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The Pakistan Credit Rating Agency Limited
Press Release

Date
20-Jun-17

Analyst
Faizan Arif
faizan.sufi@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of ACT Wind (Pvt.) Limited (Formerly Tapal Wind Energy (Pvt.) Limited)

Rating Type Entity
Current
(20-Jun-17)
Previous
(30-Dec-16)
Action Maintain Upgrade
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Tapal, Ismail, and Akhtar groups have set up a 30MW wind power plant – ACT Wind (Private) Limited. The commissioning of the plant was achieved on 7th October 2016. ACT Wind has offtake agreement with NTDC. 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 plant’s capacity factor at 31% annually. Comfort is drawn from Hydrochina – the O&M operator – having both international and local market experience. Moreover, if the Company maintains its availability as per contract and is ready to deliver electricity to NTDC, NTDC is liable to pay the Company the whole of the tariff even if no purchase is done. The Government of Pakistan has provided a sovereign guarantee against dues from NTDC. The Company has adequate insurance coverage. The Jhimpir wind corridor is home to various other operational wind power plants, which provides further confidence in regards to performance of ACT. However, the Company’s ability to manage contracted parameters over multiple wind cycles is yet to be seen. 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.

Upholding operational performance in line with agreed performance levels would remain a key rating driver. Improving, indeed aligning, the Company's repayment behavior 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.

About the Entity
ACT Wind (Private) Limited (formerly known as Tapal Wind Energy (Private) Limited) incorporated in December 2010, is a Renewable Energy Independent Power Producer (RE IPP) operating under the Renewable Energy Policy 2006 by the Alternative Energy Development Board (AEDB). The 30MW wind farm is set up in Jhimpir, Sindh. The wind corridor already has 155MW wind plants in operation as at Dec-16. The total cost of the project was USD 81mln. Debt financing constitutes 75% of the project cost i.e. PKR 6,008mln. It is priced at 3M Kibor plus 3% p.a. The facility has a ten year repayment period commencing Apr17, with the second payment in Jun17 to align the repayment cycle to semi-annual instalments. The project was commissioned on 7th October 2016. The sponsors of the Company, with equal shareholding are Tapal Group, along with Ismail Power (Private) Limited (IPPL) and Akhtar Power (Private) Limited (APPL), who merged together in August 2013 to set up the wind power plant.

ACT’s board comprises nine members, including the CEO. Each group has three representatives on the board. Mr. Maqbool Ismail is currently the Chairman of the board. The management team comprises professionals. Mr. Adnaan Tapal, an electrical engineer, is the CEO of ACT since September 2011.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.