PACRA Maintains Entity Ratings of Liberty Wind Power 2 Limited

Liberty Mills Limited has established a 50MW wind power project, “Liberty Wind Power 2 Limited” (LWP2 or the Company), located in Jhimpir, District Thatta, Sindh. Operating within the regulated power sector, the Company is awarded a cost-plus tariff, with the payments to be received from power purchaser backed by the sovereign guarantee. LWP2 successfully achieved its Commercial Operations (COD) on May 27th, 2022 and has been supplying electricity to the national grid since then. Siemens Gamesa Renewable Energy (Private) Limited and Orient Energy Systems (Private) Limited serve as the long-term Operations & Maintenance (O&M) contractors for an 11-year term. These contractors are responsible for maintaining operational benchmarks, including an availability rate of 97% and a capacity factor of 38%. This provides additional cushion for the sustainable financial risk profile. The Company also maintains a Debt Service Reserve Account (DSRA) backed by six months' Standby Letters of Credit (SBLCs), providing sufficient coverage for its financial obligations through maturity. The foreign and local components of the loan have maturities of 13 years and 10 years, respectively, with quarterly repayments that began in September 2022.
LWP2’s revenues and cash flows are subject to wind risk due to seasonal variations in wind speed, which may impact electricity generation and cash flow stability. However, historical wind speed data offers confidence in the Company's ability to generate sufficient cash flows to manage its financial risks effectively. As per the Energy Purchase Agreement ("EPA") signed with the power purchaser, in case of non-project missed volumes the power purchaser shall be liable to pay the missed volumes calculated using tariff rates. Additionally, the Company holds comprehensive insurance coverage to mitigate risks such as business interruptions and marine & erection-related incidents. During FY24, LWP2 generated approximately 169 million units of electricity, reporting revenues of PKR 2,511mln (FY23: 140mln units and revenues of PKR 1,864mln). Free Cash Flows from Operations (FCFO) for June 2024 stood at PKR 2,001mln, with total receivables recorded at PKR 943mln, primarily comprising unbilled amounts from the power purchaser. The Company has consistently met its quarterly debt repayment obligations, having repaid 16,8% of foreign and 23.25% of local project loan to date. The Company efficiently manages its working capital requirements through internal cash generation, with minimal reliance on external debt financing. LWP2 has applied for an adjustment/true-up in its original tariff decision, which is currently under review by the relevant authority.
Comfort is drawn from LWP2’s group association, having strong financial backing and relevant industry expertise. Moving forward, the Company's strong ability to generate stable cash flows will play a key role in ensuring timely repayments of project debt, reinforcing financial stability and growth. Any changes in the regulatory environment could potentially impact the ratings.

About the Entity
LWP2, incorporated in April 15, is a Renewable Energy Independent Power Producer operating under the Renewable Energy Policy 2006 by AEDB. 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 and local financial institutions at 3MLIBOR plus 4.25% and under SBP re-financing scheme at 3% plus 1.5% respectively. Mr. Azam Sakrani is the CEO of the Company. He is supported by the experienced management team. comprises qualified professionals with sufficient experience.