The Pakistan Credit Rating Agency Limited
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Taimoor Ahmad

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PACRA Maintains Entity Ratings of Harappa Solar (Pvt.) Limited

Rating Type Entity
(08-Oct-19 )
(30-Apr-19 )
Action Maintain Maintain
Long Term A- A-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Harappa Solar Private Limited (Harappa Solar), 18MWp – Pakistan’s first solar power plant with single axis sun tracking technology was set up under 2006 Renewable Energy Policy. The rating incorporates successful commissioning of the plant, achieved on 14th October 2017. The company opted for the upfront tariff. Under the upfront tariff regime, any variability in solar energy is to be borne by the Company, due to which its cash flows may face seasonality. The rating takes comfort from plant’s latest technology which gives it an extra cushion of 2.1 percentage points over required plant factor – 17%, minimizing solar risk. The company has signed the Energy Purchase Agreement with Central Power Purchasing Agency (CPPA-G) for a period of 25 years. The company has signed an O&M contract with OMS (Pvt.) Limited for a period of three years. Going forward, the management may extend the O&M contract or move this function in-house. The Government of Pakistan has provided a sovereign guarantee against dues from CPPA-G. Current borrowings mainly short-term reflect the need to bridge the working capital requirements and maintenance of projects. Because of the increasing receivables and consequent funding thereof the company is in process of arranging additional credit lines from the financial institutions. The company has availed both foreign and local loan to finance the debt. Foreign loan, covered through SBLC from local financial institutions, is availed from ECO Trade and Development Bank Turkey. The local loan is received from The Bank of Punjab, Pak Oman Investment Company and Askari Bank Limited. The company is required to maintain DSRA equivalent to two debt repayments under financing documents; this requirement is being met by SBLC from sponsors. Going forward, the company plans to fund DSRA from internal cash flows. The total outstanding foreign and local debt of Harappa Solar stood at ~ USD 7.26mln and ~PKR 847mln respectively. The company has repaid six installments up to date.
Upholding operational performance in line with agreed performance levels is important. Improving, indeed aligning, build-up of DSRA from internal sources, receipt pattern from power purchaser, debt repayment behavior and liquidity cushion would impact the directions of ratings. External factors such as any adverse changes in the regulatory framework and weakening of financial profile may impact negatively.

About the Entity
Harappa Solar, incorporated in September 2014, is a Renewable Energy Independent Power Producer (RE IPP) operating under the Renewable Energy Policy 2006 by AEDB. The 18MWp solar plant is being set up at Harappa bypass, Sahiwal, Punjab. The total cost of the project is USD 24.4mln. Debt financing constitutes 75% of the project cost i.e. USD 18.3mln, which is financed from local and foreign financial institutions in ratio of 55:45.
Harappa Solar is primarily sponsored by Rana Nasim Ahmed with 75% shareholding, other significant shareholders are Mr. Khaqan Babar Cheema (12%) and Windforce (Pvt.) Ltd (12.8%). Mr. Khaqan Babar Cheema is CEO of Orient Cargo - a logistics company and Windforce is a renewable energy power generation company from Sri Lanka. Harappa Solar’s Board of Directors (BoD) comprises eight members. Rana Nasim is the Chief Operating Officer and minority shareholder of JDW Sugar Mills. He is associated with JDW Sugar mills since 2001. Harappa Solar has been led by Chief Executive officer – Rana Uzair Nasim, since its inception. He is assisted by a qualified management team with relevant industry experience.

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.