Lucky Electric Power Company Limited - PPSTS-25 - PKR 4.0bln - TBI

RATING REPORT | Oct-26

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
02-Oct-26 AA A1+ Stable Preliminary -
About the Instrument

Lucky Electric Power Company Limited (LEPCL) is in the process of issuing a rated, unsecured, unlisted, privately placed Short-Term Sukuk, PPSTS-25, amounting to PKR 4,000 million in October 2026. The Sukuk will mature after a period of 6 months and is being issued to meet the Company’s working capital requirements. The instrument will carry a profit rate of 3-Month KIBOR minus 5 basis points, with both profit and principal payable at maturity.

Rating Rationale

Lucky Electric Power Company Limited ("LEPCL" or "the Company") has set up a 1x660MW (gross) coal-fired power plant. The project achieved COD in March 2022 and is successfully connected to and providing electricity to the grid. The primary fuel is coal; a coal supply agreement is signed with Sindh Engro Coal Mining Company (SECMC). SECMC is expanding its Block-II mine to 11.2 million tons per annum in three phases. The plant is currently operational on a mix of imported and local coal. The COD of SECMC Phase III is anticipated in September 2026, after which the company will transition to 100% local coal, thereby mitigating foreign exchange and international price volatility risks. The Company generated a topline of PKR 78,768 million during FY26 and a bottom line of PKR 22,031 million during the same period. Comfort is drawn from the experience of the O&M contractor, M/s Harbin Electric International Co., Ltd. - P.R. China (HEI), which has taken over the plant from the previous operator effective from March 2023. Going forward, the Company's main focus would be to keep the plant operational. As of June 30, 2026, the Company had total borrowings of PKR 112,767 million, including short-term borrowings of PKR 16,535 million. The Company has a history of issuing Sukuks to meet its short-term capital requirements. While multiple Sukuks were often issued simultaneously in the past, the Company had more recently shifted toward maintaining only one Sukuk outstanding at a time. However, in continuation of its financing strategy, the Company is currently in the process of issuing a PKR 4,000 million Sukuk (STS-25), alongside the recently issued PPSTS-24, resulting in two Sukuks outstanding simultaneously.

Key Rating Drivers

The financial strength and energy-sector experience of sponsor Lucky Cement remain key positives for the ratings, though LEPCL continues to navigate working capital pressures from delayed payments by the power purchaser, supply chain considerations, and tariff adjustments. Revenue stability is supported by the CPPA-G offtake agreement, under which capacity payments are guaranteed upon plant availability regardless of purchase orders, further reinforced by the Government of Pakistan's payment guarantee against CPPA-G dues.

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

Lucky Electric Power Company Limited - PPSTS-25 - PKR 4.0bln - TBI


Rating Analysis

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Issuer Profile
Profile

Lucky Electric Power Company Limited (Lucky Electric) has set up a 1x660MW (gross) local coal-fired supercritical power plant at Port Qasim, Karachi, Sindh. The plant is developed on a Build-Own-Operate (“BOO”) basis with an initial cost of USD 895 million in a debt-to-equity ratio of 75:25. The tariff is divided into two components: Capacity Payments (PKR 9.5033/ KWh) and Energy Payments. Energy payments further have two components: variable costs (PKR 0.4170/ KWh) and fixed fuel costs (PKR 14.9498/KWh). If the Plant is operational at contract availability, capacity payments and the fuel costs will be provided even if no purchase order is placed by CPPA-G. The tariff control period is 30 years. The PKR/KWh Return on Equity (ROE) of Lucky Electric, as agreed with NEPRA, is 29.5%.


Ownership

Lucky Cement Limited holds a 100% shareholding in Lucky Electric, which operates as a subsidiary of one of Pakistan's largest conglomerates with diversified interests spanning textiles, real estate, power generation, chemicals, food, and automotive sectors. As the flagship company of the Yunus Brothers Group (YBG), Lucky Cement Limited is one of the country's largest producers and leading exporters of quality cement. The Company's sponsors possess strong financial capacity to support the entity on an ongoing basis as well as during times of crisis, underpinned by their well-diversified and profitable business portfolio.


Governance

The Board of Directors is primarily dominated by the sponsor's representatives. The Company's Board of Directors comprises eight members, including the Chief Executive Officer. All Board members represent Lucky Cement Limited. Mr. Muhammad Ali Tabba has been associated with the Group in different capacities for nearly three decades and currently chairs the Board of the Company with his visionary leadership and vast experience. All Board members are highly qualified and competent enough for effective leadership. Board members meet quarterly or hold regular discussions as needed. The Chairman of the Board exercises close oversight over the affairs of the Company. However, there are no sub-committees. The Board has been actively involved in providing strategic guidance to the Company.


Management

Lucky Electric's management team includes qualified technical, commercial, legal, and financial specialists capable of constructing, developing, operating, financing, and maintaining the project. The Company has a clear organizational structure, with the CEO reporting to the Board. Mr. Ruhail Muhammad, the CEO, is an MBA and CFA Charterholder with extensive experience leading corporate organizations and serving on various boards. He is supported by a skilled professional team. Since incorporation, management has consistently delivered progressive results and achieved project milestones on time. The Company leverages advanced I.T. solutions for improved performance, and its I.T. infrastructure and operational breadth remain satisfactory.


Business Risk

Lucky Electric's business risk profile has improved during FY26 relative to FY25, driven by stronger generation performance and favorable sector dynamics. During FY26, the plant generated approximately 1,897.31 GWh with average plant availability of ~82.5% in line with the PPA's required benchmark. This represents a significant recovery from FY25, when net electrical output declined sharply to 1,018.68 GWh from 1,688.45 GWh in FY24, reflecting the challenging operating environment characterized by reduced economic activity, high electricity tariffs, increased reliance on off-grid solar solutions, and weak industrial demand. The broader sector context has also shifted favorably for LEPCL, as coal-based generation gained ground within the thermal mix - combined local and imported coal rising to ~22.9% of total FY26 generation (FY25: ~19.4%), driven by a ~51.6% YoY surge in imported coal amid reduced RLNG availability and higher LNG costs. This trend sharpened further into July 2026 (coal generation +44% YoY). While the persistence of circular debt and payment delays from the power purchaser remain ongoing systemic risks, the Company's improved generation performance and favorable dispatch dynamics relative to competing fuels strengthened its business risk profile. During Q4 FY26, the Company began transitioning to Thar coal, lifting approximately 347,000 tons, which contributed to generation in the latter part of the fiscal year. Looking ahead, the Company has now fully discontinued imported Indonesian lignite, with a further 250,000 tons lifted in August 2026 and 300,000 tons expected in September 2026, ahead of the anticipated COD of SECMC Phase III. This transition is expected to further improve the business risk profile by reducing foreign exchange exposure and international price volatility.


Financial Risk

Lucky Electric's capital structure comprises 25% equity and 75% debt financing of the initial project cost of USD 895 million. Local facilities of PKR 65.9 billion and a foreign facility of USD 210 million continue to be amortized as per their respective repayment schedules. The Company manages working capital through internal cash flows and short-term borrowings due to delayed payments from the power purchaser. Receivables stood at PKR 28,340 million as of FY26 (FY25: PKR 19,386 million). Short-term borrowings were PKR 16,535 million as of FY26 (FY25: PKR 17,790 million); these borrowings include a mixture of commercial borrowing and debt market instruments, primarily to fund working capital requirements. The Company generated FCFO of PKR 41,815 million for FY26 (FY25: PKR 47,247 million). Interest coverage stood at 2.8x as of FY26 (FY25: 2.3x), with debt coverage at 1.7x. As of FY26, the debt-to-equity ratio was 59.5%, with total debt of PKR 112,767 million and equity of PKR 76,614 million.


Instrument Rating Considerations
About the Instrument

Lucky Electric Power Company Limited (LEPCL) is in the process of issuing a rated, unsecured, unlisted, privately placed Short-Term Sukuk, PPSTS-25, amounting to PKR 4,000 million in October 2026. The Sukuk will mature after a period of 6 months and is being issued to meet the Company’s working capital requirements. The instrument will carry a profit rate of 3-Month KIBOR minus 5 basis points, with both profit and principal payable at maturity.


Relative Seniority/Subordination of Instrument

Although unsecured, in the hierarchy of creditors, the investors shall rank after the secured lenders/investors of the Company.


Credit Enhancement

The instrument is unsecured.
 
 

Oct-26

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Lucky Electric Power Company Limited - PPSTS-25 - PKR 4.0bln - TBI


Financial Summary

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(PKR mln)


 Jun-26
12M		 Jun-25
12M		 Jun-24
12M
A. BALANCE SHEET
1. Non-Current Assets 130,290 135,697 139,409
2. Investments 0 0 0
3. Related Party Exposure 0 0 0
4. Current Assets 66,809 66,511 79,554
a. Inventories 7,754 4,738 11,612
b. Trade Receivables 28,340 19,386 33,604
5. Total Assets 197,099 202,208 218,963
6. Current Liabilities 7,643 11,502 13,337
a. Trade Payables 5,666 3,559 6,078
7. Borrowings 112,767 124,005 153,675
8. Related Party Exposure 0 0 0
9. Non-Current Liabilities 75 149 124
10. Net Assets 76,614 66,552 51,827
11. Shareholders' Equity 76,614 66,552 51,827
B. INCOME STATEMENT
1. Sales 78,768 70,080 90,954
a. Cost of Good Sold (41,070) (27,246) (39,511)
2. Gross Profit 37,699 42,835 51,443
a. Operating Expenses (856) (681) (737)
3. Operating Profit 36,843 42,153 50,706
a. Non Operating Income or (Expense) 83 94 169
4. Profit or (Loss) before Interest and Tax 36,926 42,247 50,875
a. Total Finance Cost (14,871) (21,513) (31,302)
b. Taxation (24) (27) (40)
6. Net Income Or (Loss) 22,031 20,707 19,533
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 41,815 47,247 55,812
b. Net Cash from Operating Activities before Working Capital Changes 26,907 24,749 24,429
c. Changes in Working Capital (780) 12,198 (17,976)
1. Net Cash provided by Operating Activities 26,127 36,947 6,453
2. Net Cash (Used in) or Available From Investing Activities (443) (327) (783)
3. Net Cash (Used in) or Available From Financing Activities (22,447) (36,725) (12,480)
4. Net Cash generated or (Used) during the period 3,236 (106) (6,810)
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 12.4% -22.9% -7.5%
b. Gross Profit Margin 47.9% 61.1% 56.6%
c. Net Profit Margin 28.0% 29.5% 21.5%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 52.1% 84.8% 41.6%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 28.4% 29.9% 37.3%
2. Working Capital Management
a. Gross Working Capital (Average Days) 140 181 171
b. Net Working Capital (Average Days) 118 155 142
c. Current Ratio (Current Assets / Current Liabilities) 8.7 5.8 6.0
3. Coverages
a. EBITDA / Finance Cost 2.8 2.3 1.8
b. FCFO / Finance Cost+CMLTB+Excess STB 1.7 1.6 1.4
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 3.6 3.9 5.5
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 59.5% 65.1% 74.8%
b. Interest or Markup Payable (Days) 48.5 38.3 38.8
c. Entity Average Borrowing Rate 12.4% 15.0% 19.4%

Oct-26

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Lucky Electric Power Company Limited - PPSTS-25 - PKR 4.0bln - TBI


Rating Scale

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Oct-26

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Lucky Electric Power Company Limited - PPSTS-25 - PKR 4.0bln - TBI


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.
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  3. Conduct of Business
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Oct-26

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Lucky Electric Power Company Limited - PPSTS-25 - PKR 4.0bln - TBI


Regulatory & Supplementary Disclosure

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Nature of Instrument Size of Issue (PKR) Tenor Security Quantum of Security Trustee Book Value of Total Assets (PKR)
Privately Placed Short Term Sukuk (PPSTS- 25) 4,000 million 6 months Unsecured N/A Habib Bank Limited N/A
Name of Issuer Lucky Electric Power Company Limited
Issue Date Oct, 2026
Maturity Apr, 2027
Option 3M KIBOR -5bps p.a.
Due Date Opening Principal Principal Repayment* Due Date Markup/ Profit* Markup/Profit rate 3M Kibor Minus 5bps Markup/Profit Payment Installment Payable Principal Outstanding

PKR in mln

October, 2026 4,000 0 Oct- 26 3M KIBOR -5bps 0 4,000
Oct, 2026 4,000 4,000 4,237.80 0
4,000 4,237.80
Note: The profit payment (3M Kibor 11.94-5bps = 11.89% *4000= 237.8) will be due at the end of the six month period from 05th October 2026. Profit will be calculated based on the applicable Profit Benchmark, using a 365-day year (or 366 days in a leap year) for the outstanding balance of the Facility Amount.

Oct-26

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