The Pakistan Credit Rating Agency Limited
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Faizan Arif

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PACRA Maintains Entity Ratings of Lucky Electric Power Company Limited

Rating Type Entity
(07-Aug-19 )
(08-Feb-19 )
Action Maintain Initial
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Lucky Electric Power Company Limited is setting up a 1x660MW (gross) local coal fired super critical power plant at Port Qasim, Karachi, Sindh. The project achieved financial close (FC) in June-18 and the project's contracted COD shall not occur earlier than 90 days prior to RCOD. RCOD is 1st March, 2021 as per PPA and delay LDs will apply if this date is exceeded. As at end-Jun19, the actual project progress, issued by EPC was ~22% based on the shorter 33-month schedule. Lucky Electric's management is positive on achieving RCOD as agreed. Nevertheless, in case of any delays, LDs will be paid by the EPC contractors. The primary fuel is Thar Coal; a coal supply agreement is signed with Sindh Engro Coal Mining Company (SECMC), which is constructing a coal mine in Thar Block-II (Phase III). Company is also in a process of negotiating imported coal supply agreement from International supplier of a good repute. Plant would be run on imported coal in case of non-availability of local coal. It is pertinent to mention that Yunus Brother Group through its trading company, Lucky Commodities, has vast experience in import of coal. The onshore EPC contract is with SEPCO III Electric Power Construction Corporation and offshore EPC contract is with Tie Jun International. Comfort is drawn from the experience of these contractors. The ratings incorporate the project’s exposure to the completion risks of affiliated infrastructure projects needed for the successful commissioning of the plant. Once completed, the Company’s main challenge would be to keep the plant operational. DSRA will be fully funded through tariff and ROE component may be diverted to DSRA account, if required to make balance equivalent to debt servicing due for the upcoming nine months. Off take agreement is with CPPA-G, which will, upon plant’s availability as per contract, provide capacity payments even if no purchase order is placed. The Government of Pakistan has given payment guarantee against dues from CPPA-G. The business risk of the company is exposed to the specifications of Thar Coal, which is being used for the first time. Rating takes benefit from the company’s association with one of the largest conglomerate of the country.
Ensuring timely commissioning of the project is important. Moreover, timely completion of the affiliated infrastructure projects needed to make the plant operational and the viability of local Coal is a consideration. External factors such as any adverse changes in the regulatory framework or material delay in achieving COD may impact the ratings.

About the Entity
Lucky Electric Power Company Limited, incorporated in Pakistan on June 13, 2014 as public unlisted company is setting up 1x660MW (gross) local coal fired super critical power plant under the Power Policy 2002. It will be one of the indigenous coal based Power Plant of Pakistan at Port Qasim, Karachi, Sindh. Yunus Brother Group (YBG) has a long history spanning over 50 years, operating in various segments, with total turnover of ~USD 2,038mln with net profit of ~USD 262mln during 2018. Lucky Cement Limited through its wholly owned subsidiary LCL Holdings owns 100% shareholding of Lucky Electric Power Company Limited. Lucky Cement Limited stands as the flagship company of Yunus Brothers Group. Lucky Cement is one of the largest producers and leading exporters of quality cement in Pakistan.
The Company’s board comprises of six directors, including CEO, all the board members represents Lucky Cement. Mr. Muhammad Ali Tabba, the Chairman, has been associated with the Group in different capacities for more than twenty eight years and is currently chairing the Board with his visionary leadership and vast experience. Mr. Intisar ul Haq Haqqi, the CEO provides leadership to the company.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.