FLASHNEWS:

PACRA assigns Initial rating to Lucky Electric Power Company Limited – PPSTS-6 – PKR 4bln – Dec-22

Lahore, February 03, 2023 (PPI-OT):Lucky Electric Power Company Limited (“LEPCL” or “the Company”) 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 May-24. The previous tentative month was May-23. The Company has also signed imported coal supply agreement with reputable coal suppliers.

Currently, plant is generating electricity through imported coal. Up till now, the Company has utilized 48% local and 53% imported coal. The Company has generated1.8mln MWh since Mar’22. Comfort is drawn from the experience of O and M contractor – KEPCO. The Company has procured short-term financing facilities aggregating to PKR 46.5bln (including the debt instruments amounting to PKR 27bln) for operational needs. The financial strength and experience in the energy chain of the sponsoring company – Lucky Cement are considered to be 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. However, considering the unusual increase in working capital requirement due to the significant devaluation of PKR, supply chain issues and tariff adjustments LEPCL is striving to manage its need. 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 rating.

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