PACRA Maintains Ratings of Liberty Power Tech Limited
| Rating Type|| Entity|| Sukuk|| TFC|
|Current(17-Dec-2016) ||Previous(17-Dec-2015) ||Current(17-Dec-2016) ||Previous(17-Dec-2015) ||Current(17-Dec-2016) ||Previous(17-Dec-2015) |
| Action|| Maintain|| Maintain|| Maintain|| Maintain|| Maintain|| Maintain|
| Long Term|| A+|| A+|| A+|| A+|| A+|| A+|
| Short Term|| A1|| A1|
| Outlook|| Stable|| Stable|| Stable|| Stable|| Stable|| Stable|
| Rating Watch|| -|| -|| -|| -|| -|| -|
Liberty Power Limited (LPTL) runs a 200MW power plant based on Residual Fuel Oil. The Company operates in the regulated power sector. It enjoys sovereign guarantee against receivables from power purchaser CPPA given adherence to agreed performance benchmarks. The Company's operations and maintenance operator, Wartsila Pakistan (WPK), is a key source of comfort in managing the plant's operations. The Company's financial risk profile is largely dependent on repayment behaviour of the power purchaser. Although capacity payments observed improvement, the Company’s cash cycle has witnessed a surge on account of delayed energy payments by CPPA. The Company has been paying consistent dividends. Nevertheless, strong internal cash generation has helped it in managing its working capital requirements efficiently, while it significantly reduced its short-term borrowings. The Company, while managing its financial obligations, makes use of the cushion available from the lenders. The ratings draw comfort from the sponsors’ demonstrated support to the Company.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. Improving, indeed aligning, the Company's repayment behaviour with its financial profile would be ratings positive. Meanwhile, any significant increase in overdue receivables, as a result of rise in circular debt, may impact the ratings, though this risk is expected to be curtailed on the back of CPEC and increased foreign investor involvement in Pakistan’s power sector.
About the Entity
LPTL was incorporated in Sep07 as an Independent Power Producer under the power policy 2002. LPTL operates a 200MW power plant based on Residual Fuel Oil near Faisalabad. The electricity generated is being sold to National Transmission and Despatch Company under the Power Purchase Agreement.
It is majority owned by Liberty Group (Liberty Mills Limited: 29%; Mukaty Family 61%; and Soorty Enterprises: 10%). LPTL has an eight member board of directors with all members belonging to the Liberty Group, which is principally engaged in textile sector. The management team comprises qualified professionals possessing sufficient experience in various sectors. Mr. Azam Sakrani, LPTL’s CEO since two years, has over 20 years of experience in project management and banking, finance, and power sectors. He has also played an instrumental role at various capacities with multiple institutions. Mukaty Family, the key sponsors of LPTL, while planning to strengthen its foothold in power generation segment, are also contemplating ventures in unrelated industries. This is likely to strengthen the group’s overall business profile.
About the Instrument
LPTL issued a Sukuk in January 2011 for PKR 13,488mln. The instrument would mature in January 2021 with payments in 21 equal quarterly instalments. As of Nov16, an amount of PKR 8,361mln is outstanding. The profit on issue, payable quarterly, is at 3M Kibor + 300bps.
LPTL issued a Term Finance Facility in January 2011 for PKR 1,649mln. The facility would mature in January 2021 with payments in 21 equal quarterly instalments. As of Nov16, an amount of PKR 1,022mln is outstanding. The profit on issue, payable quarterly, is at 3M Kibor + 300bps.