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The Pakistan Credit Rating Agency Limited
Press Release

Date
30-Sep-21

Analyst
Maryam Arshad
maryam.arshad@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 Maintains Entity Ratings of Liberty Power Tech Limited

Rating Type Entity
Current
(30-Sep-21)
Previous
(08-Oct-20)
Action Maintain Maintain
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Liberty Power Limited (Liberty Power Tech) runs a 200MW power plant based on Residual Fuel Oil. The Company operates in the regulated power sector. It enjoys a sovereign guarantee against receivables from power purchaser CPPA-G 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. Fuel supply risk is adequately covered as they procure from different suppliers with good credit terms; being managed since 2011. Liberty Power Tech continues to meet its availability (90%) and efficiency (45%) benchmarks. The company’s working capital requirement has increased and been met through the mix of internally generated cash flows and short-term borrowing lines. The company Project-related debt was completely paid successfully in Jan’20, and now the only debt on the financial statements of Liberty Power is short-term debt. Liberty Power Tech Ltd has signed the agreement in February’21, in pursuant to MoU. This will improve the liquidity in the future, upon receipt of 40% of trade receivables, as the first installment, in the form of cash, PIBs and instruments rest 60% will be received after 6 months of the first installment. Further, ROE is revised to 17% from 15% with no dollar indexation until the dollar reaches PKR 168. In actuality, the impact of the executed agreement is yet to be seen.
Upholding operational performance in line with agreed performance levels would remain a key rating driver. The Company's repayment of debt fully comforted its financial profile thus considered positive for ratings. Meanwhile, seeking comfort in the take or pay tariff regime and expected receipt from outstanding receivables in respect of reported circular debt within a month or so 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 Sep07 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 majority-owned by Liberty Group (Liberty Mills Limited: 29% & Mukaty Family: 61%) and Soorty Enterprises (10%). Mukaty Family, the key sponsors of Liberty Power Tech, 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. Saleem Mukaty, the 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.