Receipts from second issue of Energy Sukuk to facilitate Yunus Energy in managing outstanding receivables: VIS

March 19, 2020: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of ‘A+/A-1’ (Single A /A-One) to Yunus Energy Limited (YEL).

Long Term Rating of ‘A+’ reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy.

Short Term Rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and risk factors are minor. Outlook on the assigned ratings is ‘Stable’.  

YEL operates a 50-Megawatt (MW) wind power farm, located at Jhimpir-Hyderabad Corridor. The plant comprises 20 wind turbine generators, each with a nameplate capacity of 2.5 MW. The plant was constructed on EPC basis at a total cost of $110.2m with debt to equity ratio of 80:20. YEL commenced commercial operations in September’2016.

YEL’s assigned ratings incorporate satisfactory operating track record since commercial operations, low business risk and adequate financial risk profile.

The company is part of Yunus Brother Group (YBG), a reputable conglomerate with strong financial profile and presence in diversified sectors including power generation, building materials, real estate, textile, chemicals, pharmaceuticals, food and automotive sectors. Further, contractual commitment of the sponsor to fund any shortfall in the debt payment account provides comfort to the assigned ratings.

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.  

Assessment of financial risk profile incorporates sound debt coverage metrics and healthy cash flows in relation to outstanding obligations indicating satisfactory debt servicing ability; however, erratic payment cycle exhibited by power purchaser may translate into some liquidity pressures.

Going forward, receipts from second issue of Energy Sukuk by the government will facilitate in managing outstanding receivables. Gearing and leverage ratios have improved on a timeline basis. Ratings remain dependent on maintaining satisfactory operating track record and achieving projected improvement in leverage indicators over the rating horizon.

VIS