Press Release

VIS Reaffirms Entity Ratings of Indus Wind Energy Limited

Karachi, September 10, 2024: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed entity ratings of Indus Wind Energy Limited ('IWEL’ or 'the Company’) at 'A/A-2' (‘Single A/A-Two’). 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-2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on August 07, 2023.

IWEL, incorporated in February 2015, as a public unlisted company, is a wholly owned subsidiary of Indus Dyeing & Manufacturing Company Limited. IWEL operates a 50MW wind-power plant in Thatta, Sindh. The project, utilizing 25 GE turbines (2MW each), includes a GE SCADA system and remote data connection for monitoring. The project was funded through local and foreign loans. Commercial operations began on March 25, 2022, following COVID-19-related delays.

The Company entered into a 25-year long Energy Purchase Agreement (EPA) with ‘take or pay’ provision in November 2019 with the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G). The long-term nature of the EPA with the CPPA-G mitigates offtake risk as well as default risk pertaining to receivables from the same. Additionally, the indexation of the tariff rate, additional return for excess energy production and the partial compensation of Non-Project Missed Volumes (NPMV) on account of Non-Project Events (NPE) provides comfort in terms of revenue stability and profitability metrics. Despite variability in wind conditions, comprehensive wind studies have mitigated potential operational risks.

Debt service coverage has remained marginal. However, comfort is drawn as the company has maintained a standby letter of credit (SBLC) equal to two quarterly installments for the entire loan term as per financing agreements. As the project was financed through debt-to-equity ratio of 80:20, gearing, though improved, has remained elevated. The capitalization indicators are expected to improve over time in line with scheduled repayments of long-term financing along with equity buildup on the back of profit retention.
Going forward, dependency on continued governmental and infrastructural support remains an important factor. At the same time, the ratings are dependent upon timely resolution of the true-up tariff to support the financial risk profile of the Company.

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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