Muhammad Mubashir Nazir
PACRA Maintains Entity Ratings of ACT2 Din Wind (Pvt) Limited.
Act group and Din group have successfully set up wind power plant - Act2 Din Wind (Pvt.) Limited (“Act2 Din Wind or the Project”), formerly known as Act2 wind energy Pvt. Ltd. The ratings incorporate the Group's previous experience in successfully operating wind power plants in Jhimpir sindh. The project construction starts in August 2020 and the commercial operation date (COD) was achieved in February 2022. Hydro China International Engineering Company Limited & Hangzhou Huachen Electric Power Control Company are the EPC contractors. The construction contractors are the O&M operator for two years after COD; and provide the warranty bond (10% of EPC cost) in the form of irrevocable bank guarantee for 24 months after COD. These bank guarantees provide an additional cushion for the sustainable financial risk profile. Act2 Din Wind is awarded a cost-plus tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. Energy Purchase Agreement ("EPA") is signed 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. The project is financed through debt to equity mix of 80:20, where debt comprises an equal mix of local and foreign lenders. The company will maintain the Debt Service Reserve Account (DSRA), which will be backed by 6 months SBLCs, in total providing coverage of six months on its financial obligations till maturity. The leveraging of Act2 Din Wind is yet sizeable and will gradually decline along with the life of the project once the repayment of project-related loan will start. The 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 provide comfort that ACT2 Din Wind would be able to generate enough cash flows to keep its financial risk manageable.
Comfort is drawn from the group association, having strong financial backing and relevant experience as well. Management has put forth the requisition for true up tariff to NEPRA, final decision in this respect is awaited. Upgrading operational performance in line with agreed performance levels is important. Sound cash flow generation and availability of unutilized credit limit remained congenial for the ratings. Furthermore, external factors such as any adverse changes in the regulatory framework may impact the ratings. Upholding financial discipline is also a consideration.
Act2 Din Wind Pvt. Limited, incorporated in Nov 2015, is a Renewable Energy Independent Power Producer (RE IPP) operating under the Renewable Energy Policy 2006 by AEDB. Mr. Khurshid Akhtar is the CEO of the company. Mr. Khurshid has over eighteen years of experience as an Industrialist/businessman. Mr. Khurshid has done his MBA from LUMS. The total estimated cost of the project is USD 62.952mln. Debt financing constitutes 80% of the project cost i.e. USD 50.36mln, which is financed from foreign financial institutions and locally from SBP under re-financing scheme at fixed rate 5%. The foreign facility has tenor of thirteen years with two years grace period and quarterly repayments while local loan has tenor of ten years with 2 years of grace period. The current sponsor of the project includes Akhter Group, Ismail Group, Tapal Group and, Din group. that owns 15.50%, 20%, 15.5% and 49% respectively. Previously the Project is equally owned by Akhter Group, Tapal Group, and Ismail group,