Lahore, October 14, 2022 (PPI-OT):Din Energy Limited (DEL) has set up a 50MW wind power plant “Din Energy Limited” in Jhampir. DEL is awarded upfront tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. Hydrochina International Engineering Company Limited and Hangzhou Huachen Electric Power Control Company are the EPC contractors, comfort is drawn that they have vast experience in wind power technology. The construction contractor is the O and M operator for two years after COD; it will provide the warranty bond (10% of EPC cost) in the form of irrevocable bank guarantee for 24 months after COD. These bank guarantees provide additional cushion for the sustainable financial risk profile.
The Upgrade in ratings incorporates commissioning of the complex by declaring commercial operations on March 27, 2022, after taking into account all the pre-requisites mentioned in the EPA, and successfully completed the Reliability Run Test on 26th March 2022 at 17:00 hrs, as a result of which the project does not feature any further construction risk. Further, DEL has paid 1st installment on 30.06.2022 and 2nd on 30.09.2022 of project-related loan on timely basis. DEL maintains the Debt Service Reserve Account (DSRA), which is 100% filled by 6 months SBLCs, in total providing coverage of six months on its financial obligations till maturity.
Project revenues and cash flows are exposed to wind risk, there is seasonal variation in the wind speed which affect the electricity generation, and ultimately cash flows may face seasonality. However, historical wind speeds at the Jhimpir wind farm provide comfort that DEL would be able to meet the benchmark capacity factor and generate enough cash flows to keep its financial risk manageable. DEL has signed Energy Purchase Agreement (“EPA”) with CPPA-G, as per the EPA, in case of non-project missed volumes the power purchaser shall be liable to pay the missed volumes calculated using tariff rates. DEL has insurance coverage to cover the risk of business interruptions, marine and erection etc. Short-term borrowing lines were availed in order to support its working capital needs, going forward a need to oversee the working capital management remains important.
However, the leverage is yet sizeable and will gradually decline along with the life of the project. Management in near future will put forth the requisition for true up tariff to NEPRA, for the final determination. Upgrading operational performance in line with agreed performance levels is important. Improvement in inflows and availability of unutilized credit limits remained congenial for 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: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
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