The Pakistan Credit Rating Agency Limited
Press Release


Shahmeer Dar

Applicable Criteria

Related Research

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 Assigns Initial Entity Ratings to Gul Ahmed Energy Limited

Rating Type Entity
(10-Nov-20 )
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

Gul Ahmed Energy’s Power Purchase Agreement (PPA) with Karachi-Electric (KE), expired in November, 2019. Recently, National Electric Power Regulatory Authority (NEPRA) has approved the tariff of GAEL for three years which is contingent till the time CPPA-G/NTDC are willing and capable of supplying equivalent additional power to KE. Under current tariff (i) the Company will have a 'take and pay' tariff by virtue of which the Company will generate revenue only when electricity is supplied to the power purchaser i.e. K.electric and other bulk purchasers (ii) Fuel procurement will be the responsibility of GAEL (iii) No liquidated damages relating to fuel supply / electricity supply will be applicable on either party. The Company is in negotiation with KE for finalization of PPA. The Company’s project debt has been paid and it has not procured any short-term facility, consequently the Company finances its working capital through its operations. GAEL holds short term investment in mutual funds amounting to PKR 5.1bln as at 31 Mar, 2020 which, being much beyond the operational requirement of the Company, lends extra cushion. Furthermore, GAEL’s controlling interest in the 3 subsidiaries it owns is noted as i) Gul Ahmed Wind Power Limited 50MW which is operational since 2016, ii) Gul Ahmed Electric Limited 50MW which has achieved financial close in 2019, has subsequently achieved a Construction Start Date in July, 2020 and shall be commencing commercial operations on November, 2021and iii) Gul Ahmed Solar Power Limited 50MW which has obtained Letter of Intent from Energy Department, Government of Sindh. GAEL's Leverage stands at virtually zero, as it does not have any sort of borrowings (neither long term nor short term).
The ratings have a stable outlook owing to the already determined tariff. The management is confident based on rational argument as to the finalization of PPA and continued operations of the Company. Comfort can be drawn from Company’s liquid cash position and low leveraged balance sheet and no working capital lines utilization as at 31 Mar, 2020. Although well-managed, in-house O&M activities expose the company to operational risk; thus upholding strong operational performance would remain a key driver of the ratings. Meanwhile, the determination of PPA is the final stages, while timely finalization of the same is essential for the ratings.

About the Entity
Gul Ahmed Energy Limited, successfully implemented a 136.17 MW RFO private power project under the 1994 Power Policy of the GoP on a Build, Own, Operate (BOO) basis. Gul Ahmed Energy Group holds 67.68% shares, followed by the Toyota Tsusho Corporation owning 18.62%, Tomen Power (Singapore) P.T.E Limited owns 12.78% of GAEL and Wartsila owns 0.92%. Gul Ahmed Energy Group is one of Pakistan’s leading business groups, It has a highly diversified portfolio of businesses and investments.
BoD comprises of eight members including the Chief Executive Officer. The board includes six representatives of Gul Ahmed Energy Group, one representatives of the Toyota Tsusho Corporation and one representative of Tomen Power (Singapore) P.T.E Ltd. Mr. Iqbal Alimohamed is the CEO of the company who has over fifty years of experience as an Industrialist / businessman. He is a fellow member of ICAP and ICAEW.
The total estimated cost of the project is USD 140mln. Debt financing constitutes 70% of the project cost i.e. USD 97mln, which was financed from foreign financial institutions IFC contributed USD 62 million and remaining USD 35 million was contributed from ING bank. All the debt of the company has been fully paid in 2009.

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.