The Pakistan Credit Rating Agency Limited
Press Release


Anam Waqas Ghayour

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Upgrades Entity Ratings of Gul Ahmed Electric Limited

Rating Type Entity
(17-Feb-23 )
(18-Feb-22 )
Action Upgrade Maintain
Long Term A A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Gul Ahmed Energy Limited has set up a 50 MW wind power plant - Gul Ahmed Electric Limited (GEL) located in Jhimpir, District Thatta, Sindh. GEL is awarded a cost-plus tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. The plant successfully achieved its Commercial Operations (COD) on April 7, 2022 and has been supplying electricity to the national grid since then. Comfort is drawn from entity’s group association, having strong financial backing and relevant experience in successfully commissioning and operating Power Plants. Hydrochina International Engineering Company Limited & Hangzhou Huachen Electric Power Control Company were the EPC contractors for the project and shall also remain its O&M operators for the first two years after COD. The O&M contractor will be responsible for maintaining the operational benchmarks (Availability: 98%, Capacity: 38%) and shall provide the warranty bond (10% of EPC cost) in the form of irrevocable bank guarantee for 24 months after COD. This will provide additional cushion for the sustainable financial risk profile. Further, 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. The project revenues and cash flows remain exposed to wind risk due to seasonal variation in the wind speed which may affect electricity generation, and ultimately cash flows may face seasonality. However, historical wind speeds provide comfort that GEL would be able to generate enough cash flows to keep its financial risk manageable. FCFO’s for June’22 stood at PKR 367mln while total receivables were recorded at PKR 453 million. The company has generated 15.48 GWhr of electricity till Dec’22 after achieving COD. The Company has long term project debt that is repayable in a period of ten years. The company is in the process of applying for adjustment / true up in its original tariff and may have to rely on additional financing to service its debt if payments from CPPA-G are not recovered on time.
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 Company has adequate insurance coverage to cover the risk of business interruptions, marine & erection etc. External factors such as any adverse changes in the regulatory framework may impact the ratings. Going forward, the capacity of the Company to generate stable cash flows in order to make timely repayments against the project debt remains crucial. With rising concerns about circular debt, the trend of payments received from CPPA-G against invoices will further impact ratings.

About the Entity
Gul Ahmed Electric Limited, incorporated in Dec 2015, is a Renewable Energy Independent Power Producer (RE IPP) operating under the Renewable Energy Policy 2006 by AEDB. The 50MW wind IPP has set up in Jhimpir, District Thatta, Sindh. Mr. Danish Iqbal is the newly appointed CEO of the company and has been associated with the company since its inception and thus has vast experience. The total estimated cost of the project is USD 62.95mln. Debt financing constitutes 80% of the project cost i.e., USD 51mln, which is financed from foreign financial institutions and locally from SBP under re-financing scheme at fixed rate 6%.

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.