PACRA Upgrades Entity Ratings of Oursun Pakistan Limited

Oursun Pakistan Limited (the Company) operates a 50 MW solar power plant, located in Gharo, District Thatta, Sindh. The Company's ratings are underpinned by the strong profile of its sponsors, who possess extensive experience in the power sector. Financial close was achieved in June 2017, followed by a 25-year Energy Purchase Agreement (EPA) with K-Electric Limited. The EPA, supported by guaranteed payments through an escrow mechanism, mitigates offtake risk and ensures timely payments, supporting the assigned ratings. Under the EPA terms, the power purchaser is liable to compensate for non-project missed volumes, calculated using tariff rates. However, the Company’s revenues and cash flows remain exposed to solar radiation risk, as seasonal variations in solar radiation can affect electricity generation and lead to fluctuations in cash flows. The Company operates under an upfront tariff, indexed quarterly to USD and CPI. Its business risk profile is strengthened by an O&M contract with Everone Energy Operations (Pvt.), a reputable firm with substantial expertise in the renewable energy sector. The Company also maintains comprehensive insurance coverage to mitigate the risks of business interruptions and other related damages. During FY24, the plant achieved a capacity factor of 20.2%, exceeding the required benchmark of 18%, driven by better solar radiation and enhanced operational efficiency. Total generation for the year stood at 88,262 MWh, surpassing NEPRA’s performance benchmark of 78,840 MWh. The Company’s liquidity profile remained sound during FY24, supported by healthy cash flow generation. The Company meets its working capital requirements entirely through internally generated cash flows and has not utilized any short-term borrowing facilities. Leverage indicators have improved due to the timely repayment of debt, with 53% of foreign debt and 49% of local debt repaid as of FY24, contributing to the upgrade in the assigned ratings. In compliance with financing agreements, the Company maintains a Debt Service Reserve Account (DSRA) equivalent to two quarterly debt repayments, funded from operational cash flows.
Additionally, unlike other Independent Power Producers (IPPs) that rely on sovereign guarantees from the Government of Pakistan (GoP) for receivables from CPPA-G, Oursun Pakistan benefits from a stable arrangement under the EPA with K-Electric, whereby the Company delivers all net generated energy at the Interconnection Point to the purchaser, ensuring reliable offtake. The ratings are contingent upon the Company's ability to maintain and improve operational performance in line with the agreed performance levels. Additionally, sustaining financial discipline remains a critical factor for the ratings. Any changes in the regulatory environment could potentially impact on the ratings going forward.

About the Entity
Oursun Pakistan Limited, incorporated in May 2015, Renewable Energy Independent Power Producer (REIPP) operating under the RE Policy 2006 by AEDB. The total cost of the project is ~USD 62mln. Debt financing constitutes 75% of the project cost i.e. USD 46.5mln, which is financed from local and foreign financial institutions. The Company’s major sponsor is M/s Future Energy Partners (72.5%) shareholding followed Roomi Enterprises (Pvt.) Ltd (27.5%) and individuals (0.003%). The Board of Directors (BoD) of the Company, comprises three members. Mr. Jamshed Afzal has recently been appointed as the Company's Chief Executive Officer, bringing with him relevant experience in the energy sector.