Shujat Ehsanullah Wasim
PACRA maintain Entity Ratings of Liberty Power Tech Limited
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. The power purchase agreement ('PPA') is with Central Power Purchasing Agency-Guaranteed ('CPPA-G') valid for 25 years on 'take or pay' provision, starting from the COD (Jan-2011). It enjoys a sovereign guarantee against receivables from power purchaser given adherence to agreed performance benchmarks. The Company continues to meet its availability (90%) and efficiency (45%) benchmarks. Fuel supply risk is adequately covered as they procure from different suppliers with good credit terms; being managed since 2011. During FY23, the plant generated 545 GWh (FY22: 925 GWh) of net electrical output, a decline of 42% (YoY), and thereafter reported a sales revenue of ~PKR 22,178mln (FY22: ~PKR 27,715), a decline of 20%. This decrease in generation is mainly attributed to shift of electricity demand towards the less expensive sources of generation i.e., Hydro, Solar, Wind and Biogas from the power purchase in wake of a cost-effective energy basket. Despite fall in revenue margins benefitted from lower load factors and appreciation of USD against PKR due to indexed-based tariff structure. Gross margin improved to 20% during FY23 (FY22: 15%). The company successfully paid off its long-term project-related debt in Dec 2020 resulting in a favorable impact on its financial risk profile. The Company has arranged amicable working capital lines, to cover its working capital requirements and the debt profile comprises short-term borrowings only. The utilization of short-term borrowing stood at 65% as at June 2023 (Jun 2022: 42%), mainly on account of accumulation of receivables from the off taker. Moreover, with strong financial strength and experienced & visionary sponsors, the Liberty group plans to expand itself and evolve towards acquiring equity stakes in the Energy sector, further strengthening the Company's foothold in the industry, going forward.
The Company's management of its financing required to meet the future plans and its effect on the financial risk profile, albeit long outstanding receivables from the off taker in respect of reported circular debt, remains integral to the assigned ratings.
Liberty Power Tech was incorporated in Sep'07 as an Independent Power Producer under the power policy 2002. 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 and is led by Mr. Ashraf Saleem Mukaty, the acting Chairman. The management team comprises qualified professionals with sufficient experience in various sectors led by the CEO, Mr. Azam Sakrani.