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PACRA Maintains Entity Ratings of Lucky Electric Power Company Limited

Rating Type Entity
(06-Aug-21 )
(06-Aug-20 )
Action Maintain Upgrade
Long Term AA- AA-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Lucky Electric Power Company Limited (Lucky Electric) is setting up a 1x660MW (gross) local coal fired power plant. Its COD as per PPA was 1st March, 2021, but management is expecting a delay in COD till the end of Oct-21, due to delay in availability of interconnections, however the delay window is short and management is committed to achieve the milestone at earliest. As at end-April 2021, the actual project progress, issued by EPC is ~98%. Further, an explicit undertaking from the sponsor is provided to ensure that all kind of support including financial shall be made available to complete the development work and honor both its present and future commitments towards its creditors. This is a key rating consideration. Management claimed that Company is not exposed to any risk of Liquidated Damages as the delay is from Power Purchaser. Further if the interconnection is not made available till attainment of Certificate of Readiness, Company would be entitled to claim damages under the PPA. Transmission lines are expected to be available by September 2021. The EPC contractors will be also liable to pay the liquidated damages of $ 87,500 per day beyond the time for completion subject to upper cap of 12.5% of Contract Value. The primary fuel is Thar Coal; a coal supply agreement is signed with Sindh Engro Coal Mining Company (SECMC), from its Block-II (Phase III). Company has also signed imported coal supply agreement with reputable coal supplier. Limited. 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. Once completed, the Company’s main challenge would be to keep the plant operational. Lucky Electric’s capital structure comprises 25% equity and debt financing constitutes 75% of the initial estimated project cost; ~USD 883mln, financed from local and foreign financial institutions. Local Facility obtained from the consortium of banks led by United Bank Limited amounting to PKR 55.98bln and PKR 7.9bln, has a 10 year tenure starting March 2022 and to be paid in 40 quarterly installments, facilities remained ~93% and ~44% utilized at Mar21. The foreign facility is USD 210mln. Out of which USD 20mln (fully drawn down) will be paid quarterly and USD 190mln, (Drawdown: 87.36%) will be paid semi-annually. 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.
Ensuring timely commissioning of the project is important. Moreover, timely completion of the affiliated infrastructure projects needed to make the plant operational

About the Entity
Lucky Electric Power Company Limited, incorporated in Pakistan on June 13, 2014 as public unlisted company at Port Qasim, Karachi, Sindh. Lucky Cement Limited owns 100% shareholding of Lucky Electric Power Company Limited. Lucky Cement Limited stands as the flagship company of Yunus Brothers Group. 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 nearly three decades and is currently chairing the Board with his visionary leadership and vast experience.

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