PACRA Maintains Entity Ratings of Liberty Power Tech Limited

Business News English

Lahore, October 01, 2021 (PPI-OT): Liberty Power Limited (Liberty Power Tech) runs a 200MW power plant based on Residual Fuel Oil. The Company operates in the regulated power sector. It enjoys a sovereign guarantee against receivables from power purchaser CPPA-G given adherence to agreed performance benchmarks. The Company’s operations and maintenance operator, Wartsila Pakistan (WPK), is a key source of comfort in managing the plant’s operations. Fuel supply risk is adequately covered as they procure from different suppliers with good credit terms; being managed since 2011. Liberty Power Tech continues to meet its availability (90%) and efficiency (45%) benchmarks.

The company’s working capital requirement has increased and been met through the mix of internally generated cash flows and short-term borrowing lines. The company Project-related debt was completely paid successfully in Jan’20, and now the only debt on the financial statements of Liberty Power is short-term debt. Liberty Power Tech Ltd has signed the agreement in February’21, in pursuant to MoU. This will improve the liquidity in the future, upon receipt of 40% of trade receivables, as the first installment, in the form of cash, PIBs and instruments rest 60% will be received after 6 months of the first installment. Further, ROE is revised to 17% from 15% with no dollar indexation until the dollar reaches PKR 168. In actuality, the impact of the executed agreement is yet to be seen.

Upholding operational performance in line with agreed performance levels would remain a key rating driver. The Company’s repayment of debt fully comforted its financial profile thus considered positive for ratings. Meanwhile, seeking comfort in the take or pay tariff regime and expected receipt from outstanding receivables in respect of reported circular debt within a month or so will further provide a cushion in working capital financing, in turn, will strengthen the financial risk profile.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com