Muhammad Mubashir Nazir
PACRA maintains the entity rating of Liberty Wind Power 2 Limited
Liberty Mills Limited is setting up a 50MW wind power plant “Liberty Wind Power 2 Limited” (LWP2) in Jhimpir, District Thatta, Sindh. The ratings incorporate the Group's previous experience in successfully commissioning and operating 200MW RFO based Power Plant (Liberty Power tech Limited). The required commercial operations date (RCOD) as defined under EPA is fifteen months from construction start date. The project started construction in July 2020 and has gone beyond its RCOD. The management expects to achieve it by mid-May 2022. The Company operates in the regulated power sector. LWP2 is awarded a cost plus tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. Hydrochina International Engineering Company Limited & Hangzhou Huachen Electric Power Control Company are the EPC contractors. Project sponsor has injected 100% of equity and has drawn entire local and major portion of foreign debt facility, respectively. The project shipment has been 100% received and project is 85.44% complete as per January 2022 progress report. Grid connectivity with NTDC is expected to be achieved by end of current month. Management is confident to achieve COD as per revised plan. The delay in COD might lead to LD’s payable to CPPA-G which in turn will be charged to contractor as per agreement at higher amount. However, as per agreement LDs are not applicable until the power purchaser has made the grid available for testing of plant and in that case, RCOD shall be extended until 2 months after the date on which the interconnection facilities are provided by the power purchaser. The construction contractor will be the O&M operator for two years after COD; it will provide the warranty bond (10% of EPC cost) in the form of irrevocable bank guarantee for 24 months after COD. Further, the company maintains the Debt Service Reserve Account (DSRA), which is 100% filled by 6 months SBLCs, in total providing coverage of six months on its financial obligations till maturity. Project revenues and cash flows are exposed to wind risk, there is seasonal variation in the wind speed which effect the electricity generation, and ultimately cash flows may face seasonality. Management believes that as per detailed WRA conducted, comfort has been established on wind speed , thus mitigating this risk to a minimum.
The Company has signed Energy Purchase Agreement ("EPA") with CPPA-G, as per the EPA, in case of non-project missed volumes the power purchaser shall be liable to pay the missed volumes calculated using tariff rates. The Company has adequate insurance coverage to cover the risk of business interruptions, marine & erection etc. Furthermore, external factors such as any adverse changes in the regulatory framework or prolonged delay in achieving COD may impact the ratings. Upholding financial discipline is also a consideration.
Liberty Wind Power 2 Ltd, incorporated in April 15, is a Renewable Energy Independent Power Producer (RE IPP) operating under the Renewable Energy Policy 2006 by AEDB. The company is wholly owned by Liberty Group. The total estimated cost of the project is USD 63.90mln. Debt financing constitutes 80% of the project cost i.e. USD 51.12mln, which is financed from the foreign and local financial institution under SBP refinancing scheme at 3MLIBOR plus 4.25% and 3% plus 1.75% respectively. LWP2 Ltd has 3-member board with all members belonging to the Liberty Group. Mr. Azam Sakrani, the CEO, has been associated with the Group in different capacities and is currently chairing the Board. Management team comprises qualified professionals with sufficient experience.