PACRA Maintains the Entity Ratings of Lucky Electric Power Company Limited

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 May-24. The previous tentative month was May-23. The Company has also signed imported coal supply agreement with reputable coal suppliers. Currently, plant is generating electricity through the mix of local & imported coal. The Company has generated 1.8mln MWh since Mar'22. The Company has generated a topline of ~ PKR 45.7bln during 6MFY23. Lucky Electric Power Company Limited generated a humble bottom line of ~PKR 2.19bln during the same period. Comfort is drawn from the experience of O&M contractor. O&M Contractor, KEPCO Plant Services & Engineering Co. Ltd - Republic of Korea (KPS) has been replaced with M/s Harbin Electric International Co., Ltd. -P.R. China (HEI). 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 45.2bln (including the debt instruments amounting to PKR 27bln) for operational needs. The financial strength and experience in the energy chain of the sponsoring company Lucky Cement – are considered positive for the ratings. Further, the sponsor has given explicit comfort to provide sufficient liquidity support. This is a key consideration in the assigned 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.
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. The capital structure comprises 25% equity and debt financing constitutes 75% of the initial estimated project cost; ~USD 883mln, financed from local and foreign financial institutions. Local currency facilities have been obtained from multiple consortium of banks aggregating to PKR 65.95bln and have a 10 year tenure starting June 2022 and to be paid in 40 quarterly installments. The foreign facility is USD 210mln. 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.