HNDS Energy Limited (“HNDS” or “the Company”) was established as a private limited company under the repealed Companies Ordinance, 1984 (currently the Companies Act, 2017) on April 28, 2015. The Company transitioned to a public unlisted company on December 30, 2021. Its primary business activity is the development, ownership, operation, and maintenance of a 50MW solar power plant located in Goth Gagrawara, Taluka Saleh Pat, District Sukkur. The plant commenced commercial operations (COD) on January 10, 2024. The Company’s registered office is located at G-30/4, KDA Scheme, Clifton, Karachi.

HNDS was awarded a cost-plus reference levelized tariff of PKR 5.6988/kWh (equivalent to US Cents 3.6683/kWh) on February 21, 2020. The tariff, determined by a Build-Own-Operate (BOO) model, is indexed to the Pakistan Rupee-US Dollar exchange rate and adjusted for inflation using Pakistan Consumer Price Indices (CPIs). The scalable components of the tariff include principal and interest repayments, return on equity (ROE), insurance and operation and maintenance (O&M) costs.

The Authority has approved a Return on Equity (ROE) and Return on Equity During Construction (ROEDC) for HNDS at a rate of 14%.

Scatec Sukkur B.V., a wholly owned subsidiary of Scatec Solar Netherlands B.V. (based in the Netherlands), is itself a wholly owned subsidiary of Scatec ASA (Scatec), a prominent Norwegian renewable energy company. Scatec Sukkur B.V. holds a 75% equity stake in HNDS, with the remaining 25% owned by Nizam Energy (Pvt.) Limited.

Scatec, established on February 2, 2007, is a publicly listed Norwegian company incorporated and headquartered in Norway, with its registered office located at Askekroken 11, NO-0277 Oslo, Norway. As a leading provider of renewable energy solutions, Scatec is dedicated to accelerating access to reliable and affordable clean energy in emerging markets. With a long-term commitment to sustainability, Scatec develops, builds, owns, and operates renewable energy plants. Currently, the Company has around 5 GW of renewable energy assets in operation and under construction across four continents. Driven by a shared vision of "Improving our Future," Scatec’s passionate employees and partners are committed to expanding the company's renewable energy capacity. Nizam Energy (Pvt.) Limited, established in 2012, specializes in providing EPC (Engineering, Procurement, and Construction) services, Power Purchase Agreements (PPAs), and the distribution of high-quality solar panels, inverters, and lithium battery storage solutions. In collaboration with Nizam Energy, Scatec Solar has developed and grid-connected a 150 MWp solar power portfolio in Sukkur, Pakistan, which includes HNDS. This partnership is solidified by a formal agreement, strengthening the Company's stability and long-term prospects.

By capitalizing on its extensive experience and deep understanding of the energy sector, Scatec has built a strong portfolio across solar, wind, and hydropower projects, with a keen emphasis on long-term value creation. The company’s ability to secure and manage complex EPC contracts, alongside its expertise in navigating regulatory environments and securing financing, underpins its growth. Scatec’s partnerships with local and international players, such as its collaboration with Nizam Energy in Pakistan, further solidify its market presence and enable it to deliver impactful energy solutions. Through a combination of innovation, strategic partnerships, and a commitment to sustainability, Scatec continues to strengthen its position as a leader in the global renewable energy market.

Scatec benefits from a diversified income stream across multiple geographies and energy sectors. The Company’s ability to attract significant capital investment, secure financing for large-scale projects, and manage risk through structured contracts, such as PPAs, enhances its financial stability. Scatec's group revenue is approximately NOK 12,714 million, with an EBITDA in the range of NOK 3,845 million. Scatec’s healthy balance sheet, coupled with its operational efficiency, positions the Company to capitalize on new opportunities, ensuring continued growth and resilience in a competitive market. Meanwhile, Nizam Group's revenue as of June 2023 is approximately PKR 24.8 billion.

The Board of Directors (BoD) of HNDS is composed of three executive members, including the CEO, representing the interests of the Company's sponsors.

1. Mr. Jawad Ali, a Chartered Accountant by profession, is a Nominee Director for Scatec Sukkur BV. He is currently appointed as the Finance and Asset Manager for Scatec ASA operations in Pakistan and oversees all financial and commercial matters.  He has previously worked in the local power sector in the same domain and has 19 years of experience in Project Finance, Financial Reporting, Treasury operations and Stakeholder Management. 

2. Mr. Mark Ravunni, a Chartered Accountant by profession, is a Nominee Director for Scatec Sukkur BV and is presently appointed as VP Finance and Asset Management for Scatec ASA. He has vast experience of over 30 years in finance, Business Development and Asset Management.

The board brings together a wealth of diverse expertise from various industries, ensuring a broad and comprehensive approach to governance. This diverse composition enables effective strategic decision-making, with a focus on leveraging the members' varied backgrounds to guide the company's growth and long-term success. Through their collective experience and leadership, the Board ensures that HNDS operates with strong oversight, sound judgment, and a commitment to delivering value to its stakeholders.

A.F. Ferguson & Co., Chartered Accountants, a member firm of PwC, serves as the external auditor for HNDS. The firm has issued an unqualified opinion on the Company's financial statements for CY23, confirming that the financial position is presented fairly and free from any material misstatements.

HNDS operates with a structured organizational framework that includes clearly defined reporting lines. Each department is led by experienced professionals who report directly to the CEO, ensuring efficient decision-making and accountability across the company. The CEO, in turn, reports to the BoD, strengthening the Company's governance and oversight mechanisms. This clear hierarchy supports effective management and reinforces a robust governance framework, promoting transparency and strategic alignment throughout the organization.

The CEO, Mr. Usman Ahmed is an Entrepreneur and belongs to a family of businessmen having an interest in diverse sectors. A graduate in Computer Information Systems and Business, Mr. Usman has over 10 years of experience working in his family businesses. Subsequently, he also serves as the CEO of Nizam Energy, looking after its operations and growth perspectives. Furthermore, he is also serving as a Non-Executive Director on the board of H. Nizam Din & Sons (Pvt) Limited. The remaining team members are qualified professionals with relevant experience looking after the day-to-day operations of the Company including invoicing, managing receivables and payables, debt repayments, and other matters.

The management of HNDS demonstrates effectiveness through its structured organization, experienced leadership, and clear reporting lines. The management is supported by the board, which oversees the plant’s overall performance and ensures optimal effectiveness through regular evaluations, provides guidance, and supports key decision-making for the smooth operations of the Company.

The Company maintains an adequate MIS that enables the management to effectively monitor operations and maintain seamless coordination with the O&M operator. Additionally, the presence of an in-house internal audit department ensures proactive identification and management of risks arising from operations, reinforcing the company’s commitment to transparency, efficiency, and operational resilience.

HNDS has entered into an Energy Purchase Agreement (EPA) with the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G), the designated Power Purchaser, for a term of 25 years, commencing from the Commercial Operations Date (COD) on January 10, 2024. Under the terms of the EPA, HNDS is entitled to receive energy payments against the delivered energy during the period.

The operations and maintenance of HNDS are managed by Scatec, which follows an integrated business model across the entire lifecycle of renewable energy projects. This model encompasses project development, financing, construction, ownership, and ongoing operation and maintenance. Scatec’s approach ensures seamless execution and long-term sustainability by maintaining a strong focus on every phase of the renewable energy plant’s development and operation. With its extensive expertise and global experience, Scatec is committed to delivering high-quality, reliable, and efficient energy solutions, driving the success of HNDS throughout its operational life.

The resource risk for Independent Power Producers (IPPs) under Pakistan's Renewable Energy Policy 2006 for solar energy primarily stems from the variability in sunlight availability, directly impacting energy generation. Under this policy, the IPP bears the resource risk, meaning that if solar output is lower than expected due to insufficient sunlight, it will affect the revenue of the solar plant. The policy encourages IPPs to mitigate this risk through efficient project design, such as the use of solar tracking systems and energy storage solutions. However, any reduction in generation due to low solar radiation directly influences the IPP's revenue, as the risk of resource availability is not transferred to the Power Purchaser or the government. For HNDS, the trend in solar generation will evolve as the plant continues its operations.

HNDS has adequate insurance coverage for business interruptions, property damages, etc., as per the agreements.

In FY24, Pakistan's power generation declined by 1.9%, totaling 127,160 GWh. This marks the second consecutive year of reduced output, driven by elevated electricity costs, rising inflation, and lower economic activity. The country's power generation remains heavily reliant on thermal and hydel sources, contributing approx. 45% and 31%, respectively, in FY24. The share of nuclear energy has notably increased to approx. 19% in FY24, while renewable energy sources continue to constitute a modest 5% of the total generation. Recently, the Government of Pakistan (GoP) resumed negotiations with Independent Power Producers (IPPs) and established a special task force to implement structural reforms in the power sector. The ongoing process aims to lower generation costs and make electricity more affordable, although the outcomes of these negotiations are yet to be seen.

HNDS began its commercial operations on January 10, 2024. During CY24, the plant has successfully generated and supplied 92.4 GWh of energy to the national grid.

As per the EPA, the Company is required to maintain the plant's efficiency and availability factors to prevent the power purchaser from charging liquidated damages to the Company. Hence, during the period, the plant maintained its required benchmarks.

The total project cost, including cost overruns, amounted to USD 38.124 million, with the EPC cost being the largest component, totaling USD 29.417 million. The sponsors' initial equity contribution was USD 6.332 million (16.61%), with Scatec contributed USD 4.749 million (75%) and Nizam contributing USD 1.583 million (25%), of which half remains to be injected. The total cost overruns and funding shortfall amounted to USD 10.419 million, of which USD 2.1 million is yet to be injected, entirely to be contributed by Scatec. The remaining portion of the project cost, USD 21.373 million, is funded through a mix of 40% local debt and 60% foreign debt. The foreign debt is sourced from FMO, while the local debt is obtained from a consortium of local banks.

With the plant completing its first year of commercial operations, the Company's trade receivables, which include outstanding payments from CPPA-G against energy delivered, have risen to PKR 612 million as of the end of Dec 2024. As a result, the Company's Gross Working Capital days stood at 106 days. As circular debt continues to be an issue for companies operating in the power sector, consequently, IPPs have to manage their liquidity requirements from short-term borrowings.

The Company had only obtained a loan from the sponsors to cover the cost overruns during the construction of the project. Post-COD, the Company has been managing its operations from internal cash generation resulting from completing one year of successful operations. Furthermore, the management plans to obtain a PKR 300 million working capital facility from local lenders to meet its operational needs.

The Company's cash flows are derived from the sale of electricity at an agreed tariff to the power purchaser. During the first year of operations, the Company reported adequate FCFOs standing at PKR 896 million, which is expected to improve going forward as the true-up tariff will approve. With high finance costs as a result of peaking interest rates during the period, the Company reported an interest coverage (EBITDA/Finance Cost) of 0.9x.

As of the end of December 2024, the Company's leverage stood at 108.5% as a result of fully drawn long-term project-related debt along with a negative equity position. Going forward, as the Company keeps on generating and supplying electricity to the power purchaser along with making timely payments against outstanding debt obligations, the leveraging ratio is expected to decline over time.