Pakistan Credit Rating Agency revises ratings of Liberty Power Tech Limited

Lahore, November 29, 2012 (PPI-OT): The Pakistan Credit Rating Agency Limited (PACRA) has revised the long-term and short-term entity ratings of Liberty Power Tech Limited (LPTL) to “A+” (Single A Plus) and “A1″ (A One) respectively [Previous: AA/A1+]. The ratings of the Sukuk of PKR 13,488mln and Term Finance Facility of PKR 1,649mln have also been revised to “A+” (Single A Plus)[Previous: AA]. The ratings denote a low expectation of credit risk.

The ratings of LPTL incorporate continuing pressure of inter-corporate debt on liquidity profile of the power sector in general, and IPPs in particular. The current regulatory structure, wherein sovereign guarantee is provided for timeliness of cash flows, given adherence to agreed performance benchmarks, ensures low business risk. This remains a critical factor in LPTL’s ratings. However, at the same time, the company cannot fully isolate itself from sector related risks, that has constrained its financial profile.

On a standalone basis LPTL’s performance remains strong, mainly characterized by higher efficiency as compared to agreed benchmark with the power purchaser. The company is well placed to sustain its performance in the medium term owing to i) lower maintenance requirements in initial years of operations, and ii) outsourcing of O and M operations to Wartsila Pakistan (WPK) – a recognized O and M operator with established track record. Lately, certain differences with NTDC on another critical benchmark – availability – have led to lower capacity payments. However, the company expects a positive outcome.

Although weak financial discipline of the sole customer, NTDC, remains the key challenge, the ratings draw comfort from the explicit commitment of the key sponsors, including Liberty Mills, to support LPTL, in case the need arises. The sponsors have also demonstrated this commitment in the recent past.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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