The Pakistan Credit Rating Agency Limited
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Muhammad Mubashir Nazir

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PACRA Assigns Initial Entity Ratings to Din Energy Limited

Rating Type Entity
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

Din Energy Limited is setting up a 50MW wind power plant “Din Energy Limited” in Jhampir, District Thatta, Sindh. The required commercial operations date as defined in Tariff determined by Nepra, is fifteen months from the construction start date and till August’21, the construction of the project is ~61% completed. Din Energy is awarded upfront tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. Hydrochina International Engineering Company Limited & Hangzhou Huachen Electric Power Control Company are the EPC contractors, comfort is drawn that they have vast experience in wind power technology. So far, owners have injected 90% of equity which lends support to achieve timely completion. In case of delay in achieving the COD, the EPC contractors will be liable to pay the liquidated damages of $ 28,500 per day backed by irrevocable bank guarantee of 15% of EPC cost. The construction contractor will be the O&M operator for two years after COD; it will provide the warranty bond (10% of EPC cost) in the form of irrevocable bank guarantee for 24 months after COD. These bank guarantees provide additional cushion for the sustainable financial risk profile. Further, the company maintains the Debt Service Reserve Account (DSRA), which is 100% filled by 6 months SBLCs, in total providing coverage of six months on its financial obligations till maturity. 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 Din Energy would be able to meet the benchmark capacity factor and generate enough cash flows to keep its financial risk manageable.
The Company has signed Energy Purchase Agreement ("EPA") 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 Company has insurance coverage to cover for the risk of business interruptions, marine & erection etc. Furthermore, external factors such as any adverse changes in the regulatory framework or prolonged delay in achieving COD may impact the ratings, which the management is confident to achieve, keeping in consideration the progress of project. Upholding financial discipline is also a consideration.

About the Entity
Din Energy Limited, was incorporated On July 02, 2014 is a Renewable Energy Independent Power Producer (RE IPP) operating under the Renewable Energy Policy 2006 by AEDB. The 50MW wind IPP is setting up in Jhampir, District Thatta, Sindh. The company is majorly owned by Din Group. The total estimated cost of the project is USD 63.91mln. Debt financing constitutes 80% of the project cost i.e. USD 51.12mln, which is financed from foreign financial institutions and locally from SBP under re-financing scheme at 3MKIBOR plus 1.75%. The foreign facility has tenor of thirteen years with two years grace period and quarterly repayments while the local loan has the tenor of ten years with 2 years of grace period. Din Energy Limited has four-member board of directors with all members belonging to the DIN Group, which is principally engaged in the textile and leather sector. Mr. Shaikh Muhammad Pervez currently chairing the Board. Mr. Fawad Jawed is the CEO, has been associated with the Group in different capacities and leading the Company with his visionary leadership and vast experience. The management team comprises qualified professionals with relevant professional experience.

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.