Oursun Pakistan Limited

CREDIT RATING REPORT | Jan-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
10-Jan-25 A+ A1 Stable Upgrade -
22-Jan-24 A A1 Stable Maintain -
23-Jan-23 A A1 Stable Maintain -
25-Feb-22 A A1 Stable Maintain -
26-Feb-21 A A1 Stable Upgrade -
About the Entity

Oursun Pakistan Limited, incorporated in May 2015, Renewable Energy Independent Power Producer (REIPP) operating under the RE Policy 2006 by AEDB. The total cost of the project is ~USD 62mln. Debt financing constitutes 75% of the project cost i.e. USD 46.5mln, which is financed from local and foreign financial institutions. The Company’s major sponsor is M/s Future Energy Partners (72.5%) shareholding followed Roomi Enterprises (Pvt.) Ltd (27.5%) and individuals (0.003%). The Board of Directors (BoD) of the Company, comprises three members. Mr. Jamshed Afzal has recently been appointed as the Company's Chief Executive Officer, bringing with him relevant experience in the energy sector.

Rating Rationale

Oursun Pakistan Limited (the Company) operates a 50 MW solar power plant, located in Gharo, District Thatta, Sindh. The Company's ratings are underpinned by the strong profile of its sponsors, who possess extensive experience in the power sector. Financial close was achieved in June 2017, followed by a 25-year Energy Purchase Agreement (EPA) with K-Electric Limited. The EPA, supported by guaranteed payments through an escrow mechanism, mitigates offtake risk and ensures timely payments, supporting the assigned ratings. Under the EPA terms, the power purchaser is liable to compensate for non-project missed volumes, calculated using tariff rates. However, the Company’s revenues and cash flows remain exposed to solar radiation risk, as seasonal variations in solar radiation can affect electricity generation and lead to fluctuations in cash flows. The Company operates under an upfront tariff, indexed quarterly to USD and CPI. Its business risk profile is strengthened by an O&M contract with Everone Energy Operations (Pvt.), a reputable firm with substantial expertise in the renewable energy sector. The Company also maintains comprehensive insurance coverage to mitigate the risks of business interruptions and other related damages. During FY24, the plant achieved a capacity factor of 20.2%, exceeding the required benchmark of 18%, driven by better solar radiation and enhanced operational efficiency. Total generation for the year stood at 88,262 MWh, surpassing NEPRA’s performance benchmark of 78,840 MWh. The Company’s liquidity profile remained sound during FY24, supported by healthy cash flow generation. The Company meets its working capital requirements entirely through internally generated cash flows and has not utilized any short-term borrowing facilities. Leverage indicators have improved due to the timely repayment of debt, with 53% of foreign debt and 49% of local debt repaid as of FY24, contributing to the upgrade in the assigned ratings. In compliance with financing agreements, the Company maintains a Debt Service Reserve Account (DSRA) equivalent to two quarterly debt repayments, funded from operational cash flows.

Key Rating Drivers

Additionally, unlike other Independent Power Producers (IPPs) that rely on sovereign guarantees from the Government of Pakistan (GoP) for receivables from CPPA-G, Oursun Pakistan benefits from a stable arrangement under the EPA with K-Electric, whereby the Company delivers all net generated energy at the Interconnection Point to the purchaser, ensuring reliable offtake. The ratings are contingent upon the Company's ability to maintain and improve operational performance in line with the agreed performance levels. Additionally, sustaining financial discipline remains a critical factor for the ratings. Any changes in the regulatory environment could potentially impact on the ratings going forward.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Oursun Pakistan Limited

rating analysis

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Profile
Plant

Oursun Pakistan Limited (Oursun or the Company), incorporated in May 2015, and operates under the Renewable Energy Policy 2006. Oursun has set up 50 MW Solar Power Plant at Gharo, District Thatta, Sindh, Pakistan.

Tariff

Oursun opted for the Upfront Tariff for Solar Power Projects by NEPRA. The Company has a levelized generation tariff of PKR 12.6396/KWh for 25 years from commercial operation date (COD). The tariff is revised quarterly. During Oct-Dec 2024, the tariff was PKR 31.2792 Rs. /KWh (Oct-Dec 2023, PKR 34.3465 Rs./KWh).

Return on Project

The ROE of the project, as per upfront tariff issued by NEPRA, is PKR 3.7430.

Ownership
Ownership Structure

Oursun’s major sponsor is M/s Future Energy Partners (72.5%), Roomi Enterprises (Pvt.) Ltd (27.5%) and individuals (0.0003%).

Stability

Stability in the IPPs is drawn from the agreements signed between the Company and power purchaser -K-Electric. The electricity generated is being sold to K- Electric Limited under a 25-year Energy Purchase Agreement (EPA).

Business Acumen

The project sponsors bring extensive local and international experience, with a proven track record of financing and managing number of power plants utilizing various commercially available technologies.

Financial Strength

Strong financial background of the sponsor will continue to provide comfort.

Governance
Board Structure

The Board of Directors (BoD) of Oursun consists of three members: Mr. Mohammad Tahir, Mr. Mohammad Aamir, and Mr. Muhammad Anees. Two board members are nominated by Future Energy Partners, while one is nominated by Roomi Enterprises Pvt. Ltd.

Members’ Profile

The board members have diversified experience of setting up and running of power plants. All board members are highly qualified and competent enough for effective leadership. Mr. Muhammad Anees is representative of Roomi Enterprises Pvt Ltd.

Board Effectiveness

Board members meet quarterly and conduct regular board discussions on need basis. There are no sub-committees; however, the board remains actively engaged in offering strategic guidance to the Company.

Financial Transparency

KPMG Taseer Hadi & Co Chartered Accountants is the external auditor of the company. The auditor gave an unqualified opinion on the Company’s financial statements for the year ended June 30, 2024.

Management
Organizational Structure

IPPs are generally featured by a flat organizational structure, mainly comprising finance and technical staff, while the engineering, construction and operations of the plant are outsourced.

Management Team

Following the demise of Mr. Zain-ul-Abidin, Mr. Jamshed Afzal was appointed as the CEO of the Company in January 2025. Mr. Afzal has had a long-standing association with the Company and possesses extensive experience in managing its affairs, having worked closely under Mr. Zain's leadership. He is supported by a highly experienced team.

Effectiveness

The management’s role in an IPP is confined largely to financial matters and regulatory interaction. The management tier ensures effective delegation of functional responsibility across various departments, facilitating a smooth flow of operations.

Control Environment

The company takes advantage of Global Business Management Solution Software to deliver comparatively better on many fronts. Moreover, Oursun Pakistan’s quality of the IT infrastructure and the breadth and depth of activities performed has remained well satisfactory.

Operational Risk
Power Purchase Agreement

The electricity generated is sold to Karachi Electric Limited under a 25-year Energy Purchase Agreement (EPA). According to the EPA terms, the power purchaser is obligated to compensate for non-project missed volumes, calculated based on the applicable tariff rates.

Operation and Maintenance

Oursun holds an annual renewable operations and maintenance (O&M) contract with Everone Energy Operations (Pvt.) Limited. As part of this agreement, the O&M team is allocated a standard response time of 12 non-sunlight hours to resolve any equipment issues, minimizing plant downtime. The contract also outlines specific performance benchmarks and includes provisions for liquidated damages if the actual performance ratio fails to meet the agreed standards.

Resource Risk

Oursun is situated in Gharo, District Thatta, Sindh, a location with favorable solar irradiation. Solar energy generation primarily depends on two factors: irradiation and temperature. The Company's revenues and cash flows are subject to solar radiation risk, as seasonal variations in solar irradiation can impact electricity production, resulting in fluctuations in cash flows.

Insurance Cover

The Company also maintains comprehensive insurance coverage to mitigate the risks of business interruptions and other related damages.

Performance Risk
Industry Dynamics

Owing to newly installed plants, Pakistan’s energy mix is shifting towards Solar/Gas/and coal from Furnace Oil and other expensive sources. The total generation of the country during FY24 stood at 137,196 GWh with share from Hydel (29.08%), Thermal (49.01%), Nuclear (16.88%) Imports (0.28%) and Renewable (4.75%). Out of which solar IPPs contribute around 1%

Generation

The Company energy output for FY24 and July-December 6MFY25 recorded to be 88,262 MWh and 40,994 MWh respectively, as compared to 88,600 MWh in FY23 and 40,777 MWh in 6MFY24. Based on the generation, topline in FY24 clocked to PKR: 3,121mln (FY23: 2,547mln).

Performance Benchmark

Annual benchmark energy is expected to be 78,840 MWh with the benchmark capacity factor of plant as per tariff is at 18%. The average capacity factor during FY24 remains 20.1% above the benchmark.

Financial Risk
Financing Structure Analysis

Debt financing constitutes 75% of the project cost i.e. USD 46mln. The FCY facility between the United National Bank Ltd (UK) and Oursun is for USD 13mln, priced at daily SOFAR + CAS (previously 3M LIBOR) + 4.5%. The local debt facility is between the Bank of Punjab, United Bank Limited, Askari Bank Limited and Oursun is for PKR 4,017mln (USD 21mln) at 3M KIBOR plus 3%, as per SBP REFF. The tenor is of 10 years with Quarterly debt repayments. The Company has paid around 50% of its loan. The total outstanding debt at 30 June 2024 is PKR 1.9bln from local banks and USD 6.3mln from foreign bank. The Company has paid around 50% of its loan

Liquidity Profile

As at end-June 2024, total receivables of the Company stood at PKR 721mln (FY23: PKR 734mln). Oursun has an escrow account agreement with KE to secure the receivables. The Company is also required to maintain Debt Service Reserve Account (DSRA) equivalent to two quarterly debt repayments under financing documents, this requirement is being met through cash deposit and Stand by Letter of Credit (SBLC) given from sponsors.

Working Capital Financing

The Company has been effectively managing its working capital needs, primarily related to payments to the O&M contractor, through internal cash generation supported by timely receipts from the power purchaser. To date, the Company has not utilized any working capital facilities.

Cash Flow Analysis

FCFO of the Company clocked to PKR 2,602mln in FY24 (FY23: PKR 2,152mln), supported by better generation and improved profitability. The coverages of the Company have also improved during FY24: 3.3x (FY23: 2.9x), representing a sound ability to source its debt in timely manner.

Capitalization

The total project cost is USD 62 million, financed through a debt-to-equity ratio of 75:25. As of FY24, the Company's leverage reduced to 40.7% from 52.4% in FY23, reflecting a strengthening capitalization structure driven by timely repayments of project-related debt. To date, the Company has neither utilized nor plans to utilize any short-term borrowing facilities in the medium term.

 
 

Jan-25

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Oursun Pakistan Limited

financial summary

(PKR mln)

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Jun-24
12M		 Jun-23
12M		 Jun-22
12M
A. BALANCE SHEET
1. Non-Current Assets 7,040 7,376 6,975
2. Investments 0 0 0
3. Related Party Exposure 0 0 0
4. Current Assets 3,016 2,152 1,369
a. Inventories 0 0 0
b. Trade Receivables 721 734 481
5. Total Assets 10,056 9,528 8,343
6. Current Liabilities 667 786 411
a. Trade Payables 48 10 14
7. Borrowings 3,819 4,576 4,466
8. Related Party Exposure 0 0 0
9. Non-Current Liabilities 9 5 4
10. Net Assets 5,561 4,160 3,462
11. Shareholders' Equity 5,561 4,160 3,462
B. INCOME STATEMENT
1. Sales 3,121 2,547 1,855
a. Cost of Good Sold (747) (626) (547)
2. Gross Profit 2,374 1,921 1,308
a. Operating Expenses (102) (69) (78)
3. Operating Profit 2,273 1,852 1,230
a. Non Operating Income or (Expense) 299 159 69
4. Profit or (Loss) before Interest and Tax 2,571 2,011 1,299
a. Total Finance Cost (821) (761) (474)
b. Taxation (97) (46) (20)
6. Net Income Or (Loss) 1,653 1,204 805
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 2,602 2,152 1,550
b. Net Cash from Operating Activities before Working Capital Changes 1,803 1,418 1,105
c. Changes in Working Capital (31) (296) (191)
1. Net Cash provided by Operating Activities 1,772 1,121 914
2. Net Cash (Used in) or Available From Investing Activities 260 47 6
3. Net Cash (Used in) or Available From Financing Activities (1,337) (764) (1,310)
4. Net Cash generated or (Used) during the period 695 405 (390)
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 22.5% 37.3% 6.1%
b. Gross Profit Margin 76.1% 75.4% 70.5%
c. Net Profit Margin 53.0% 47.3% 43.4%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 82.4% 72.9% 73.2%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 30.5% 30.8% 23.3%
2. Working Capital Management
a. Gross Working Capital (Average Days) 85 87 85
b. Net Working Capital (Average Days) 82 85 82
c. Current Ratio (Current Assets / Current Liabilities) 4.5 2.7 3.3
3. Coverages
a. EBITDA / Finance Cost 3.3 2.9 3.3
b. FCFO / Finance Cost+CMLTB+Excess STB 1.6 1.4 1.5
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 2.1 3.3 4.2
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 40.7% 52.4% 56.3%
b. Interest or Markup Payable (Days) 0.0 0.0 0.0
c. Entity Average Borrowing Rate 19.3% 17.3% 10.9%

Jan-25

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Oursun Pakistan Limited

rating scale

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Jan-25

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Oursun Pakistan Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
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    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
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