PACRA assigns Preliminary rating to Lucky Electric Power Company Limited - PPSTS-20 - PKR 7bln - TBI

Lucky Electric Power Company Limited ("LEPCL" or "the Company") has set up a 1x660MW (gross) coal-fired power plant. The project achieved COD in March-22 and is successfully connected to and providing electricity to the grid. The primary fuel is Coal; a coal supply agreement is signed with Sindh Engro Coal Mining Company (SECMC), SECMC will provide the coal from its developing Block-II (Phase III), which will be started in Dec 24. The previous tentative month was May-24. The Company has also signed imported coal supply agreement with reputable coal suppliers. Currently, plant is generating electricity through imported coal. The Company has generated a topline of ~PKR 71bln during 9MFY24. Lucky Electric Power Company Limited generated a bottom line of ~PKR 14bln during the same period. Comfort is drawn from the experience of O&M contractor, M/s Harbin Electric International Co., Ltd. -P.R. China (HEI), which has taken over the plant from previous operator from Mar-23. Going forward, the Company’s main focus would be to keep the plant operational. The Company has currently procured short-term financing facilities aggregating to ~PKR 18,249mln which are ~80% utilized as of Mar-2024. The cumulative short-term borrowings stand at ~PKR 39,618mln as of Mar-2024. Additionally, as at Mar-24, the Company has outstanding debt instruments amounting to PKR 25bln for operational needs. PPSTS-20 is being issued in replacement of PPSTS-16 maturing on 15-Aug-24.
The financial strength and experience in the energy chain of the sponsoring company Lucky Cement – are considered positive for the ratings. However, considering the unusual increase in working capital requirement due to the significant devaluation of PKR, supply chain issues and tariff adjustments, LEPCL is striving to manage its need. The offtake agreement is with CPPA-G, which will, upon the plant’s availability as per the contract, provide capacity payments even if no purchase order is placed. The Government of Pakistan has given a payment guarantee against dues from CPPA G

About the Entity
LEPCL, incorporated in Pakistan on June 13, 2014 as public unlisted company at Port Qasim, Karachi, Sindh. Lucky Cement Limited owns 100% shareholding of LEPCL. Lucky Cement Limited stands as the flagship company of Yunus Brothers Group. The Company’s board comprises seven directors, including CEO, all the board members represent 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.

About the Instrument
LEPCL is in the process to issue a rated, unsecured, unlisted, privately placed, short-term Sukuk Lucky Electric Power Company Limited | PPSTS-20 | PKR 7bln | TBI (“PPSTS-20”) of PKR 7,000mln (inclusive of green option of PKR 2,000mln) in August, 2024. PPSTS-20 will be issued in rollover of PPSTS-16 amounting PKR 7,000mln which will mature on 15th August 2024. The tenor of the instrument will be 6 months. The purpose of the instrument is to be utilized by the Company to meet its working capital requirements. PPSTS-20 will carry a profit rate of 6MK+ upto50bps. Profit and principal will be realized at the time of maturity.