The Pakistan Credit Rating Agency Limited
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Anam Waqas Ghayour

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PACRA Upgrades Entity Ratings of Liberty Power Tech Limited.

Rating Type Entity
(10-Nov-22 )
(30-Sep-22 )
Action Upgrade Maintain
Long Term AA- A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Liberty Power Tech Limited (the Company) runs a 200MW power plant based on Residual Fuel Oil. The Company operates in the regulated power sector. The plant achieved its commercial operations in Jan'2011 with its PPA valid for 25 years starting from the COD. It enjoys a sovereign guarantee against receivables from power purchaser given adherence to agreed performance benchmarks. Fuel supply risk is adequately covered as they procure from different suppliers with good credit terms; being managed since 2011. The Company continues to meet its availability (90%) and efficiency (45%) benchmarks. The plant generated 925 GWh of net electrical output for the year ended at June, 2022. Net income recorded during 9MFY22 was PKR 2,063mln (6MFY22: PKR 1,143mln). As a result of the revision in agreement with the power purchaser, the Company’s profitability indicators will be slightly lower going forward, albeit are considered to be adequate. However, in line with the agreement, the issue of long outstanding receivables has been assuaged, as the Company has received remaining 60% of its receivables from the off taker in June 2022 as a second tranche. First tranche has been received in Jan 2022. The company successfully paid off its long-term project-related debt in Dec 2020 resulting in a favourable impact on its financial risk profile. As on March 2022, the debt profile comprises short-term borrowings only, which have been availed to meet working capital requirements, mainly on account of accumulation of receivables from the off taker. However, with the second receipt of outstanding receivables from the power purchaser, under the master agreement the working capital cycle has improved and the utilization of short-term borrowing is expected to decrease going forward with timely repayments.
The Company's repayment of debt fully comforted its financial profile thus considered positive for ratings. Though the Company has achieved sound financial discipline, but maintaining the plant's availability and operational benchmarks to the agreed level remains integral to the assigned ratings.
Meanwhile, seeking comfort in the take or pay tariff regime and expected receipt from outstanding receivables in respect of reported circular debt in coming months will further provide a cushion in working capital financing, in turn, will strengthen the financial risk profile.

About the Entity
Liberty Power Tech was incorporated in Sep'07 as an Independent Power Producer under the power policy 2002. Liberty Power Tech 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. The company is majorly-owned by Liberty Group (Liberty Mills Limited: 29% & Mukaty Family: 61%) and Soorty Enterprises (10%). Mukaty Family, the key sponsors of the Company, while planning to strengthen its foothold in the power generation segment, are contemplating ventures in unrelated industries. This is likely to strengthen the group’s overall business profile.
Liberty Power Tech has an eight-member board of directors with all members belonging to the Liberty Group, which is principally engaged in the textile sector. Mr. Ashraf Saleem Mukaty, the acting Chairman, has been associated with the Group in different capacities and is currently chairing the Board with his visionary leadership and vast experience. The management team comprises qualified professionals with sufficient experience in various sectors. The company has a well-defined organizational structure with the CEO reporting to the board.

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.