The Pakistan Credit Rating Agency Limited
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Madiha Sohail

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PACRA Maintains Rating of Liberty Power Tech Limited | Sukuk| Jan-11

Rating Type Debt Instrument
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. 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.

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 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. Mr. Saleem Mukaty, the Chairman, has been associated with the Group in different capacities and is currently chairing the Board with his visionary leadership. 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.

About the Instrument
Liberty Power issued a Sukuk in January 2011 for PKR 13,488mln. The instrument would mature in January 21 with payments in 40 equal quarterly installments. During six-month period (Jan20-Jul20), a payment of PKR 1,386mln is paid off. As at Oct-20, an amount of PKR 1,394mln is outstanding. The profit on the issue is 3M Kibor + 300bps.

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.