Lahore, July 23, 2021 (PPI-OT):The rating recognizes that ACT2 Wind is now clearly heading towards achieving the commercial and sustainable operations. The project has also taken significant strides towards completion and management is committed to achieve the milestone. Akhter Group, Ismail Group and Tapal Group is setting up a 2nd JV of 50 MW wind power plant – ACT2 Wind (Pvt) Limited. The ratings incorporate the Group’s previous experience in successfully commissioning and operating a 30MW Wind Energy Power Plant (ACT Wind Pvt Limited). ACT2 Wind is awarded a cost plus tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee.
The required commercial operations date as defined under EPA is fifteen months from construction start date (July’20). The project has completed 80% of off-shore and 64% of on-shore work. Hydrochina International Engineering Company Limited and Hangzhou Huachen Electric Power Control Company are the EPC contractors, comfort is drawn that they have ~40 years of worldwide experience in the wind power technology. In case of delay in achieving the COD, the EPC contractors will be liable to pay the liquidated damages of $ 28,000 per day backed by irrevocable bank guarantee of 15% of EPC cost. The construction contractor will be the O and 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. The project will be financed through debt to equity mix of 80:20, where debt comprises an equal mix of local and foreign lenders. So far owners have injected equity of PKR 869mln and debt quantum is USD 3.4mln and PKR 3.1bln of foreign and local facility respectively. The company will maintain the Debt Service Reserve Account (DSRA), which will be backed by 6 months SBLCs, in total providing coverage of six months on its financial obligations till maturity. Further, the project revenues and cash flows are exposed to wind risk, there is seasonal variation in the wind speed which effect the electricity generation, and ultimately cash flows may face seasonality. However, historical wind speeds provide comfort that ACT2 Wind would be able to generate enough cash flows to keep its financial risk manageable. Comfort is drawn from the group association, having strong financial backing and relevant experience as well.
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 Government of Pakistan has given payment guarantee against dues from CPPA-G. The Company has adequate insurance coverage to cover the risk of business interruptions, marine and erection etc. Furthermore, external factors such as any adverse changes in the regulatory framework or prolonged delay in achieving COD may impact the ratings. Upholding financial discipline is also a consideration.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com