PACRA Maintains the Entity Ratings of Gul Ahmed Electric Limited

Gul Ahmed Energy Limited has set up a 50 MW wind power plant - Gul Ahmed Electric Limited (“GEL” or “the Company”) 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 Company 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. The Company has generated 143.9GWhr of electricity in FY23. The revenue of the Company stood at PKR 859mln during 1QFY24 (FY23: 2,039mln). FCFO’s for Sep’23 stood at PKR 725mln (FY23:1,673mln) while total receivables were recorded at PKR 997mln (FY23: 907mln). The Company holds both foreign and local long-term project debt repayable over a thirteen and ten year period, respectively with ~10% of the project debt already repaid by the end of Dec’23. The Company has also procured short-term working capital lines of PKR 670mln which will be used to fund its working capital requirements. Furthermore, the Company is pursuing adjustments or true-ups in its original tariff.
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 Company's primary venture is a 50MW wind IPP located in Jhimpir, District Thatta, Sindh. Under the leadership of CEO Mr. Danish Iqbal, who has been with the Company since its inception, GEL benefits from his extensive experience in the field. The total investment for the project amounts to USD 62.95mln, with debt financing comprising 80% of the project cost, equating to USD 50.36mln. This financing is sourced from foreign financial institutions and domestically from the SBP under a refinancing scheme, providing funds at a fixed rate of 6%.