Press Release
VIS Credit Rating Company Reaffirms Entity Ratings of NASDA Green Energy Limited
Karachi, February 08, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of NASDA Green Energy Limited (NGEL or the Company) at ‘A-/A-2’ (Single A Minus/A-Two). 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-2’ denotes good certainty of timely payment; sound liquidity factors and company fundamentals. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’. Last rating action was announced on December 4, 2020.
The assigned ratings incorporate sound financial profile of sponsor, given shareholding being vested with sponsors of Soorty Enterprises (Private) Limited. NGEL is a wind power project with an estimated cost of USD 63.9m, which is being financed in debt to equity ratio of 80:20, where debt component constitutes an approximately equal (51:49) mix of local and foreign lenders. Around 85% of the cost of the project had been incurred as at November’21. The Commercial Operations Date (COD) is expected in early-Q2’2022 (initial date was December’21). So far, there has been delay mainly due to pandemic related issues in import of machinery and equipment. As per management, despite the delays, no or immaterial overheads & finance cost overrun has been noted as the disbursements from lenders were delayed accordingly. The commencement on the expected COD date is important to achieve, VIS will continue to monitor the progress on an ongoing basis.
Business risk profile draws support from Operations & Maintenance (O&M) contract in place with experienced O&M operator. Presence of long-term EPA with lower tariff providing competitive position in the economic merit order mitigates off-take risk. Insurance coverages are in place for the construction period and for the first year of operations.
Assessment of financial risk profile take into account sound projected debt coverage metrics; however, inconsistent payment cycle exhibited by CPPA may translate into some liquidity pressures. Moreover, to facilitate timely debt servicing, the Company has provided a 6-month SBLC to lenders to ensure timely repayment. 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 Mr. Arsal Ayub, CFA or the undersigned (Ext. 201) at 021-35311861-70 or email at info@vis.com.pk
Javed Callea
Advisor
VIS Entity Rating Criteria: Corporates (August, 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf