The Pakistan Credit Rating Agency Limited
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Muhammad Mubashir Nazir

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PACRA Maintains the Entity Ratings of Master Green Energy Limited - Outlook Stable

Rating Type Entity
(24-May-23 )
(22-Jun-22 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Developing
Rating Watch - Yes

Master Group, pioneer of foam products in Pakistan, installed its second 50MW wind power plant project in district Jamshoro, Sindh – Master Green Energy Limited (“the Company” or “Master Green”), after the success of its first wind power project. Master Wind Energy Limited located in Jhimpir, Sindh. The Company signed Energy Purchase Agreement ("EPA") with CPPA-G for a period of 25 years. As per the EPA, in case of non-project missed volumes the power purchaser shall be liable to pay the missed volumes at applicable tariff rates. Master Green was awarded a cost-plus tariff by NEPRA, with the energy payments to be received from CPPA-G backed by the sovereign guarantee of Government of Pakistan. The project revenues and cash flows are exposed to wind risk and operational risk. The operational risk aspect is mitigated by achieving benchmarks of availability and efficiency as agreed in the Energy Purchase Agreement (EPA). Under the cost-plus tariff regime, any variability in wind speeds is to be borne by the Company, due to which its cash flows may face seasonality. Hydro China International Engineering Company Limited & Hangzhou Huachen Electric Power Control Company were the EPC contractors on the Project. The construction on the project started in September 2019 and commercial operation date (COD) was achieved in August 2021. HydroChina International Engineering Company Limited is O&M operator for the warranty period i.e. up to August 2023. The long-term O&M contractor is expected to be finalized soon by the management. Comfort is drawn from its vast international and local experience of the operators. The Company delivered 88.46GWh electricity during 9MFY23 to the national grid. Short-term borrowing lines were availed in order to support its working capital needs, going forward a need to oversee the working capital management remains important. The Company has repaid seven installments (total number of installments forty for local SBP RE loan and fifty-two for foreign and local conventional KIBOR loan) of its project-related long-term debt by March 2023 in a timely manner without availing any forbearance period. However, the leverage is yet sizeable and will gradually decline along with the life of the project.
Ratings take comfort from the true-up tariff approved by the authority. However, upgrading operational performance in line with agreed performance levels is important. Improvement in inflows and availability of unutilized credit limits remained congenial for the ratings.

About the Entity
Master Green Energy Limited, incorporated in May 2015, is a Renewable Energy Independent Power Producer (RE IPP) operating under the Renewable Energy Policy 2006 by AEDB. The 50MW wind IPP is installed in Jamshoro, Sindh. Mr. Shahzad Malik was appointed as CEO w.e.f April 07, 2022. He is responsible for Master Group's investments in the energy sector. Mr. Rumman Arshad Dar is the COO of the company. Mr. Dar has fourteen years of experience in the energy sector. The total cost of the project is USD 65.03mln. Debt financing constitutes 80% of the project cost i.e., USD 52mln, which is financed from local and foreign financial institutions. The local SBP RE facility has a tenor of ten years and the foreign facility and local conventional KIBOR facility have a tenor of thirteen years with two years grace period, with quarterly repayments. Master Group has a long history spanning over 50 years. The flagship company Master Enterprises (Pvt.) Ltd established in the year 1963, deals in foam products. The Group gradually diversified in various industries with operations across textile, engineering, automobile, and retail sector.

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