PACRA Assigns Initial Entity Ratings to HNDS Energy Limited

HNDS Energy Limited ("HNDS" or "the Company") has successfully established a 50 MWp solar power plant in Goth Gagrawara, Taluka Saleh Pat, District Sukkur. The assigned ratings are supported by its association with Scatec ASA ("Scatec"), a leading Norwegian renewable energy company, formerly known as Scatec Solar ASA. Scatec specializes in developing, constructing, owning, and operating renewable energy systems in emerging markets. Scatec maintains operational and financial control through governance structures, shareholder agreements, and contracts, often serving as the project developer, EPC provider, operator, maintenance, and asset manager. By the end of 2023, Scatec had 4.2 GW of renewable energy assets in operation and under construction across four continents. Scatec has launched its first project in the country—a 150 MWp solar power plant. The project is developed through three private companies, which are predominantly owned by Scatec Sukhur B.V., a wholly owned subsidiary of Scatec Solar Netherlands B.V., based in the Netherlands. Scatec Sukhur B.V. holds a 75% equity stake in HNDS, while the remaining 25% is owned by the Pakistani company Nizam Energy (Private) Limited. HNDS benefits from a long-term Energy Purchase Agreement (EPA) with the power purchaser, CPPA-G, for 25 years from the Commercial Operations Date (COD), mitigating business and economic risks. The EPA is backed by sovereign guarantees regarding payment obligations from the power purchaser. The RCOD was initially extended due to the floods and set for June 2023. The Company applied for a further extension, which was approved, making the new RCOD December 01, 2023. However, HNDS achieved its COD on January 10, 2024, due to Force Majeure events covered in the contract. Under the EPA, if there are missed volumes due to curtailment by the power purchaser, the power purchaser is liable to compensate for the missed volumes based on the tariff rates. The long-term EPA, coupled with NPMV coverage, provides comfort in terms of offtake risk and revenue stability. However, the Company's revenues and cash flows are still influenced by solar irradiance, as unexpected weather conditions, such as storms or cloud cover, can reduce solar energy capture, impacting electricity generation and potentially leading to seasonality in cash flows. During CY24, the plant has successfully generated and supplied 92.4 GWh of energy to the national grid. The total project cost amounted to USD 38.124 million, with debt financing covering 80% of the total project cost. The debt structure consists of 60% foreign funding and 40% local financing. The Company has arranged an SBLC, providing coverage for the two quarterly installments of financial obligations, offering comfort to lenders. HNDS was awarded a cost-plus tariff by the authority on February 21, 2020. The management has submitted a request for a tariff true-up, with the decision expected from the authority in FY26. Meanwhile, the Company has been granted an Interim Tariff. The O&M of the plant is managed by Scatec. HNDS has adequate insurance coverage to mitigate business interruption risks, further assurance for the ratings.
Maintaining operational performance as per agreed levels is crucial for sustaining the Company’s ratings. Key factors influencing future ratings include improvements in payment receipt patterns, debt repayment behavior, and liquidity. Additionally, external risks such as regulatory changes or financial profile deterioration could impact the ratings.

About the Entity
HNDS Energy Limited was incorporated as a private limited company under the repealed Companies Ordinance, 1984 (subsequently replaced by the Companies Act, 2017) on April 28, 2015. The Company transitioned to a public unlisted company on December 30, 2021. The Board of Directors consists of three members from the sponsoring groups. Mr. Usman Ahmed is the CEO.