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The Pakistan Credit Rating Agency Limited
Press Release

Date
04-Mar-21

Analyst
Saadat Mirza
saadat.mirza@pacra.com
+92-42-35869504
www.pacra.com

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PACRA Assigns Initial Entity Ratings to Liberty Wind Power 1 Limited

Rating Type Entity
Current
(04-Mar-21)
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

Liberty Mills Limited is setting up a 50MW wind power plant “Liberty Wind Power 1 Limited” in Jhimpir, District Thatta, Sindh. The ratings incorporate the Group's previous experience in successfully commissioning and operating a 200MW RFO based Power Plant (Liberty Power tech Limited). The required commercial operations date as defined under EPA is fifteen months from construction start date and till January’21, the construction of the project is ~43% completed. The Company operates in the regulated power sector. Liberty Wind Power 1 is awarded a cost plus tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. Currently, project is under construction phase; Hydrochina International Engineering Company Limited & Hangzhou Huachen Electric Power Control Company are the EPC contractors, comfort is drawn that they have ~40 years of worldwide experience in the wind power technology. So far, owners have injected 100% of equity which lends support to achieve timely completion. In case of delay in achieving the COD, the EPC contractors will be liable to pay the liquidated damages of $ 30,500 per day backed by irrevocable bank guarantee of 15% of EPC cost. The construction contractor will be the O&M operator for two years after COD; it will provide the warranty bond (10% of EPC cost) in the form of irrevocable bank guarantee for 24 months after COD. These bank guarantees provide additional cushion for the sustainable financial risk profile. Further, the company maintains the Debt Service Reserve Account (DSRA), which is 100% filled by 6 months SBLCs, in total providing coverage of six months on its financial obligations till maturity. Project revenues and cash flows are exposed to wind risk, there is seasonal variation in the wind speed which effect the electricity generation, and ultimately cash flows may face seasonality. However, historical wind speeds and wind assessment by Mott MacDonald provide comfort that Liberty Wind Power 1 would be able to surpass the benchmark capacity factor and generate enough cash flows to keep its financial risk manageable.
The Company has signed Energy Purchase Agreement ("EPA") with CPPA-G, as per the EPA, in case of non-project missed volumes the power purchaser shall be liable to pay the missed volumes calculated using tariff rates. The Company has adequate insurance coverage to cover the risk of business interruptions, marine & erection etc. Furthermore, external factors such as any adverse changes in the regulatory framework or prolonged delay in achieving COD may impact the ratings, which the management is confident to achieve, keeping in consideration the progress of project. Upholding financial discipline is also a consideration.

About the Entity
Liberty Wind Power 1 Ltd, was incorporated in April 15, is a Renewable Energy Independent Power Producer (RE IPP) operating under the Renewable Energy Policy 2006 by AEDB. The 50MW wind IPP is setting up in Jhimpir, District Thatta, Sindh. The company is wholly owned by Liberty Group. The total estimated cost of the project is USD 63.90mln. Debt financing constitutes 80% of the project cost i.e. USD 51.12mln, which is financed from foreign financial institutions and locally from SBP under re-financing scheme at 3MKIBOR plus 1.5%. The foreign facility has tenor of thirteen years with two years grace period and quarterly repayments while local loan has tenor of ten years with 2 years of grace period.
Liberty Wind Power 1 Ltd has three-member board of directors with all members belonging to the Liberty Group, which is principally engaged in the textile sector. Mr. Azam Sakrani, the CEO, 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 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.