Lahore, August 16, 2023 (PPI-OT): Harappa Solar Private Limited an 18MWp Solar Power Plant – incorporated in September 2014, operates under the Renewable Energy Policy 2006. Rating upgrade takes into account smooth operational performance and relative positioning in the peer universe. Assigned ratings also take into account sound profile of sponsors having considerable experience in establishing green-field projects in power and industrial sectors and also operating a portfolio of solar projects. A long-term energy purchase agreement of 25 years with Power Purchaser, mitigating the underlying business and economic risk factors, along with sovereign guarantees on power purchaser’s payment obligation, also contribute positively towards the ratings. During FY23, Harappa Solar generated 16,776MW of electrical output while maintaining capacity and availability factor.

The Company's operating performance improved, with the capacity factor rising to 19.5% (required: 17%). Due to the growth in net revenues (FY23: PKR787mln, FY22: PKR 581mln), gross and operating margins have returned to FY21 levels. The Company has availed both foreign and local loan to finance the debt. The Company has repaid ~55% of local loan and 49% of foreign loan by which leveraging comes down to 60%. The Company is required to maintain Debt Servicing Reserve Account (DSRA) equivalent to two debt repayments under financing documents, the Company is funding DSRA from SBLC.

Short-term borrowing stands at PKR 177mln to meet the working capital requirement. With a favourable liquidity profile and enough internal resources for working capital management, debt servicing remained satisfactory. Power Purchaser has been making payments on time so far; however, any future payment delays may result in some liquidity pressure. Capitalization metrics improved in FY23 due to an increase in the equity base. Based on predicted profitability and minor capex plans in the future, gearing and leverage levels will likely remain low. Upgrading operational performance in line with agreed performance levels is important. Improvement in inflows and availability of unutilized credit limit remained congenial for the ratings.

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Lahore, Pakistan

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