Draft PR
The Pakistan Credit Rating Agency Limited

Rai Umar Zafar

Hamza Ghalib

Applicable Criteria

  • Correlation between long-term and short-term rating scale (Jun 17)
  • Criteria Modifiers (Jun 17)
  • Methodology | Independent Power Producers (IPP) (May 17)

Related Research

  • Sector Study | Power Generation (Mar 17)
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PACRA Maintains Ratings of Liberty Power Tech Limited
 Rating Type Entity Debt Instrument Debt Instrument
 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 behavior of the power purchaser. In FY17, the company has witnessed an increase in profitability due to gain of PKR 438mln owing to disposal of securities. The Company has been paying consistent dividends, however, during FY17 company’s dividend payments has increased significantly. Nevertheless, strong internal cash generation and available working capital lines has helped it in managing its working capital requirements efficiently. 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 behavior with its financial profile would be ratings positive. Meanwhile, any significant increase in overdue receivables may impact the ratings.
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 Dispatch 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 2014, has over 20 years of experience in project management and banking, finance, and power sectors. Mukaty Family, the key sponsors of LPTL, while planning to strengthen its foothold in power generation segment, are 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 40 equal quarterly instalments. As of Dec-17, an amount of PKR 6,468mln 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 40 equal quarterly instalments. As of Dec-17, an amount of PKR 791mln is outstanding. The profit on issue, payable quarterly, is at 3M Kibor + 300bps.
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.