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The Pakistan Credit Rating Agency Limited
Press Release

Date
16-Mar-22

Analyst
Uswa Sikandar
uswa.sikandar@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 Assigns Initial Ratings to Lucky Electric Power Company Limited Islamic Commercial Paper ICP-2

Rating Type Debt Instrument
Current
(16-Mar-22 )
Action Initial
Long Term AA-
Short Term A1
Outlook Stable
Rating Watch -

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 which the Company has obtained certificate of Readiness of synchronization. So, the management is now expecting COD by March 20, 22, and is therefore not exposed to any material amount of 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 agreements 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 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 facilities remained ~95% utilized at March 10, 2022. The foreign facility is USD 210mln. Out of which USD 20mln (fully drawn down) will be paid quarterly and USD 190mln, (Drawdown: ~93%) 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.
Currently commissioning is in progress and expected to be completed by 3rd week of March 2022.

About the Entity
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.

About the Instrument
Lucky Electric Power Company Limited has issued 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, repayable in 6 months. After the current issue of ICP-2 amounting PKR 5,000mln, total amount of unsecured short term instruments is PKR 12,000mln.

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.