Lahore, June 28, 2021 (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 manageable. 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 is managing its short-term investment book by investing in various mutual funds to strengthen the bottom-line and cash flows through dividend inflows. (Dividend Income as at end Dec’20 PKR ~18mln; as at end Dec’19 PKR 3.8mln). 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. Company is timely paying its debt instalments and did not avail any deferment facility, which provides comfort. As at end December’20 company has debt equity ratio of 55% (FY20: 60%). Ratings further draw comfort as the company is managing its working capital needs through internally generated cash flows without utilizing short term borrowings.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. Company’s repayment behaviour, from internally generated cashflows, would be considered positive for ratings. Government has started paying IPPs as per agreement and ACT Wind has received its share against outstanding receivables which improves the liquidity of the Company. The concession agreed under the agreement will be given once the remaining amount received by the Company. The actual impact of the executed agreement is yet to be seen.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com