Bazah Tul Qamar
PACRA Assigns Preliminary Ratings to Lucky Electric Power Company Limited Islamic Commercial Paper ICP-2
|Rating Type||Debt Instrument|
Lucky Electric Power Company Limited (Lucky Electric) is setting up a 1x660MW (gross) local coal fired power plant. Its COD as per PPA was 1st March, 2021, but delayed due to non-availability of interconnection lines. The transmission lines have become available in November 2021, after the Company has obtained certificate of Readiness of synchronization. So, the management is now expecting COD by end of Jan-22, and is therefore not exposed to any liquidity damages. The key rating consideration is an explicit undertaking from the sponsor to ensure that all kind of support including financial shall be made available. The ratings also take into account the project exposure to completion risk . The primary fuel is Thar Coal; a coal supply agreement is signed with Sindh Engro Coal Mining Company (SECMC), from its Block-II (Phase III). Company has also signed imported coal supply agreement with reputable coal suppliers. Plant would be run on imported coal in case of non-availability of local coal. Once completed, the Company’s main challenge would be to keep the plant operational. Lucky Electric’s 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 Facility obtained from the consortium of banks led by United Bank Limited amounting to PKR 55.98bln and PKR 7.9bln, has a 10 year tenure starting June 2022 and to be paid in 40 quarterly installments, facilities remained ~93% and 100% utilized at the November 30, 2021. The foreign facility is USD 210mln. Out of which USD 20mln (fully drawn down) will be paid quarterly and USD 190mln, (Drawdown: ~90%) will be paid semi-annually. Off take agreement is with CPPA-G, which will, upon plant’s availability as per contract, provide capacity payments even if no purchase order is placed.
Ensuring timely commissioning of the project is important. Moreover, timely completion of the affiliated infrastructure projects needed to make the plant operational.
Lucky Electric Power Company Limited, incorporated in Pakistan on June 13, 2014 as public unlisted company at Port Qasim, Karachi, Sindh. 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 six directors, including CEO, all the board members represents 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.
Lucky Electric Power Company Limited is issuing a rated, privately placed, unsecured, short term, Islamic Commercial Paper of PKR 5,000mln. The tenor of the instrument is 6 months. Issue proceeds will be utilized by the Company to meet its working capital requirements. Profit will be paid on the outstanding principal amount at the rate of 6M KIBOR + Spread of 150bps. The Company has already issued an islamic commercial paper of PKR 7,000mln in November 2021, repaybale in 6 months. After the current issue of ICP-2 amounting PKR 5,000mln, total amount of short term instruments will be PKR 12,000mln.