Lucky Electric Power Company Limited

CREDIT RATING REPORT | Apr-25

Logo
Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
08-Apr-25 AA A1+ Stable Maintain -
08-Apr-24 AA A1+ Stable Maintain -
11-Apr-23 AA A1+ Stable Maintain -
11-Apr-22 AA A1+ Stable Upgrade -
06-Aug-21 AA- A1 Stable Maintain -
About the Entity

Lucky Electric Power Company Limited, incorporated in Pakistan on June 13, 2014 as public unlisted company at Port Qasim, Karachi, Sindh. The capital structure comprises 25% equity and debt financing constitutes 75% of the project cost; ~USD 895mln, financed from local and foreign financial institutions. Local currency facilities have been obtained from multiple consortium of banks aggregating to PKR 65.9bln and have a 10 year tenure starting June 2022 and to be paid in 40 quarterly installments. The foreign facility is USD 210mln. 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 eight directors, including the CEO, out of which three directors are independent, ensuring effective governance and oversight. 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

Rating Rationale

Lucky Electric Power Company Limited ("LEPCL" or "the Company") has established a 1x660MW (gross) coal-fired power plant, achieving Commercial Operations Date (COD) in March 2022 and supplying electricity to the national grid. The plant primarily runs on coal, with a supply agreement with Sindh Engro Coal Mining Company (SECMC). SECMC’s Block-II (Phase III) operations are now expected to commence in December 2025. The Company also sources imported coal from reputable suppliers for current operations. During 6MFY25, the plant generated 715.6 GWh of electricity, contributing to a topline of approximately PKR 41 billion. The Company recorded a bottom-line profit of around PKR 10.3 billion in the same period. In comparison, FY24 generation stood at 1,688 GWh with revenue of PKR 90.95 billion and a net profit of PKR 19.53 billion. The lower generation was primarily driven by reduced demand, which in turn impacted working capital utilization. Consequently, the Company's reliance on external financing was lower, reflected in the issuance of a single Sukuk of PKR 5 billion in FY25, compared to PKR 25 billion in Sukuk issuances in the previous year. Operational stability is ensured through M/s Harbin Electric International Co., Ltd. - P.R. China (HEI), which took over O&M in March 2023. The Company remains focused on uninterrupted plant operations. LEPCL has secured short-term financing facilities totaling approximately PKR 24,155 million, with a utilization rate of 70% as of December 2024. As of December 2024, cumulative short-term borrowings stand at around PKR 21,955 million. The financial strength and extensive experience of the sponsor, Lucky Cement, in the energy sector are key positive factors supporting the Company's credit profile. LEPCL continues to make timely payments on its project debt, with explicit liquidity support from the sponsor, which is a critical consideration in the assigned ratings. The Company's offtake agreement is with the Central Power Purchasing Agency (CPPA-G), ensuring capacity payments as per contractual availability, even in the absence of a purchase order. Furthermore, the Government of Pakistan has provided a payment guarantee against CPPA-G dues, enhancing the Company’s financial stability.

Key Rating Drivers

The management’s ability along with the explicit support from the sponsor to effectively manage operational risks provides comfort to assigned ratings. Trend in operational profitability would bode well for rating. External factors such as any adverse changes in the regulatory framework may impact the ratings

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Lucky Electric Power Company Limited

rating analysis

Logo
Profile
Plant

Lucky Electric Power Company Limited ("the Company" or "Lucky Electric") has set up a 1x660MW (gross) local coal-fired supercritical power plant at Port Qasim, Karachi, Sindh. The plant is developed on a Build-Own-Operate (“BOO”) basis with a project cost of USD 895 Million in a debt-to-equity ratio of 75:25. Furthermore, Lucky Electric Power Company Limited has met all the necessary requirements of Shariah compliance, and the Securities and Exchange Commission of Pakistan (SECP) has accordingly granted the Shariah Compliance Certificate to the Company on March 03, 2025. 


Tariff

The tariff is divided into two components; Capacity Payments and Energy Payments. Energy payments further have two components; variable costs and fixed fuel costs. If the Plant is operational at contract availability, capacity payments and the fixed fuel costs will be provided even if no purchase order is placed by CPPA-G. The tariff control period is 30 years.


Return on Project

The PKR/KWh Return on Equity (ROE) of Lucky Electric, as agreed with NEPRA, is 29.5% for local coal and 27.2% for imported coal. 


Ownership
Ownership Structure

Lucky Cement Limited owns 100% shareholding of Lucky Electric, incorporated in Pakistan on June 13, 2014 as public unlisted company. The registered office of the Company is situated at 6-A, Muhammad Ali Housing Society, Karachi, Sindh.


Stability

Lucky Electric Power Company Limited (LEPCL) maintains a strong and stable position under the ownership of Yunus Brothers Group (YBG), one of Pakistan’s most established and diversified conglomerates. As a subsidiary of Lucky Cement Limited, LEPCL holds a strategic position within the group, benefiting from its financial strength, operational expertise, and long-term commitment to the energy sector. The sponsor has a proven track record of successful operations across multiple industries, ensuring sustained support and strategic oversight. Furthermore, there is no intent to dilute the shareholding in the Company, reaffirming LEPCL’s long-term stability and growth trajectory.


Business Acumen

Yunus Brothers Group (YBG) exhibits strong business acumen through its diverse portfolio in cement, textiles, real estate, power, chemicals, pharmaceuticals, food, and automotive. With a proven track record of strategic investments and financial strength, YBG drives sustainable growth across industries. Lucky Electric Power Company benefits from this solid foundation, leveraging the Group’s expertise, operational excellence, and long-term vision.


Financial Strength

Lucky Electric Power Company benefits from strong financial stability, backed by its parent company, Lucky Cement Limited, a market leader in Pakistan’s industrial sector. Lucky Cement boasts a strong asset base of Rs. 255.2 billion, equity of Rs. 157.2 billion, a topline of Rs. 89 billion, and a profit after tax of Rs. 13.8 billion as of December 2024. This strong financial foundation ensures LEPCL’s sustainable operations, long-term growth, and resilience in the power industry. Additionally, the explicit financial support from Yunus Brothers Group (YBG) further strengthens LEPCL’s position, as the sponsors have well-diversified and profitable businesses across multiple industries.


Governance
Board Structure

The Board of Directors is primarily dominated by the sponsor’s representatives. The Board comprises eight members, including the CEO. Out of these, three members serve as Independent Directors, ensuring some level of independent oversight within the governance framework.


Members’ Profile

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. All board members are highly qualified and competent enough for effective leadership.


Board Effectiveness

The Board members meet on a quarterly basis or conduct regular discussions on need basis. The Chairman of the Board exercises close oversight over the Company’s affairs, ensuring effective governance. Additionally, a Board Audit Committee is in place to oversee financial reporting and internal controls. The Board remains actively engaged in providing strategic direction and guidance to the Company’s management.


Financial Transparency

A.F. Ferguson & CO., Chartered Accountants, is the external auditor of the Company. They have expressed an unqualified opinion on the Company’s financial statements at end-Jun-24.


Management
Organizational Structure

Lucky Electric’s management team comprises qualified professionals in areas like technical, commercial and legal specialists with the capability to construct, develop, operate, finance and maintain the project. The Company has a well-defined organizational structure with the CEO reporting to the board.


Management Team

Mr. Ruhail Muhammad, the CEO, is MBA and CFA Charter holder. Mr. Ruhail carries vast experience in leading various corporate organizations and is also on the board of various renowned corporate entities. He is supported by an experienced team of professionals.


Effectiveness

Over the years since incorporation, Lucky Electric Power Company's management has played a pivotal role in driving the organization's growth through strategic decision-making and operational excellence. By achieving key project milestones in a timely and efficient manner, the management has demonstrated strong leadership, effective resource utilization, and a commitment to continuous improvement, ensuring the Company's long-term success and sustainability.


Control Environment

Lucky Electric Power Company upholds a strong control environment by integrating advanced IT solutions, well-structured governance practices, and robust risk management frameworks. With a well-integrated and reliable IT infrastructure, the Company enhances operational efficiency, ensures regulatory compliance, and maintains transparency across its business functions, contributing to long-term sustainability and excellence.


Operational Risk
Power Purchase Agreement

The electricity generated is being sold to Central Power Purchasing Agency (CPPA-G) under 30 years Power Purchase Agreement (PPA). RCOD as per the PPA was March 01 2021. However, the Company achieved COD on March 21, 2022 owing to global pandemic of Novel Corona Virus.


Operation and Maintenance

The Company has entered into a 7-year Operation & Maintenance (O&M) contract with M/s Harbin Electric International Co., Ltd. - P.R. China (HEI), effective from March 2023. The project’s revenues and cash flows are primarily dependent on maintaining the plant’s operational availability and capacity factors at the adequate levels.


Resource Risk

The Coal Supply Agreement (CSA) of Lucky Electric is with SECMC. SECMC is expanding up to 13.1 mmpta coal mine in Thar Block – II in three phases. The Company has also negotiated imported coal supply agreement from Indonesia. Plant would run on imported coal in case of non-availability of Thar coal.


Insurance Cover

Lucky Electric has obtained four types of different insurances to cover its various types of risks.


Performance Risk
Industry Dynamics

As of June 30, 2024, the installed capacity within the CPPAG system stood at 42,362 MW, distributed among various sources, including thermal (49.01%), hydroelectric (29%), renewable energy (4.75%), and nuclear (16.88%). Within the total thermal generation, coal accounts for 30.5%, contributing 20,542 GWh. The total coal capacity is 7,260 MW out of which 2,640 MW is local coal and 4,620 MW is the imported coal. The total electricity generated in the country during FY24 amounted to 138,028.86 GWh (FY23: 154,056.18 GWh). The decline in consumption is attributed to reduced economic activity, a slowdown in industrial and commercial operations, and the high cost of electricity, which has negatively impacted household consumption patterns.


Generation

Lucky Electric Power Company Limited generated 715.6 GWh of electricity in 6MFY25 and reported revenues of PKR 40,493mln during 6MFY25 (6MFY24: PKR 54,262mln). Thus, reporting a profit of PKR 10,357mln in 6MFY25 (6MFY24: PKR 9,163mln). The revenue was declined due to lower demand from the Company.  


Performance Benchmark

The contractually agreed availability for the plant over 30 years is set at 85%, with non-compliance resulting in Liquidated Damages (LDs) imposed by the Power Purchaser. During 6MFY2025, the plant achieved an availability of 97.30%, demonstrating strong operational efficiency and reliability.


Financial Risk
Financing Structure Analysis

Lucky Electric’s capital structure comprises 25% equity and debt financing constitutes 75% of the initial estimated project cost; ~USD 895mln, financed from local and foreign financial institutions. Local Facility obtained from multiple consortium of banks aggregating to PKR 65.9 billion has a 10 year tenure starting June 2022 and to be paid in 40 quarterly installments. A total local loan of  PKR 6.54 billion (10%) has been repaid by the Company.  The foreign facility is USD 210mln. Out of which USD 20mln will be paid quarterly and USD 190mln will be paid semiannually. A total foreign loan of USD 4.1mln out of USD 20mln and USD 31.7mln out  of USD 190mln has been repaid by the Company. Overall 17% of foreign debt has been repaid. 


Liquidity Profile

Independent Power Producers (IPPs) continue to face payment delays from the power purchaser due to ongoing circular debt challenges in the country. As a result, Lucky Electric Power Company relies on short-term borrowings to meet its liquidity needs, with cash and cash equivalents standing at PKR 5 million as of December 2024. However, the Company benefits from the explicit financial support of Yunus Brothers Group (YBG), ensuring stability and the ability to navigate liquidity challenges effectively.


Working Capital Financing

The Company manages its working capital needs through internal cash flows and short-term borrowings. As of December 2024, the Company's receivables stood at PKR 25,704 million, while short-term borrowings amounted to PKR 21,955 million, reflecting its financing requirements to support ongoing operations.


Cash Flow Analysis

The stability and sustainability of future cash flows of Lucky Electric depends completely on continuous performance of its power plant. During 6MFY25, the Company generated FCFOs of PKR 25,396mln (6MFY24: PKR 28,063mln). Interest coverage stands at 2.0x and Debt Coverage stands at 1.5x.


Capitalization

The project has incurred a project cost of USD 895mln with 75:25 debt to equity ratio. Currently debt to equity ratio stood at 67.9% as of end Dec-2024 with a total debt of the Company at PKR 131,349mln and equity of PKR 62,184mln.
 
 

Apr-25

www.pacra.com

Lucky Electric Power Company Limited

financial summary

(PKR mln)

Logo

Dec-24
6M		 Jun-24
12M		 Jun-23
12M		 Jun-22
12M
A. BALANCE SHEET
1. Non-Current Assets 137,025 139,409 146,974 134,264
2. Investments 0 0 0 0
3. Related Party Exposure 0 0 0 0
4. Current Assets 66,583 79,554 76,150 51,780
a. Inventories 6,063 11,612 9,227 14,439
b. Trade Receivables 25,704 33,604 30,859 16,372
5. Total Assets 203,608 218,963 223,123 186,043
6. Current Liabilities 9,919 13,337 23,069 14,360
a. Trade Payables 5,461 6,078 8,221 0
7. Borrowings 131,349 153,675 161,659 142,717
8. Related Party Exposure 0 0 0 0
9. Non-Current Liabilities 157 124 116 89
10. Net Assets 62,184 51,827 38,279 28,877
11. Shareholders' Equity 62,184 51,827 38,279 28,877
B. INCOME STATEMENT
1. Sales 40,494 90,954 98,280 25,953
a. Cost of Good Sold (17,368) (39,511) (62,126) (19,647)
2. Gross Profit 23,126 51,443 36,154 6,306
a. Operating Expenses (320) (737) (545) (156)
3. Operating Profit 22,805 50,706 35,609 6,150
a. Non Operating Income or (Expense) 50 169 74 (139)
4. Profit or (Loss) before Interest and Tax 22,855 50,875 35,683 6,011
a. Total Finance Cost (12,484) (31,302) (26,231) (5,236)
b. Taxation (14) (40) (62) 0
6. Net Income Or (Loss) 10,357 19,533 9,390 775
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 25,396 55,812 40,446 7,337
b. Net Cash from Operating Activities before Working Capital Changes 12,035 24,429 16,387 (3,130)
c. Changes in Working Capital 10,110 (17,976) (11,708) (36,033)
1. Net Cash provided by Operating Activities 22,144 6,453 4,679 (39,163)
2. Net Cash (Used in) or Available From Investing Activities (117) (783) (1,082) (14,206)
3. Net Cash (Used in) or Available From Financing Activities (22,412) (12,480) 1,774 53,659
4. Net Cash generated or (Used) during the period (385) (6,810) 5,371 289
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) -11.0% -7.5% 278.7% N/A
b. Gross Profit Margin 57.1% 56.6% 36.8% 24.3%
c. Net Profit Margin 25.6% 21.5% 9.6% 3.0%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 87.7% 41.6% 29.2% -110.6%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 32.1% 37.3% 26.8% 3.3%
2. Working Capital Management
a. Gross Working Capital (Average Days) 173 171 132 433
b. Net Working Capital (Average Days) 147 142 101 N/A
c. Current Ratio (Current Assets / Current Liabilities) 6.7 6.0 3.3 3.6
3. Coverages
a. EBITDA / Finance Cost 2.0 1.8 1.6 1.5
b. FCFO / Finance Cost+CMLTB+Excess STB 1.5 1.4 1.2 1.0
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 4.4 5.5 10.0 42.8
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 67.9% 74.8% 80.9% 83.2%
b. Interest or Markup Payable (Days) 33.7 38.8 51.9 0.0
c. Entity Average Borrowing Rate 16.8% 19.4% 16.5% 4.6%

Apr-25

www.pacra.com

Lucky Electric Power Company Limited

rating scale

Logo

Apr-25

www.pacra.com

Lucky Electric Power Company Limited

regulatory disclosure

Logo
  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
    1. No director, officer, or employee of PACRA communicates the information acquired by him for use for rating purposes to any other person, except where required under law to do so. (Chapter III; 10-(5))
    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
    5. PACRA maintains the principle of integrity in seeking rating business. (Chapter III; 11-A-(u))
    6. PACRA promptly investigates in the event of misconduct or a breach of the policies, procedures, and controls, and takes appropriate steps to rectify any weaknesses to prevent any recurrence, along with suitable punitive action against the responsible employee(s). (Chapter III; 11-B-(m))
  4. Independence & Conflict of Interest
    1. PACRA receives compensation from the entity being rated or any third party for the rating services it offers. The receipt of this compensation has no influence on PACRA’s opinions or other analytical processes. In all instances, PACRA is committed to preserving the objectivity, integrity, and independence of its ratings. Our relationship is governed by two distinct mandates: i) rating mandate - signed with the entity being rated or issuer of the debt instrument, and ii) fee mandate - signed with the payer, which can be different from the entity.
    2. PACRA does not provide consultancy/advisory services or other services to any of its customers or their associated companies and associated undertakings that are being rated or have been rated by it during the preceding three years, unless it has an adequate mechanism in place ensuring that the provision of such services does not lead to a conflict of interest situation with its rating activities. (Chapter III; 12-2-(d))
    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
    4. PACRA ensures that the rating assigned to an entity or instrument is not affected by the existence of a business relationship between PACRA and the entity or any other party, or the non-existence of such a relationship. (Chapter III; 12-2-(i))
    5. PACRA ensures that the analysts or any of their family members shall not buy, sell, or engage in any transaction in any security which falls in the analyst’s area of primary analytical responsibility. This clause, however, does not apply to investments in securities through collective investment schemes. (Chapter III; 12-2-(l))
    6. PACRA has established policies and procedures governing investments and trading in securities by its employees and for monitoring the same to prevent insider trading, market manipulation, or any other market abuse. (Chapter III; 11-B-(g))
  5. Monitoring and Review
    1. PACRA monitors all the outstanding ratings continuously, and any potential change therein due to any event associated with the issuer, the security arrangement, the industry, etc., is disseminated to the market immediately and in an effective manner after appropriate consultation with the entity/issuer. (Chapter III; 17-(a))
    2. PACRA reviews all the outstanding ratings periodically on an annual basis. Provided that public dissemination of annual review and in an instance of change in rating will be made. (Chapter III; 17-(b))
    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
    4. PACRA engages with the issuer and the debt securities trustee to remain updated on all information pertaining to the rating of the entity/instrument. (Chapter III; 17-(d))
  6. Probability of Default
    1. PACRA’s Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e., probability). PACRA’s transition studies capture the historical performance behavior of a specific rating notch. Transition behavior of the assigned rating can be obtained from PACRA’s Transition Study available at our website. (www.pacra.com) However, the actual transition of rating may not follow the pattern observed in the past. (Chapter III; 14-3(f)(vii))
  7. Proprietary Information
    1. All information contained herein is considered proprietary by PACRA. Hence, none of the information in this document can be copied or otherwise reproduced, stored, or disseminated in whole or in part in any form or by any means whatsoever by any person without PACRA’s prior written consent.

Apr-25

www.pacra.com