PACRA Maintains Entity Ratings of Liberty Power Tech Limited |TFF| Jan-11

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. 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. The company has been managing its working capital requirements through a mix of internal cash generation and short-term borrowings. Lately, the management has secured a short-term loan from the directors to ease out liquidity requirements. Because of the mounting receivables and consequent funding thereof from banking lines, cushion in the available working capital facilities was limited. Cognizant of this, the management has repaid short-term borrowings to create a room in the utilization of working capital lines wherein the size of the available lines remained the same. Meanwhile, the company continues to enjoy sound coverages, though its financial profile is highly dependent on the timely repayment of the receivables. The recent sizeable payment of PKR 200bln to IPPs, including Liberty Power, has improved the liquidity position. The Company has been paying dividends which in times of need is an internal source of liquidity available. 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. However, the management ably supported by sponsors’ remains committed to sustain improvement in the management of commercial obligations and timely debt repayments.

About the Entity
Liberty Power Tech operates a 200MW power plant based on Residual Fuel Oil near Faisalabad. The 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 the textile sector. Mr. Saleem Mukaty, the Chairman, has been associated with the Group in different capacities and is currently chairing the Board with his visionary leadership and vast experience.

About the Instrument
Liberty Power Tech issued a TFF in January 2011 for PKR 1,649mln. The instrument would mature in January 2021 with payments in 40 equal quarterly installments. During the three-month period (Oct18-Dec18), a payment of ~PKR 58mln has paid off. As at end-Dec18, an amount of PKR 569mln (Sep18: PKR 627mln) is outstanding. The profit on the issue, payable quarterly, is at 3M Kibor + 300bps. The financing is secured by 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% of shares of all sponsors of the company.