The Pakistan Credit Rating Agency Limited
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Bazah Tul Qamar

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PACRA upgrades the entity rating of Harappa Solar (Pvt.) Limited

Rating Type Entity
(11-Sep-20 )
(08-Oct-19 )
Action Upgrade Maintain
Long Term A A-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

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 generation that exceeded the required benchmark by 2% in FY20. 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. The Company has increased short term credit lines to PKR 325 mln previously held at PKR 100 mln that has taken the credit limit in a comfortable zone. Out of available limit~52% remains unavailed. Current borrowings mainly short-term reflect the need to bridge the working capital requirements and maintenance of projects. 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 6.57 mln and ~PKR 747mln respectively. The company has repaid 25% of total project related debt i.e ten installments out of total 40 installments by which the debt equity ratios comes to 66% (2019: 70%). Further the government through issuance of Sukuk made payments to IPPs, the company has received ~300 mln from CPPA-G that positively impacted the cashflows of the company.
Upgrading operational performance in line with agreed performance levels is important. Improvement in inflows and availability of unutilized credit limit remained congenial for the ratings.

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 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 has been developed and supervised by experienced sponsors and management, who have also several renewable projects in their portfolio such as 50MWp Gharo Solar Limited, 8MW Kathai-II Hydro Private Limited and experience of bagasse projects as well.
Harappa Solar is primarily sponsored by Mr. Rana Nasim Ahmed with 75% shareholding, other significant shareholders are Mr. Khaqan Babar Cheema (12%) and Windforce (Pvt.) Ltd (12.8%). Mr. Rana Nasim is a high net worth individual and is the major sponsor of 50 MW Gharo Solar Limited as well. He has almost two decades of diverse managerial and operational experience in the sugar and power sectors. Mr. Khaqan Cheema is CEO and sponsor 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. 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.