Press Release
VIS Credit Rating Company Upgrades Entity Ratings of Artistic Energy (Pvt.) Limited
Karachi, March 16, 2021: VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of Artistic Energy (Pvt.) Limited (AEPL) to ‘A+/A-1’ (Single A Plus/A-One) from ‘A/A-1’ (Single A /A-One). Long term rating of ‘A+’ indicates good credit quality; adequate protection factors. Risk factors may vary with possible changes in the economy. Short term rating of ‘A-1’ reflects high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on March 16, 2020.
AEPL’s assigned ratings favorably take into account satisfactory operating track record of AEPL, adequate financial profile and low exposure to business risk. AEPL is a wholly owned subsidiary of Artistic Milliners (Pvt.) Limited (AMPL). The assigned ratings incorporate sound financial profile of sponsor. AEPL operates a 49.3MW wind power farm in Jhimpir, District Thatta, Sindh which was set up at a total cost of Rs 11.7b. The project was financed in a debt equity ratio of 75:25.
Business risk profile draws support from long-term Operations & Maintenance (O&M) contract in place with experienced O&M operator and track record of compliance with normative parameters stipulated in Energy Purchase Agreement (EPA) since commencement of operations. Presence of long term EPA with guaranteed capacity payments mitigates off-take risk while adequate insurance coverage is also in place. While power produced and in turn cash flows are susceptible to seasonality and possible variance in wind speed, comfort is drawn from surveys conducted by international consultants confirming adequate wind availability historically.
Assessment of financial risk profile incorporates sound debt coverage metrics and healthy cash flows in relation to outstanding debt repayments. Moreover, recent MOU signed with the GoP may further improve liquidity profile once a sizeable chunk of the outstanding trade debts are received. Leverage indicators have improved during the outgoing year due to profit retention and no dividend payout. Going forward, ratings would remain dependent on maintenance of capitalization indicators comprising gearing, leverage and equity base at current levels following a prudent dividend payout strategy; along with timely materialization of MOU signed with the GoP.
For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext. 306) at 021-35311861-70 or email at info@vis.com.pk.
Faryal Ahmad Faheem
Deputy CEO
Applicable Rating Criteria: Industrial Corporates (April 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf