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The Pakistan Credit Rating Agency Limited
Press Release

Date
18-May-22

Analyst
Anam Waqas Ghayour
anam.waqas@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Ratings to Lucky Electric Power Company Limited | Sukuk PPSTS | upto PKR 7,000mln

Rating Type Debt Instrument
Current
(18-May-22 )
Action Initial
Long Term AA
Short Term A1+
Outlook Stable
Rating Watch -

Lucky Electric Power Company Limited (Lucky Electric 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). The Company has also signed imported coal supply agreement with reputable coal suppliers. Currently, plant is generating electricity through imported coal. Comfort is drawn from the experience of O&M contractor - KEPCO. Going forward, the Company’s main focus would be to keep the plant operational. The Company has procured short term financing facilities aggregating to PKR 33bln for the operational needs. The financial strength and experience in the energy chain of the sponsoring company – Lucky Cement is considered to be positive for the ratings. Further the sponsor has given explicit assurance to provide sufficient liquidity support or otherwise fund the Company in such a manner that sufficient funds are available at all time to discharge it’s short term financing obligations as per term of financing agreements. This is key consideration in the assigned ratings. The parent company has defined a financial discipline around that as well. The offtake agreement is with CPPA-G, which will, upon plant’s availability as per contract, provide capacity payments even if no purchase order is placed. The Government of Pakistan has given payment guarantee against dues from CPPA-G.
The management’s ability along with the explicit support from the sponsor to effectively manage operational risks provides comfort to assigned ratings. Trend in operational profitability would bode well for rating. External factors such as any adverse changes in the regulatory framework may impact the ratings.

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 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 and vast experience.

About the Instrument
Lucky Electric Power Company Limited has issued a rated, privately placed, unsecured, short term Sukuk of PKR 7,000mln. The tenor of the instrument is 6 months. Issue proceeds will be utilized by the Company to meet its working capital requirements. Profit will be paid on the outstanding principal amount at the rate of 6M KIBOR + Spread of 120bps. The Company has already issued Islamic commercial papers of PKR 7,000mln and PKR 5,000mln. After the current issue of PPSTS amounting PKR 7,000mln, total amount of short-term instruments will be PKR 19,000mln.

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.