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The Pakistan Credit Rating Agency Limited
Press Release

Date
24-Dec-20

Analyst
Saadat Mirza
saadat.mirza@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

Rating Type Entity
Current
(24-Dec-20)
Previous
(26-Dec-19)
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Tapal, Ismail, and Akhtar groups have set up a 30MW wind power plant – ACT Wind (Private) Limited. The ratings assigned take into account its strong ownership profile with Tapal Group, Ismail Group, and Akhtar Group, holding equal stake in the company. The commissioning of the plant was achieved on 7th October 2016. The project is established under the Policy for Development of Renewable Energy for Power Generation, 2006 which offers a guaranteed internal rate of return, cost indexation, and pass-through tariff structure. 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 management. Second; operational risk. The Company has to maintain the plant’s capacity factor at 31% annually. Company has to maintain its availability as per contract and is ready to deliver electricity to CPPA-G, CPPA-G is liable to pay the whole tariff even if no purchase is done. Comfort is drawn from Hydrochina – the O&M operator – having both international and local market experience. The Company has adequate insurance coverage. 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. The Company has been paying dividends which in times of need is an internal source of liquidity available. Company is timely paying its debt instalments and did not avail any deferment facility, which provides comfort. As at end June’20 company has debt equity ratio of 59.5% (FY19: 68.5%). Ratings further draw comfort as the company is managing its working capital needs through internally generated cash flows while short-term borrowings are nil. The Government has signed MoU with the IPPs operating under the Power Policy of 2002 and 2006 to review the terms of legal and contractual agreements.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. Improving build-up of DSRA from internal sources, indeed aligning, and 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 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). Debt financing constitutes 75% of the project cost i.e. PKR 6,008mln. It is priced at 3M Kibor plus 3% p.a. The debt has a ten year repayment period, commenced on Apr'17, with payments to be made in twenty consecutive semiannual installments. 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. Maqsood Ismail is currently the Chairman of the board. The Chairman shall be nominated on rotation from each Group for a term of two years commencing from the first BoD meeting. Mr. Adnaan Tapal, an electrical engineer, is the CEO of ACT since September 2011. He is supported by experienced individuals. The CEO shall be elected by the BoD on rotation from each Group for a term of two years.

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.