 November 2022 - - -

6 month
KIBOR +
6 month KIBOR + margin of
Profit on rental payments - margin of -
1.45% payable semi annually
200 basis
points p.a

Musharakah assets share 62.75% - 32.25% - 100%

15.4.1 The Sukuk and TFCs are secured by way of guarantee of the GoP to the Pak Brunei Investment Company Limited
(Trustee) whereas Mangla Dam's land amounting to Rs. 103,244 million is being used as Musharakah Assets.
Further Power Generation Plant Assets of Ghazi Barotha and Tarbela HPP amounting to Rs. 77,106 million have
been hypothecated in favor of Security Trustee for securing Islamic and Commercial Asset Backed Facilities.
WAPDA Hydroelectric has injected equity amounted Rs. 18,106 million (2018: Rs. 13,673 million) as at reporting
date for the construction of Dasu Hydropower Project.

As per clause 22 of schedule 8 of DASU syndicated facilities, WAPDA Hydroelectric shall maintain Financial
Services Coverage Ratio (FSCR) and Current Ratio at least 1.25:1 and 1:1 respectively; any breach will trigger an
event of default. As described in Notes 15.2.2, 15.5.1 and 15.6, WAPDA Hydroelectric classified the loan from
Credit Suisse, loans from GoP and loan against diminishing musharakah facility as current; resultantly WAPDA
Hydroelectric was unable to maintain the required FSCR and current ratios as of reporting dates. hence, the entire
outstanding loan amounted Rs. 25,000 million (2018: Rs. 25,000 million) has been classified as current.

F-106 Page 44 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2019 2018
(Un-audited)
15.5 Diminishing Musharakah - secured ----------------------- PKR '000' -----------------------
Note

Habib Bank Limited 15.5.1 38,120,000 38,120,000

United Bank Limited 15.5.2 - 42,032,000
38,120,000 80,152,000

15.5.1 This represents Shirkat ul milk facility amounting to Rs. 38,120 million obtained from Habib Bank Limited for
payment of net hydel profits to the Provincial Governments. The principal is repayable at the end of two years in the
form of a bullet repayment. Profit is payable semi-annually in arrears at the rate of six months KIBOR minus 50
bps. The facility is secured by unconditional and irrevocable first demand guarantee covering principal and profit
from the GoP.

As per clause 2 of schedule 5 of the loan agreement, WAPDA Hydroelectric shall maintain Financial Services
Coverage Ratio (FSCR) and Current Ratio at least 1.25:1 and 1:1 respectively; any breach will trigger an event of
default. As described in Notes 15.2.2, 15.4.1 and 15.6, WAPDA Hydroelectric classified the loan from Credit
Suisse, loans from GoP and loan against syndicated term finance facility as current; resultantly WAPDA
Hydroelectric was unable to maintain the required FSCR and Current Ratio as at reporting dates. hence, the entire
outstanding loan amounted Rs. 38,120 million (2018: Rs. 38,120 million) has been classified as current. Further as
at 30 June 2019, the payment against this loan is due in next 12 months.

15.5.2 This represented Non Interest Demand Finance (NIDF) and Islamic Structure facility to meet interim working capital
needs of WAPDA. The principal was repayable at the end of two years in the form of a bullet repayment. Profit was
payable semi-annually in arrears at the rate of six months KIBOR minus 21 bps. The principal amount and profit
accrued was secured by unconditional and irrevocable first demand guarantee covering principal and profit from
the GoP. The Musharakah property relating to the Islamic structure of finance facility included generators,
switchgears, control and protection equipment.

15.6 As described in Note 20.2, WAPDA Hydroelectric did not repay the installments of certain Foreign relent loans
(FRLs) and cash development loans (CDLs) as per agreed repayment schedules. WAPDA Hydroelectric does not
have unconditional right to defer the settlement of these loans for at least twelve months after the reporting date. As
a result of being in default of these loans, the management has classified the FRLs and CDLs amounted Rs.
31,799 million (2018: Rs. 31,270 million) and Rs. 21,506 million (2018: Rs. 18,801 million), respectively, as current
liabilities.

2019 2018
(Un-audited)
16. DEFERRED GRANTS ----------------------- PKR '000' -----------------------
Note

Balance as at 01 July 8,499,955 3,852,092

Add: grants received during the year 24,298,519 4,791,928
Less: grants amortized during the year 28.2 (319,471) (144,065)
Balance as at 30 June 16.1 32,479,003 8,499,955
Less: current portion shown under current liabilities (246,283) (319,471)
32,232,720 8,180,484

Grants related to capital Grants related to operating

work in progress fixed assets
2019 2018 2019 2018
(Un-audited) (Un-audited)
----------------------------------------------------
Note PKR '000' ----------------------------------------------------
16.1 These relates to:
- Gomal Zam 16.1.1 - - 2,218,736 2,314,110
- Mangla Dam Rehabilitation 16.1.2 4,726,143 3,571,251 - -
- Golen Gol 16.1.3 - 2,506,839 3,542,622 -
- Diamer Bhasha Dam 16.1.4 4,736,070 - - -
- Mohmand Dam 16.1.5 17,000,000 - - -
- Hydropower Training Institute 228,872 101,367 - -
- Glacier Monitoring Network Center 26,559 6,388 - -
- Land granted by GoGB 16.1.6 1 - - -
26,717,645 6,185,845 5,761,358 2,314,110

F-107 Page 45 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

16.1.1 The grant was received from United States Agency for International Development (USAID) for the construction of
Gomal Zam project consisting construction of civil works and purchase of electronic and mechanical equipment
and is being amortized over 50 years and 25 years respectively which are useful lives of the respective assets of
the project.

16.1.2 The grant for Mangla Refurbishment Project is received from USAID to enhance the total installed capacity of
Mangla Power Station by 310 Mega Watts (MW) from the current 1,000 MW to 1,310 MW. The grant is also being
used for refurbishing and upgrading units 5 and 6 of Mangla Power Station along with related plant facility
enhancements.

16.1.3 This represents grant received from USAID for the construction of Golen Gol Hydropower Project with a total
installed capacity of 108 MW. Consequential to capitalization of Golan Gol Hydropower Project during the year it is
now being amortized over 30 years which is the useful life of the plant and equipment of the project.

16.1.4 The grant is received under Public sector Development Program (PSDP), from the GoP for the construction of
Diamer Bhasha Dam having total installed capacity of 4,500 MW.

16.1.5 The grant is received under Public sector Development Program (PSDP), from the GoP for the construction
Mohmand Dam having total installed capacity of 800 MW.

16.1.6 This pertains to the nominal value assigned as per WAPDA Hydroelectric's accounting policy for non-monetary
grants to the land measuring 17,214 acres granted by Government of Gilgit Baltistan (GoGB) free of cost for the
construction of Diamer Bhasha Dam.

17. EMPLOYEE RETIREMENT AND OTHER BENEFITS

2019
Free Free
Particulars Compensated
medical electricity Pension Total
absences
facility facility
---------------------------------------------------- PKR '000' ----------------------------------------------------
Liabilities recognized in the
statement of financial position 857,073 3,645,650 2,261,928 47,219,670 53,984,321

Changes in the
present value of obligations:

Opening balance 643,871 3,403,426 2,222,753 38,987,168 45,257,218

Service cost 36,165 91,784 52,556 918,074 1,098,579
Interest cost 75,655 382,737 256,146 4,442,407 5,156,945
Benefits paid - (292,172) (85,581) (2,358,902) (2,736,655)
Actuarial loss / (gain) 101,382 59,875 (183,946) 5,230,923 5,208,234
Closing balance 857,073 3,645,650 2,261,928 47,219,670 53,984,321

2018 - (Un-audited)
Free Free
Particulars Compensated
medical electricity Pension Total
absences
facility facility
---------------------------------------------------- PKR '000' ----------------------------------------------------
Liabilities recognized in the
statement of financial position 643,871 3,403,426 2,222,753 38,987,168 45,257,218

Changes in the
present value of obligations:

Opening balance 628,176 3,131,821 2,148,227 27,512,147 33,420,371

Service cost 40,283 100,034 49,903 853,229 1,043,449
Interest cost 62,952 334,977 231,671 2,922,711 3,552,311
Benefits paid (111,766) (173,145) (84,248) (1,884,098) (2,253,257)
Actuarial loss / (gain) 24,226 9,739 (122,800) 9,583,179 9,494,344
Closing balance 643,871 3,403,426 2,222,753 38,987,168 45,257,218

F-108 Page 46 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

17.1 Charge for the year in statement of profit or loss

2019
Free Free
Particulars (Note 25.2) Compensated
medical electricity Pension Total
absences
facility facility
---------------------------------------------------- PKR '000' ----------------------------------------------------

Current service cost 36,165 91,784 52,556 918,074 1,098,579

Interest cost 75,655 382,737 256,146 4,442,407 5,156,945
Actuarial loss 101,382 - - - 101,382
213,202 474,521 308,702 5,360,481 6,356,906

2018 - (Un-audited)
Free Free
Particulars (Note 25.2) Compensated
medical electricity Pension Total
absences
facility facility
---------------------------------------------------- PKR '000' ----------------------------------------------------

Current service cost 40,283 100,034 49,903 853,229 1,043,449

Interest cost 62,952 334,977 231,671 2,922,711 3,552,311
Actuarial loss 24,226 - - - 24,226
127,461 435,011 281,574 3,775,940 4,619,986

17.2 Key assumptions 2019

Free
Compensated Free medical
electricity Pension
absences facility
facility
Medical cost growth rate - 14.75% - -
Cash medical allowance growth rate - 5.00% - -
Discount rate 14.75% 14.75% 14.75% 14.75%
Salary growth rate 13.75% - - 13.75%
Pension growth rate - - - 9.75%
Electricity cost growth rate - - 13.75% -
Average expected remaining working life 9 Years 10 Years 10 Years 10 Years
Average duration of liabilities 9 Years 23 Years 23 Years 23 Years

2018 - (Un-audited)
Free
Compensated Free medical
electricity Pension
absences facility
facility
Medical cost growth rate - 10.75% - -
Discount rate 11.75% 11.75% 11.75% 11.75%
Salary growth rate 10.75% - - 10.75%
Pension growth rate - - - 6.75%
Electricity cost growth rate - - 10.75% -
Average expected remaining working life 9 Years 9 Years 9 Years 9 Years
Average duration of liabilities 9 Years 26 Years 26 Years 26 Years

2019
17.3 Quantitative sensitivity analyses Free
Compensated Free medical
electricity Pension
absences facility
facility
--------------------------------- PKR '000' ---------------------------------

Medical cost increase + 1% - 629,166 - -

Medical cost increase - 1% - (536,562) - -
Discount rate + 1% (73,423) (567,369) (352,021) (7,348,748)
Discount rate - 1% 80,295 671,909 416,883 8,702,788
Salary increase + 1% 80,296 - - 3,406,258
Salary increase - 1% (73,417) - - (3,177,031)
Pension increase rate + 1% - - - 3,082,505
Pension increase rate - 1% - - - (2,668,364)
Electricity cost increase + 1% - - 390,363 -
Electricity cost increase - 1% - - (332,908) -

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NOTES TO THE FINANCIAL STATEMENTS

2018 - (Un-audited)
Free
Compensated Free medical
electricity Pension
absences facility
facility
--------------------------------- PKR '000' ---------------------------------

Medical cost increase + 1% - 138,165 - -

Medical cost increase - 1% - (560,332) - -
Discount rate + 1% (39,479) (637,255) (258,510) (3,227,825)
Discount rate - 1% 44,804 248,832 321,015 3,848,303
Salary increase + 1% 44,804 - - 1,225,732
Salary increase - 1% (40,154) - - (1,101,865)
Pension increase rate + 1% - - - 2,545,086
Pension increase rate - 1% - - - (2,203,149)
Electricity cost increase + 1% - - 246,427 -
Electricity cost increase - 1% - - (206,423) -

2019 2018
(Un-audited)
18. RETENTION MONEY PAYABLES Note -------------------- PKR '000' --------------------

Opening balance 3,118,496 2,809,712

Add:
- Retention held during the year 663,493 722,647
- Exchange loss 429,461 233,919
1,092,954 956,566
Less:
- Payments made during the year (679,962) (647,782)
Closing balance 3,531,488 3,118,496
Less: current portion shown under current liabilities 258,805 886,181
3,272,683 2,232,315

19. TRADE AND OTHER PAYABLES

Payables to contractors and consultants 4,123,167 5,775,742

Due to other wings of WAPDA 19.1 1,453,164 1,183,865
Due to statutory authorities 436,958 557,448
Security deposits 367,845 542,076
Accrued liabilities 38,758 25,906
Other liabilities 19.2 849,954 773,125
7,269,846 8,858,162

19.1 Due to other wings of WAPDA

WAPDA Coordination Wing 84,255 283,602

WAPDA Water Wing 1,368,909 900,263
1,453,164 1,183,865

19.2 This includes payable to related parties (mainly, entities under control of WAPDA) amounted Rs. 372 million (2018:
Rs. 101 million).

19.3 Terms and conditions of the above financial liabilities:

- Payable to contractors and consultants are non-interest bearing and are normally settled on 30-60 days terms.
- Other payables are non-interest bearing and have an average term of three to six months.

2019 2018
(Un-audited)
20. SHORT TERM BORROWINGS Note -------------------- PKR '000' --------------------

Power Sector Investment (PSI) 20.1 96,229 -

Payable to the GoP 20.2 40,956,678 26,806,982
41,052,907 26,806,982

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NOTES TO THE FINANCIAL STATEMENTS

20.1 This represent unsecured and interest free loan obtained during the year from PSI (entity under common control of
WAPDA) to meet the working capital requirements and is payable on demand.

20.2 This represents the overdue balances of installments and related interest accrued on foreign relent and cash
development loans, which is not paid as per the respective repayment schedules. The outstanding balances and
the related interest accrued are payable on demand and will be settled upon specific instructions from Economic
Affair Division (EAD), the GoP. No interest is charged on the outstanding balance, after their due dates.

2019 2018
(Un-audited)
21. PAYABLE AGAINST HYDEL LEVIES Note -------------------- PKR '000' --------------------

NHP payable to Government of Punjab (GoPb) 8.1.1 32,758,962 265,417

NHP payable to Government of KPK (GoKPK) 8.1.2 30,088,008 16,906,235
WUC payable to Government of AJ&K (GoAJ&K) 8.1.3 74,509 48,700
WMC payable to IRSA 8.1.4 35,788 45,884
62,957,267 17,266,236
21.1 Movement in payable against hydel levies during the year is as follows:

NHP payable NHP payable WUC payable WMC payable

Total
to GoPb to GoKPK to GoAJ&K to IRSA

----------------------------------------------- PKR '000' -----------------------------------------------

As at 01 July 2017 - (Un-audited) - 17,224,898 139,102 42,523 17,406,523
Billed during the year 24,582,685 35,204,470 610,925 133,877 60,531,957
Paid during the year (24,317,268) (35,523,133) (701,327) (130,516) (60,672,244)
As at 30 June 2018 - (Un-audited) 265,417 16,906,235 48,700 45,884 17,266,236
Billed during the year 63,864,308 39,214,104 570,417 135,980 103,784,809
Adjusted with unbilled NHP (31,370,763) (6,032,331) - - (37,403,094)
Paid during the year - (20,000,000) (544,608) (146,076) (20,690,684)
As at 30 June 2019 32,758,962 30,088,008 74,509 35,788 62,957,267

22. ACCRUED INTEREST

This represents interest accrued on foreign relent loans received during the year from the GoP.

23. CONTINGENCIES AND COMMITMENTS

23.1 Contingencies

There are no significant contingencies to disclose at the reporting date (2018: Nil).

23.2 Commitments

23.2.1 Capital commitments contracted for but not incurred as at 30 June 2019 amounted to Rs. 693,770 million (2018:
Rs. 952,890 million).

23.2.2 Commitments under letter of credit amounts to Rs. 2,586 million (2018: Rs.1,513 million).

23.2.3 The commitments in respect of Ijarah rentals payable to WAPDA Third Sukuk Company Limited are described
below:

2019 2018
(Un-audited)
------------------ PKR '000' ------------------

Not later than one year 1,780,126 1,834,072

Later than one year and not later than five years 2,223,119 4,321,600
4,003,245 6,155,672

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NOTES TO THE FINANCIAL STATEMENTS

23.2.4 The commitments in respect of arrears of net hydel profit payable to the Governments of Punjab and Khyber
Pakhtunkhwa are described below:

Government of Khyber
Government of Punjab
Pakhtunkhwa

2019 2018 2019 2018

(Un-audited) (Un-audited)
------------------------------------ PKR '000' ------------------------------------

With in one year 14,860,000 14,860,000 - 15,000,000

With in one to five years - 14,860,000 - -
14,860,000 29,720,000 - 15,000,000

2019 2018
(Un-audited)
24. REVENUE FROM CONTRACT WITH CUSTOMER - NET Note ------------------ PKR '000' ------------------

Sale of electricity
- Variable charges 24.1 2,197,509 2,348,928
- Fixed charges 63,946,024 56,968,506
24.3 66,143,533 59,317,434

24.1 The amount is net of sale tax amounting Rs. 373.577 million (2018: Rs. 399.318 million).

2019 2018
(Un-audited)
24.2 Timing of revenue recognition --------------- PKR '000'----------------

Revenue recognized over time 66,143,533 59,317,434

24.3 Plant wise disaggregated revenue information

Tarbela 15,932,772 24,820,961

Ghazi Barotha 15,141,585 13,330,833
Tarbela 4th Extension 5,066,201 -
Mangla 8,538,740 8,523,914
Khan Khwar 2,146,763 1,142,717
Chashma 3,390,727 2,203,917
Warsak 1,936,541 2,011,764
Duber Khwar 4,495,930 2,302,325
Golen Gol 586,042 -
Jinnah Hydel 2,248,731 1,311,259
Allai Khwar 3,221,811 1,778,926
Jabban 844,175 418,669
Rasul 232,010 201,068
Dargai 227,128 190,379
Gomal Zam 1,392,624 565,951
Nandipur 205,710 148,342
Shadiwal 178,211 135,048
Chichoki 163,292 129,029
Kurram Garhi 94,608 55,740
Chitral 53,991 24,387
Renala Khurd 45,941 22,205
66,143,533 59,317,434

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NOTES TO THE FINANCIAL STATEMENTS

2019 2018
(Un-audited)
25. COST OF REVENUE Note ------------------ PKR '000' ------------------

Salaries, wages and benefits 25.1 5,445,618 4,983,857

Retirement and other benefits 25.2 6,356,906 4,619,986
Sukuk Ijarah rentals 25.3 1,834,072 2,571,259
Repairs and maintenance 832,137 1,081,288
Depreciation 5.1.1 7,655,469 4,785,425
Dams inspection and monitoring cost 943,715 709,193
Power, gas and water 358,392 302,099
NEPRA fee 125,863 101,747
Insurance 25.4 55,046 52,690
Consultancy charges 71 155,788
Fuel charges 29,648 27,591
Return on assets to provinces 12,972 12,972
Sundry expenses 22,839 22
23,672,748 19,403,917

25.1 Salaries, wages and benefits

Pay and allowances 4,312,354 3,974,487

Other benefits 1,133,264 1,009,370
5,445,618 4,983,857

25.2 Retirement and other benefits

Pension 17.1 5,360,481 3,775,940

Free electricity facility 17.1 308,702 281,574
Free medical facility 17.1 474,521 435,011
Compensated absences 17.1 213,202 127,461
6,356,906 4,619,986

25.3 Sukuk Ijarah rentals

Sukuk-II - 686,106
Sukuk-III 1,834,072 1,885,153
1,834,072 2,571,259

25.4 As per the WAPDA Equipment Protection Scheme (WEPS), WAPDA Hydroelectric's equipment of power houses
has been provided insurance coverage based on net book value of equipment.

2019 2018
(Un-audited)
26. OPERATING EXPENSES Note ------------------ PKR '000' ------------------

Management service charges 698,953 1,182,353

R&D - Survey and Investigation 26.1 329,924 1,562,558
Vehicle running expenses 217,098 199,287
Outside services employed 48,105 23,199
Travelling expenses 81,087 88,171
Office expenses 20,178 23,915
Advertisement and periodicals 19,746 13,919
Legal and professional charges 12,717 18,231
Communication 12,196 14,757
Rent, rates and taxes 2,762 2,827
Others 1,649 4,576
1,444,415 3,133,793

26.1 R&D - Survey and investigation includes research and development expenses of projects which cannot be
developed due to financial or technical reasons and the projects which are not to be developed by WAPDA
Hydroelectric (i.e. the feasibility is either transferred to Federal or Provincial Government, any organization or
expensed).

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NOTES TO THE FINANCIAL STATEMENTS

2019 2018
(Un-audited)
27. FINANCE AND OTHER COSTS --------------------- PKR '000' ---------------------
Note

Finance costs 27.1 36,063,545 29,923,253

Other costs 27.2 2,231,018 1,253,724
38,294,563 31,176,977

27.1 Finance costs

27.1.1 Development hydel projects

Interest on foreign relent loans 5.2.2 14,371,510 12,788,730
Interest on foreign direct loans 5.2.2 2,861,535 1,256,911
Dasu syndicated term finance facility 5.2.2 2,577,273 1,876,382
Interest on cash development loans 5.2.2 8,494,423 8,506,485
28,304,741 24,428,508
27.1.2 Operational hydel stations
Interest on foreign relent loans 15.1.1 1,916,993 2,378,394
Interest on foreign direct loans 15.2.1 124,777 168,265
Interest on cash development loans 15.3.1 720,013 759,086
Interest on diminishing musharakah 27.1.2.1 4,997,021 2,189,000
7,758,804 5,494,745
36,063,545 29,923,253

27.2 Other costs

Bank charges 15,954 1,624
Other charges 27.2.1 2,215,064 1,252,100
2,231,018 1,253,724

27.1.2.1 This represents markup accrued on diminishing musharakah facility, obtained for payment of NHP to the
Governments of KPK and Punjab.

27.2.1 This mainly includes net exchange loss on foreign currency loan and payment of foreign currency invoices of
designated contractors and consultants.
2019 2018
(Un-audited)
28. OTHER INCOME Note--------------------- PKR '000' ---------------------

28.1 Income from financial assets

Profit on bank balances 10.4 2,623,118 2,120,272
Interest income - investments 1,443,723 703,713
Interest income - long term loans to employees 835 2,159
Interest income - bridge financing 392,731 271,286
Recovery from contractor 28.1.1 - 906,676
Liabilities written back - 100,562
4,460,407 4,104,668
28.2 Income from non financial assets
Amortization of grant 16 319,471 144,065
Income from guest houses and others 121,137 89,797
Sale of scrap 29,270 32,349
Gain on disposal of operating fixed assets 104,867 10,607
Income from non - utility operation 3,558 3,185
Sale of stores 1,972 22,042
Miscellaneous income 176,204 163,311
756,479 465,356
5,216,886 4,570,024

28.1.1 This represented amount recovered from designated contractor of Jinnah Hydel Power Project against
settlement.

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NOTES TO THE FINANCIAL STATEMENTS

29. FINANCIAL RISK MANAGEMENT

29.1 Financial risk factors

WAPDA Hydroelectric financial liabilities comprise of interest bearing long term financing, short term borrowings,
trade and other payables (excluding statutory payables), accrued interest and retention money payables. The main
purpose of these financial liabilities is to raise finances for Hydroelectric operations. Hydroelectric financial assets
includes receivables from the customer, long term loans and deposits, other receivables, cash and short term
deposits that arise directly from its operations.

Risk management is carried out by WAPDA Authority (which comprise of a Chairman and 3 Members) for WAPDA
Hydroelectric. WAPDA Authority provides principles for overall risk management, as well as policies covering specific
areas such as currency risk, interest rate risk, credit risk and liquidity risk.

WAPDA Hydroelectric activities expose it to a variety of financial risks: market risk (including currency risk, interest
rate risk and other price risk), credit risk and liquidity risk. WAPDA Hydroelectric overall risk management programme
focuses on the liquidity crisis and seeks to minimize potential adverse effects on the financial performance.

29.1.1 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices
will affect WAPDA Hydroelectric’s income or the value of its holdings of financial instruments. The objective of market
risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the
return on risk.

(a) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or
receivables and payables that exist due to transactions in foreign currencies.

WAPDA Hydroelectric is exposed to currency risk arising from currency exposure to the United States Dollar
(USD). Currently, WAPDA Hydroelectric's foreign exchange risk exposure is restricted to the repayment of foreign
direct loans, retention money payables, Payables to contractors and consultants and cash and bank balances
held in foreign currency.

Exposure to foreign currency risk

WAPDA Hydroelectric’s exposure to foreign currency risk was as follows based on following amounts:

2019 2018
(Un-audited)
------------------------ USD '000' ------------------------
Long term financing - foreign direct loans 362,308 374,618
Bank balances 300,569 304,745
Payables to contractors and consultants 2,139 10,754
Retention money payables 8,561 10,474

The following significant exchange rates applied during the year:

Annual average rate Reporting date spot rate

2019 2018 2019 2018
US $ 136.27 124.14 160.05 121.49

Sensitivity analysis

WAPDA Hydroelectric's exposure to foreign currency risk arise on the projects which are under development
mainly due to the foreign currency balances mentioned above. The translation differences on the foreign currency
loan and related foreign currency bank balances are capitalized in pursuant to the SECP exemption regarding
capitalization of exchange differences, whereas fluctuation in the functional currency against USD on other
balances would not be having any significant impact on the profit of the Hydroelectric.

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NOTES TO THE FINANCIAL STATEMENTS

(b) Interest rate risk

The interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the
market interest rates. Sensitivity to interest rate risk arises from mismatches of financial assets and liabilities that
mature in a given period.

WAPDA Hydroelectric has no significant long-term interest-bearing assets. WAPDA Hydroelectric interest rate
risk arises from interest bearing loans and borrowings. Borrowings obtained at variable rates expose Hydroelectric
to cash flow interest rate risk.

At the statement of financial position date the interest rate profile of WAPDA Hydroelectric’s interest bearing
financial instruments is:
2019 2018
(Un-audited)
Fixed rate instruments --------------------- PKR '000' ---------------------
Financial liabilities:
Cash development, foreign relent and direct loans 257,893,162 238,037,468

Financial assets:
Short term investments 3,000,000 31,000,000
Bridge financing to other Wings 2,981,293 2,194,988

Floating rate instruments

Financial liabilities:
Syndicated term finance facility 25,000,000 25,000,000
Diminishing musharakah 38,120,000 80,152,000

Financial assets:
Bank balances - deposit accounts 15,274,446 25,649,660

Fair value sensitivity analysis for fixed rate instruments

WAPDA Hydroelectric does not account for any fixed rate financial assets and liabilities at fair value through profit
or loss. Therefore, a change in interest rate at the statement of financial position date would not affect profit of
WAPDA Hydroelectric.

Fair value sensitivity analysis for floating rate instruments

If floating interest rates on financial instruments at the year end date, fluctuate by 1% higher / lower with all other
variables held constant, profit for the year would have decreased / increased by Rs. 312 million (2018: Rs. 440
million), mainly as a result of higher / lower interest expense in the year ended 30 June 2019. This analysis is
prepared assuming the amount of floating rate instruments outstanding at the statement of financial position dates
were outstanding for the whole year.

(c) Other price risk

Other price risk is a risk that fair value or future cash flows of a financial instruments will fluctuate because of
changes in the market prices (other than those arising from currency risk and interest rate risk), whether those
changes are caused by specific to the individual financial instruments or its issuer, or factors effecting all similar
instruments traded in the market.

As at 30 June 2019, WAPDA Hydroelectric is not exposed to any significant price risk. (2018: Nil)

29.1.2 Credit risk

Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge its obligation. WAPDA Hydroelectric is exposed to credit risk from its operating activities (primarily
for trade receivable) loans to related parties and employees and from its financing activities, including deposits with
banks and financial institutions and other financial instruments.

The maximum risk positions of financial assets which are generally subject to credit risk are equal to their carrying
amounts. Following table shows the maximum risk positions.

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NOTES TO THE FINANCIAL STATEMENTS

2019 2018
-------------------- (Un-audited) --------------------
PKR '000' Exposure % PKR '000' Exposure %
At amortized cost:
Long term loans to employees 660,796 0.24% 631,455 0.26%
Long term deposits 1,956 0.00% 1,670 0.00%
Receivable from the customer 192,282,954 70.64% 137,440,872 56.93%
Short term investments 3,000,000 1.10% 31,000,000 12.84%
Other receivables 4,572,935 1.68% 2,718,678 1.13%
Bank balances 71,677,455 26.34% 69,643,051 28.84%
272,196,096 100.00% 241,435,726 100.00%

At 30 June 2019, WAPDA Hydroelectric has only one customer, the CPPA-G (a Government owned entity) that owed
WAPDA Hydroelectric amounted Rs. 67,677 million (2018: Rs. 48,250 million) and Rs. 124,606 million (2018: Rs.
89,191 million) against sale of electricty and hydel levies respectively .

SRO No. 985(1)/2019 issued by the SECP on 2 September 2019 in respect of the companies holding financial assets
due from GOP, the requirements contained in "IFRS 9 (Financial instrument) with respect to application of ECL" shall
not be applicable till 30 June 2021. Accordingly, no ECL is recorded on receivables from the CPPA-G as at 30 June
2019.

Further, due to WAPDA Hydroelectric's long standing business relationships with the CPPA-G and considering that it
is a Government owned entity, management does not expect to recognize the provision against receivables from
CPPA-G. Accordingly, the credit risk is minimal.

Other receivables mainly includes balances from other segments of WAPDA or other Government controlled entities.
The management has assessed that ECL allowance on these receivable from related parties, is not significant as the
balances have been acknowledged by respective counter party and they have financial ability to settle the amount.

WAPDA Hydroelectric deals with banks having credit ratings in the top categories therefore, considers these as low
risk and does not expect credit loss to arise on the balances. Following are the credit ratings of banks with balances
and short term investments are held at reporting date:

Rating 2018
Bank 2019
Short term Long term Agency (Un-audited)
--------------------- PKR '000' ---------------------
Bank balances
National Bank of Pakistan A1+ AAA PACRA 55,743,095 43,121,296
Habib Bank Limited A1+ AAA JCR-VIS 7,484,398 7,749,164
MCB Bank Limited A1+ AAA PACRA 2,028,992 3,493,752
Habib Metropolitan Bank A1+ AA+ PACRA 2,005,821 1,567,577
Askari Bank Limited A1+ AA+ PACRA 1,896,848 6,841,395
United Bank Limited A1+ AAA JCR-VIS 979,615 944,067
Allied Bank Limited A1+ AAA PACRA 844,883 1,505,382
Bank Alfalah Limited A1+ AA+ PACRA 434,944 1,965,899
Soneri Bank Limited A1+ AA- PACRA 258,855 2,454,515
Standard Chartered Bank A1+ AAA PACRA 4 4
71,677,455 69,643,051
Short term investments
Bank Alfalah Limited A1+ AA+ PACRA 1,500,000 1,500,000
Habib Metropolitan Bank A1+ AA+ PACRA 1,500,000 1,500,000
Habib Bank Limited A1+ AAA JCR-VIS - 19,000,000
National Bank of Pakistan A1+ AAA PACRA - 9,000,000
3,000,000 31,000,000
74,677,455 100,643,051

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NOTES TO THE FINANCIAL STATEMENTS

29.1.3 Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

WAPDA Hydroelectric's approach to managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to Hydroelectric's reputation. Despite, presentation of various loans as current
as mentioned in Notes 15.2.2, 15.4.1, 15.5.1 and 15.6, WAPDA Hydroelectric expects to pay these loans in
accordance with original loan schedules.

The table below analyses WAPDA Hydroelectric's financial liabilities into relevant maturity groupings based on the
remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the
table are the contractual undiscounted cash flows, the liabilities have been disclosed on the basis of earliest date on
which WAPDA Hydroelectric is required to pay these liabilities.

2019
Between
Carrying Contractual Less than Over 5
1 and 5
Amount cash flows 1 year years
years
--------------------------------------------------------- PKR '000' ---------------------------------------------------------
As at 30 June 2019
Long term financing 321,013,162 435,666,064 209,512,697 101,249,162 124,904,205
Short term borrowings 41,052,907 41,052,907 41,052,907 - -
Trade and other payables 6,832,888 6,832,888 6,832,888 - -
Payable against hydel levies 62,957,267 62,957,267 62,957,267 - -
Retention money payables 3,531,488 3,531,488 258,805 3,272,683 -
Accrued Interest 1,161,323 1,161,323 1,161,323 - -
436,549,035 551,201,937 321,775,887 104,521,845 124,904,205

2018
Between
Carrying Contractual Less than Over 5
1 and 5
Amount cash flows 1 year years
years
------------------------------------------------------ (Un-audited) ------------------------------------------------------
--------------------------------------------------------- PKR '000' ---------------------------------------------------------
As at 30 June 2018
Long term financing 343,189,468 469,097,294 231,877,865 76,385,197 160,834,232
Short term borrowings 26,806,982 26,806,982 26,806,982 - -
Trade and other payables 8,300,714 8,300,714 8,300,714 - -
Payable against hydel levies 17,266,236 17,266,236 17,266,236 - -
Retention money payables 3,118,496 3,118,496 886,181 2,232,315 -
Accrued Interest 1,161,323 1,161,323 1,161,323 - -
399,843,219 525,751,045 286,299,301 78,617,512 160,834,232

29.1.4 Fair values estimation

Financial instruments comprise financial assets and financial liabilities. The fair values of the financial assets and
liabilities are included at the amount at which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. WAPDA Hydroelectric's financial assets consist of
receivables from the customer, long term loans and deposits, other receivables and bank balances and short term
investments. Its financial liabilities consist of long term financing, short term borrowings, trade and other payables
(excluding statutory payable), retention money payables and payable against hydel levies. The above financial
assets and liabilities (except non-current portion of long term loans and deposits, long term financing and retention
money payables) approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of non-current portion of long term loans and deposits and long term financing is not significantly
different to its carrying value as these financial instruments bear interest at floating rates which gets re-priced at
regular intervals. Management has concluded that carrying value of retention money payable approximates its fair
value.

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NOTES TO THE FINANCIAL STATEMENTS

29.1.5 Financial instruments by categories

2019 2018
(Un-audited)
Financial assets at amortized cost --------------------- PKR '000' ---------------------
Long term loans and security deposits 662,752 633,125
Receivable from the customer 192,282,954 137,440,872
Short term investments 3,000,000 31,000,000
Other receivables 4,572,935 2,718,678
Cash and bank balances 71,677,455 69,686,606
272,196,096 241,479,281

Financial liabilities at amortized cost

Long term financing 321,013,162 343,189,468
Short term borrowings 41,052,907 26,806,982
Trade and other payables 6,832,888 8,300,714
Payable against hydel levies 62,957,267 17,266,236
Retention money payables 3,531,488 3,118,496
Accrued Interest 1,161,323 1,161,323
436,549,035 399,843,219

29.1.6 Capital risk management

WAPDA Hydroelectric’s objectives when managing capital are to safeguard Hydroelectric’s ability to continue as a
going concern. Hydroelectric manages its capital structure and make adjustments to it, in the light of the changes in
economic conditions.

Hydroelectric monitors capital using gearing ratio, which is net debt divided by equity plus net debt. Debt represent
long term loans (including current portion) obtained by Hydroelectric. Total equity includes accumulated profits and
equity investment by the GoP plus net debt.

The gearing ratios as at 30 June 2019 and 30 June 2018 are as follows:
2019 2018
(Un-audited)
Note --------------------- PKR '000' ---------------------

Long term financing including current portion 15 321,013,162 343,189,468

Short term borrowings 20 41,052,907 26,806,982
Less: Cash and bank balances 12 (71,677,455) (69,686,606)
Net debt 290,388,614 300,309,844

Equity 211,231,448 210,445,105

Net debt 290,388,614 300,309,844
Equity and net debt 501,620,062 510,754,949

Gearing ratio (%) 58% 59%

30. CHANGES IN LIABILITIES ARISING FROM FINANCING

ACTIVITIES INCLUDING CURRENT PORTION

Short term borrowings Long term financing

2019 2018 2019 2018
Note (Un-audited) (Un-audited)
------------------------------------------- PKR '000'------------------------------------------
As on 01 July 26,806,982 580,439 343,189,468 229,164,609
Cash flows 100,051 - (32,105,706) 115,010,695
Foreign exchange - - 15,197,024 3,778,635
Others 30.1 & 30.2 14,145,874 26,226,543 (5,267,624) (4,764,471)
As on 30 June 41,052,907 26,806,982 321,013,162 343,189,468

30.1 The others pertains to the interest on FRLs and CDLs and overdue installments of principal of FRL and CDL
transferred from long term financing, payable to the GoP.

30.2 The others pertains to the overdue installments of principal of FRL and CDL transferred into payable to the GoP
under short-term borrowings.

F-119 Page 57 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

2019 2018
31. INSTALLED CAPACITY AND NET ELECTRIC OUTPUT (Un-audited)

Installed Capacity (Mega Watts) 8,348 6,902

Net Electric Output (Giga Watt) 27,196 26,775

32. NUMBER OF EMPLOYEES ---------------------- Number ----------------------

Active employees 8,461 7,287

Pensioners 8,882 8,411

33. TRANSACTIONS WITH RELATED PARTIES

WAPDA Hydroelectric is part of WAPDA Power Wing, which is a segment of WAPDA, which is fully owned by the
GoP, therefore entities which are owned and / or controlled by the GoP, or where the GoP may exercise significant
influence, are related parties of WAPDA Hydroelectric. WAPDA Hydroelectric in the ordinary course of business
enters into transaction with Government-related entities. Related parties comprise the GoP and its associated
departments and entities being commonly controlled by GoP, associated undertakings, key management personnel
and entities in which key management personnel are office holders / members. Using the exemption granted under
IAS 24, WAPDA Hydroelectric has disclosed only the significant related parties transactions entered into during the
year. Balances due from and due to related parties are shown in their respective notes. Details of significant related
parties transactions during the year are as follows:

Name of related 2019 2018

Nature of transaction
party & relationship (Un-audited)
-------------------- PKR '000' --------------------
Government of Pakistan

- Economic Affair Division Receipt of disbursements against FRL 11,549,543 26,226,543

Adjustment of financing with trade debts 16,238,071 -
Adjustment of financing with prepayments 1,361,868 3,382,980
Payment of guarantee fee - Exim Bank 13,990 18,576
Payment of guarantee fee - Credit Suisse 52,350 43,900
Receipt of Government grants 21,736,070 -

Associated undertakings
due to common control

- CPPA-G Sale of electricity including related to tests run 67,229,632 59,317,434

Billing of hydel levies 103,784,809 60,531,957
Adjustment of borrowing with trade debts 16,238,071 -
Receipts against sale of electricity and hydel levies 62,919,450 72,396,635

- Government of Punjab Payment of 4% return on assets 9,284 9,284

Hydel levies adjustment / payment 31,370,763 24,317,268

- Government of Sindh Accrual of 4% return on assets 257 257

- Government of Khyber Payment of 4% return on assets 3,430 3,430

Pakhtunkhwa Hydel levies adjustment / payment 26,032,331 35,523,133

- WAPDA Equipment Insurance premium 55,046 52,690

Protection Scheme

- WAPDA Second Payment of Ijarah rentals - 686,106

Sukuk Company

F-120 Page 58 of 60
 PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY
(HYDROELECTRIC - NEPRA REGULATED BUSINESS)
NOTES TO THE FINANCIAL STATEMENTS

Name of related 2019 2018

Nature of transaction
party & relationship (Un-audited)
------------ PKR '000' ------------
Associated undertakings
due to common control

- WAPDA Third Payment of Ijarah rentals 1,834,072 1,885,153

Sukuk Company

- Government of Azad Payment of water usage charges 544,608 701,327

Jammu and Kashmir

- Indus River Payment of water management charges 146,076 130,516

System Authority

- WAPDA Water Wing Bridge financing - net 334,916 899,217

Dams inspection and monitoring charges 943,715 709,193
Long term advance for technical services 106,562 -
Interest on bridge financing 369,886 271,170

- WAPDA Coordination Wing Bridge financing - net 446,164 9,300

Authority overhead 287,521 417,123
Interest on bridge financing 22,845 116

- NEPRA NEPRA fee 125,863 101,747

- Power Services and Receipt of short term borrowing 100,000 -

Investments (PSI)

- Land Acquisition Collectors Advance provided for land acquisition 1,882,271 1,826,461

- National Highway Authority Payment to NHA for construction of Shatial Thor

(NHA) Nullah by-pass - 250,000
Advance paid to NHA for relocation and upgradation
of Karakoram Highway 4,299,161 -

- National Transmission & Payment made against the upgradation of 225,080 -

Despatch Company (NTDC) transmission line and switch yard of Tarbela

- Chief Resident Advance against foreign purchase of plant, 494,408 670,872

Representative Karachi machinery, stores and spares - net
(CRRK)

Key management personnel

The Members of WAPDA Authority are the key management personnel of WAPDA Hydroelectric. The salaries
and other benefits of key management personnel are recorded and paid by WAPDA Coordination Wing. WAPDA
Coordination Wing charges these amounts to WAPDA Hydroelectric as part of authority overhead, disclosed
above.

34. IMPACT OF COVID-19 PANDEMIC ON THE FINANCIAL STATEMENTS

The World Health Organization declared COVID-19 a global pandemic on 11 March 2020. Accordingly, on 20 March
2020, the GoP announced temporary lock down as a measure to reduce the spread of COVID-19. The outbreak of
COVID-19 has had a distressing impact on overall demand in the global economy with notable downgrade in growth
forecasts. Resultantly, WAPDA Hydroelectric faced minor disruptions in business operations during the lock down
period.

F-121 Page 59 of 60
F-122
 ISSUER

Pakistan Water and Power Development Authority

Wapda House
Sharah-e-Quaid-e-Azam
Lahore, Pakistan

SOLE GLOBAL COORDINATOR, JOINT BOOKRUNNER, GREEN STRUCTURING

AGENT AND DEVELOPMENT FINANCE STRUCTURING AGENT

J.P. Morgan Securities plc

25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom

JOINT BOOKRUNNERS

Deutsche Bank Aktiengesellschaft Standard Chartered Bank

Mainzer Landstr. 11-17 7th Floor Building One, Gate Precinct
60329 Frankfurt am Main Dubai International Financial Centre
Germany PO Box 999
Dubai
United Arab Emirates

CO-MANAGER

Habib Bank Limited

24th Floor, HBL Tower
Block 7, Clifton, Karachi
Pakistan

NOTEHOLDERS' REPRESENTATIVE AND REGISTRAR AND TRANSFER AGENT

PRINCIPAL PAYING AGENT The Bank of New York Mellon SA/NV, Dublin
The Bank of New York Mellon, London Branch
Branch Riverside Two
One Canada Square Sir John Rogerson's Quay
London E14 5AL Dublin 2
United Kingdom D02 KV60
Ireland
 AUDITORS

To WAPDA Hydroelectric
EY Ford Rhodes
96-B-1, 4th Floor, Pace Mall Building,
M.M. Alam Road,
Gulberg-II, PO Box 104,
Lahore - 54660

LEGAL ADVISERS

To the Issuer

As to English law As to Pakistani law

Baker McKenzie LLP Ahmed & Qazi
100 New Bridge Street 402-404 & 417, Clifton Centre Building
London EC4V 6JA Block 5, Clifton, Karachi
United Kingdom Pakistan

To the Managers and the Noteholders' Representative

As to English law As to Pakistani law

Allen & Overy LLP Allen & Overy LLP Kabraji & Talibuddin
One Bishops Square 11th Floor, Burj Daman 406-407, 4th Floor
London E1 6AD Building, Al Mustaqbal The Plaza at Do Talwar
United Kingdom Street, Dubai Block 9, Clifton
International Financial Karachi-75600
Centre, PO Box 506678,
Dubai,
United Arab Emirates