VIS Credit Rating Company Assigns Initial Entity Ratings to NASDA Green Energy Limited

Karachi, December 04, 2020 (PPI-OT): VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings to NASDA Green Energy Limited (NGEL or the Company) of ‘A-/A-2’ (Single A Minus/A-Two). Long term rating of ‘A-’ indicates good credit quality; adequate protection factors. Risk factors may vary with possible changes in the economy. Short term rating of ‘A-2’ denotes good certainty of timely payment; sound liquidity factors and company fundamentals. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.

NGEPL plans to set up a 50MW wind power plant in Jhimpir, District Thatta, Sindh. Shareholding is vested with the sponsors of Soorty Enterprises (Private) Limited. The assigned ratings incorporate sound financial profile of sponsor. The total cost of the project has been estimated at $63.9m which shall be financed in debt to equity ratio of 80:20 where debt component will comprise an approximate equal (51:49) mix of local and foreign lenders. The financial close for this project has been achieved in November 2019. The targeted commercial operations date is expected in December’21 while construction of the project has commenced in July’20. The project has an estimated ROE of 14%.

Business risk profile draws support from Operations and Maintenance (O and M) contract in place with experienced O and M operator. Presence of long term EPA with lower tariff providing competitive position in the economic merit order mitigates off-take risk. Insurance coverages are in place for the construction period and for the first year of operations. While power produced and in turn cash flows are susceptible to seasonality and possible variance in wind speed, comfort is drawn from surveys conducted by international consultants confirming adequate wind availability historically. Ratings incorporate inherent construction and project completion risk; however the same is partly mitigated by in-built guarantees and liquidated damages the operation of which would materialize during construction. Timely project completion will remain an important rating driver.

Assessment of financial risk profile take into account sound projected debt coverage metrics; however, inconsistent payment cycle exhibited by CPPA may translate into some liquidity pressures. Moreover, to facilitate timely debt servicing, the Company has provided a 6 month SBLC to lenders to ensure timely repayment. The assigned ratings incorporate elevated leverage indicators in line with project funding mix. Leverage indicators are expected to improve over time owing to debt repayments and internal capital generation and are captured in the assigned ratings.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873

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