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The Pakistan Credit Rating Agency Limited
Press Release

Date
08-Oct-20

Analyst
Sana Shameen
sana.shameen@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Liberty Power Tech Limited

Rating Type Entity
Current
(08-Oct-20)
Previous
(08-Oct-19)
Action Maintain Maintain
Long Term A+ A+
Short Term A1 A1
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. 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's financial risk profile is dependent on the timely receipt of receivables from the power purchaser. Nevertheless, strong internal cash generation and available working capital lines have helped it in managing its working capital requirements. As at end March-20 available working capital lines stood at PKR 14,245mln out of which PKR 12,696mln are utilized (~89%). 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; meanwhile, recovery in overdue receivables from the Energy Sukuk of PKR200bln is observed and settlement of pending receivables is considered crucial. As at end March-20 the company has outstanding principal for Sukuk and Islamic finance facility of PKR 2,787mln respectively. 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 behaviour with its financial profile would be ratings positive. Meanwhile, despite seeking comfort in take or pay tariff regime, any significant increase in overdue receivables, as a result of rising circular debt, coupled with insufficient available working capital financing, in turn weakening in financial risk profile may negatively 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. The company is majority owned by Liberty Group (Liberty Mills Limited: 29% & Mukaty Family: 61%) and Soorty Enterprises (10%). Mukaty Family, the key sponsors of Liberty Power Tech, while planning to strengthen its foothold in the power generation segment, are contemplating ventures in unrelated industries. This is likely to strengthen the group’s overall business profile.
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. Management team comprises qualified professionals with sufficient experience in various sectors. The company has a well defined organizational structure with the CEO reporting to the board.

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.