The Pakistan Credit Rating Agency Limited
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Saadat Mirza

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PACRA Maintains Entity Ratings of ACT Wind (Pvt) Limited with “Positive Outlook”

Rating Type Entity
(25-Jun-21 )
(24-Dec-20 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Positive 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 manageable. 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 is managing its short-term investment book by investing in various mutual funds to strengthen the bottom-line and cash flows through dividend inflows. (Dividend Income as at end Dec’20 PKR ~18mln; as at end Dec’19 PKR 3.8mln). 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. Company is timely paying its debt instalments and did not avail any deferment facility, which provides comfort. As at end December’20 company has debt equity ratio of 55% (FY20: 60%). Ratings further draw comfort as the company is managing its working capital needs through internally generated cash flows without utilizing short term borrowings.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. Company’s repayment behaviour, from internally generated cashflows, would be considered positive for ratings. Government has started paying IPPs as per agreement and ACT Wind has received its share against outstanding receivables which improves the liquidity of the Company. The concession agreed under the agreement will be given once the remaining amount received by the Company. The actual impact of the executed agreement is yet to be seen.

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 semi-annual instalments. 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. Mr. Adnaan Tapal, an electrical engineer, is the CEO of ACT since September 2011. He is supported by experienced individuals. The Chairman and CEO shall be nominated and elected after every two years. However, the CEO and Chairman can hold the position for longer period with mutual consent of board members.

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.