Lahore, December 28, 2020 (PPI-OT): Tapal, Ismail, and Akhtar groups have set up a 30MW wind power plant – ACT Wind (Private) Limited. The ratings assigned take into account its strong ownership profile with Tapal Group, Ismail Group, and Akhtar Group, holding equal stake in the company. The commissioning of the plant was achieved on 7th October 2016. The project is established under the Policy for Development of Renewable Energy for Power Generation, 2006 which offers a guaranteed internal rate of return, cost indexation, and pass-through tariff structure. The project revenues and cash flows are exposed to two main risks. First; wind risk. Under the upfront tariff regime, any variability in wind speeds is to be borne by the Company, due to which its cash flows may face seasonality.
However, historical wind speeds provide comfort that ACT Wind would be able to generate enough cash flows to keep its financial risk management. Second; operational risk. The Company has to maintain the plant’s capacity factor at 31% annually. Company has to maintain its availability as per contract and is ready to deliver electricity to CPPA-G, CPPA-G is liable to pay the whole tariff even if no purchase is done. Comfort is drawn from Hydrochina – the O and M operator – having both international and local market experience. The Company has adequate insurance coverage. The company’s reserve build-up mechanism through SBLC providing coverage of one time on its financial obligations till maturity provides comfort to the ratings.
The Company has been paying dividends which in times of need is an internal source of liquidity available. Company is timely paying its debt instalments and did not avail any deferment facility, which provides comfort. As at end June’20 company has debt equity ratio of 59.5% (FY19: 68.5%). Ratings further draw comfort as the company is managing its working capital needs through internally generated cash flows while short-term borrowings are nil. The Government has signed MoU with the IPPs operating under the Power Policy of 2002 and 2006 to review the terms of legal and contractual agreements.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. Improving build-up of DSRA from internal sources, indeed aligning, and company’s repayment behaviour with its financial profile would be ratings positive. Furthermore, external factors such as any adverse changes in the regulatory framework and weakening of financial profile owing to delays in cash flow receipts may impact the ratings.
For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com
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