Press Release

VIS Upgrades Entity Ratings of Gharo Solar Limited

Karachi, September 26, 2024: VIS Credit Rating Company Limited (‘VIS’) has upgraded the entity ratings of Gharo Solar Limited (‘GSL’ or ‘the Company’) at 'A+/A-1' (‘Single A plus/A-One’) from ‘A/A-1’ (‘Single A/A-One’). Medium to long term rating of 'A+' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A-1' suggests strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous ratings action was announced on September 12, 2023.

GSL, established in 2016, operates as a public unlisted entity engaged in the generation and supply of electricity to K-Electric through a 50 MW solar PV power plant located in Gharo, District Thatta, Sindh. The project, with a total cost of Rs. 6.3 billion and a debt-to-equity ratio of 75:25, operates under a 25-year Energy Purchase Agreement (‘EPA’) with K-Electric, incorporating a ‘must run’ provision. The plant, exempt from merit order due to its renewable nature, operates under a cost-plus tariff structure with a 15% return on equity (‘ROE’). Supported by local sponsors and international partners experienced in renewable energy, GSL commenced commercial operations in December 2019 without curtailments since inception.

Assigned ratings take into account the business risk profile of GSL, which is supported by a sound sponsor base. The involvement of both local and international sponsors, with significant experience in developing greenfield projects within the power and industrial sectors, underpins the ratings. The ownership structure is led by Mr. Rana Ahmed, who serves as the principal sponsor, along with Windforce (Pvt.) Ltd and Norsk Solar, each bringing extensive expertise in renewable energy projects. The long-term Energy Purchase Agreement with K-Electric and an experienced O&M contract further mitigate operational risks.

Assigned ratings also consider the Company’s profitability profile, driven by tariff adjustments and income from short-term investments. The capitalization profile improved due to an increase in equity, supported by stable dividend payouts. The liquidity profile remains sound, with funds from operations showing growth, supported by a Debt Service Reserve Account and short-term investments in mutual funds. Despite high leverage, coverage ratios remain adequate, with maintained DSCR levels. The improved leverage profile is attributed to equity gains and stabilization of foreign debt levels due to favorable currency movements. Ratings are dependent upon continuation of guaranteed offtake arrangements and achieving benchmark operational results.

For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.








Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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