Press Release
VIS Reaffirms Entity Ratings to Din Energy Limited
Karachi, April 1, 2021: VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of Din Energy Limited (DEL) at ‘A-/A-2’ (Single A minus/Single A-Two). Outlook on the assigned ratings is ‘Stable’. Long term rating of ‘A-’ signifies good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals. Access to capital markets is good. Risk factors are small. Previous rating action was announced on June 15, 2020.
Din Energy Limited (DEL) was incorporated in 2015 and plans to set up a 50MW wind power plant in Jhimpir, District Thatta, Sindh. The sponsors received an LOI from the Energy Department, Government of Sindh (EDGOS) in July 2015 and the project has been allocated 325 acres of land by the Government of Sindh in January 2016 through official land allocation letter. The generation license was awarded by NEPRA in 2017 while tariff for the project was notified in 2019. Given the low tariff in comparison to other fuel based power producers, Wind Farms are categorized as must run IPPs. The total cost of the project has been estimated at $67.1m which shall be financed in debt to equity ratio of 80:20 where debt component will comprise an equal (50:50) mix of local and foreign lenders. The financial close for this project has been achieved in November 2019.
Business risk profile draws support from long-term Operations & Maintenance (O&M) contract in place with experienced O&M operators. Presence of long term EPA with guaranteed capacity payments mitigates off-take risk while insurance coverage is adequate and covers both construction and operations phase. While power produced and in turn cash flows are susceptible to seasonality and possible variance in wind speed, comfort is drawn from adequate wind availability historically. Ratings incorporate inherent construction and project completion risk; however the same is partly mitigated by in-built guarantees and liquidated damages. Timely project completion will remain an important rating driver.
Assessment of financial risk profile takes into account sound projected debt coverage metrics; however, inconsistent payment cycle exhibited by CPPA may translate into some liquidity pressures. The assigned ratings incorporate elevated leverage indicators in line with project funding mix. Leverage indicators are expected to improve over time owing to debt repayments and internal capital generation and are captured in the assigned ratings.
For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext: 306) at (021) 35311861-66 or email at info@vis.com.pk.
Faryal Ahmad Faheem
Deputy CEO
Applicable Rating Criteria: Industrial Corporates (May 2019)
http://vis.com.pk/kc-meth.aspx