Analyst
Hamza Ghalib
hamza.ghalib@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Rating of Liberty Power Tech Limited |Sukuk| Jan-11
Rating Type | Debt Instrument | |
Current (27-Dec-18 ) |
Previous (30-Jun-18 ) |
|
Action | Maintain | Maintain |
Long Term | A+ | A+ |
Short Term | - | - |
Outlook | Stable | Stable |
Rating Watch | - | - |
Liberty Power Limited (Liberty Power Tech) runs a 200MW power plant based on Residual Fuel Oil. The Company operates in the regulated power sector. It enjoys sovereign guarantee against receivables from power purchaser CPPA-G given adherence to agreed performance benchmarks. The Company's operations and maintenance operator, Wartsila Pakistan (WPK), is a key source of comfort in managing the plant's operations. The Company's financial risk profile is largely dependent on repayment behavior of the power purchaser. The Company has been paying consistent dividends. Fuel supply risk is adequately covered as they procure from different suppliers with good credit terms; being managed since 2011. Liberty Power Tech continues to meet its availability (90%) and efficiency (45%) benchmarks. Nevertheless, strong internal cash generation and available working capital lines has helped it in managing its working capital requirements efficiently. Because of the mounting receivables and consequent funding thereof from banking lines, remaining cushion in the available working capital facilities is limited, warranting management’s immediate attention. The ratings draw comfort from the sponsors’ demonstrated support to the Company.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. Improving, indeed aligning, the Company's repayment behavior with its financial profile would be ratings positive. Meanwhile, any significant increase in overdue receivables may impact the ratings.
About
the Entity
Liberty Power Tech was incorporated in Sep07 as an Independent Power Producer under the power policy 2002. Liberty Power Tech operates a 200MW power plant based on Residual Fuel Oil near Faisalabad. The electricity generated is being sold to National Transmission and Dispatch Company under the Power Purchase Agreement. Company is majorly owned by Liberty Group (Liberty Mills Limited: 29%; Mukaty Family 61%; and Soorty Enterprises: 10%).
Liberty Power Tech has an eight member board of directors with all members belonging to the Liberty Group, which is principally engaged in textile sector. Mr. Saleem Mukaty, Chairman has been associated with the Group in different capacities and is currently chairing the Board with his visionary leadership and vast experience. Mr. Azam Sakrani, Liberty Power Tech’s CEO since 2014, has over 20 years of experience in project management and banking, finance, and power sectors.
About
the Instrument
Liberty Power Tech issued a Sukuk in January 2011 for PKR 13,488mln. The instrument would mature in January 2021 with payments in 40 equal quarterly installments. As of Dec’18, an amount of PKR 5,132mln is outstanding. The profit on the issue, payable quarterly, is at 3M Kibor + 300bps. The financing is secured by a first Pari Passu charge on immovable property, mortgage of the project receivables, hypothecation of all present and future assets and all properties of the company, lien and setoff rights over project accounts, assignment over project insurance and pledge of 51% shares of all sponsors of the company.