PACRA maintains entity ratings of Lucky Electric Power at 'AA'

April 09, 2024 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Lucky Electric Power Company Limited (LEPCL) at "AA" for the long term and "A1+" for short term with a stable outlook forecast, latest press release issued by PACRA showed.

LEPCL has set up a 1x660MW (gross) coal-fired power plant. The project achieved COD in March-22 and is successfully connected to and providing electricity to the grid.

The primary fuel is Coal; a coal supply agreement is signed with Sindh Engro Coal Mining Company (SECMC), SECMC will provide the coal from its developing Block-II (Phase III), which will be started in December 24.

The previous tentative month was May-24. The company has also signed imported coal supply agreement with reputable coal suppliers. Currently, plant is generating electricity through imported coal.

The company has generated 1486GWh of electricity during 6MFY24 eventually generating a topline of Rs 54 billion.

Lucky Electric Power Company Limited generated a bottom line of Rs9.1bn during the same period.

Comfort is drawn from the experience of O&M contractor, Harbin Electric International Co., Ltd. -P.R. China (HEI), which has taken over the plant from previous operator from Mar-23. Going forward, the Company’s main focus would be to keep the plant operational.

The company has currently procured short-term financing facilities aggregating to Rs18.249bn which are 76% utilized as of Dec-2023.

The cumulative short-term borrowings stand at Rs38.823bn as of Dec-2023. Additionally, as at Dec-23, the company has outstanding debt instruments amounting to Rs25bn for operational needs.

The financial strength and experience in the energy chain of the sponsoring company Lucky Cement – are considered positive for the ratings. Further, the sponsor has given explicit comfort to provide sufficient liquidity support.

This is a key consideration in the assigned ratings. The offtake agreement is with CPPA-G, which will, upon the plant’s availability as per the contract, provide capacity payments even if no purchase order is placed.

The Government of Pakistan has given a payment guarantee against dues from CPPA-G.

The management’s ability along with the explicit support from the sponsor to effectively manage operational risks provides comfort to assigned ratings.

The trend in operational profitability would bode well for rating. External factors such as any adverse changes in the regulatory framework may impact the ratings.

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