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Anam Waqas Ghayour

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PACRA Upgrades Entity Ratings of ACT Wind (Pvt.) Limited

Rating Type Entity
(23-Jun-22 )
(25-Jun-21 )
Action Upgrade Maintain
Long Term A+ A
Short Term A1 A1
Outlook Stable Positive
Rating Watch - -

Tapal, Ismail and Akhtar groups has set up a 30MW wind power plant - Act Wind (Pvt) Limited (“Act Wind” or “the Company”) in Jhimpir, 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, 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. During the period, 6MFY22 & FY21, Act wind recorded sales revenue of PKR ~1,108mln & PKR ~2,068mln along with a Net Profit of PKR ~523mln & PKR ~927mln respectively. The Company has received its outstanding receivables (as of Nov’21) in form of 1/3rd cash, 1/3rd PIB and 1/3rd Sukuk’s, under the agreement signed with CPPA-G, this improves the liquidity profile of the Company. Pursuant to this agreement the Company has revised its ROE to 13% from 18% with dollar indexation continues to apply. Working capital requirements of Act Wind are fulfilled through in-house adequate cash flow generation, without any utilization of short term borrowing lines. Free cash flows of the Company are in a comfortable position to make timely debt repayments. Act Wind has repaid ~30% of its debt on time without availing benefit of forbearance period, facet of strong financial profile and working capital management. Act Wind is also managing its short-term investment book by investing in various mutual funds to strengthen the bottom-line and cash flows through dividend inflows.
Sustained good financial discipline and upholding strong operational performance in line with agreed performance levels remain a key rating driver. Company’s repayment behavior, from internally generated cashflows, would be considered positive for ratings.

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.