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Karachi, VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Lucky Renewables (Pvt) Limited (formerly known as Tricom Wind Power (Pvt) Limited) at ‘A/A-2’, indicating the company’s good credit quality and sound liquidity in a changing economic landscape.
According to VIS Credit Rating Company Limited, the medium to long-term rating of ‘A’ for Lucky Renewables underscores the company’s good credit quality and adequate protection factors, although these may vary with economic shifts. The short-term rating of ‘A-2’ reflects the company’s good certainty of timely payment, backed by solid liquidity factors and strong company fundamentals. This stable outlook aligns with the previous rating action announced on December 29, 2022.
Established in 2017, Lucky Renewables operates a 50MW wind power plant in Jhimpir, District Thatta, Sindh. The ratings consider the company’s association with the Yunus Brother Group, a well-regarded conglomerate with a robust financial profile and presence in diverse sectors, including cement, power generation, building materials, real estate, and textiles. A key factor underpinning the rating is the company’s 25-year long Energy Purchase Agreement (EPA) with the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G), which significantly mitigates off-take risk. This agreement, backed by a Government of Pakistan guarantee, along with a long-term OandM contract with an experienced operator, contributes to the company’s low operational risk profile. Despite being susceptible to wind risk, comprehensive studies have shown a very low potential risk to operations.
However, the company has faced challenges, including delayed true-up tariff adjustments that have impacted profitability. Despite foregoing interim relief from the Government of Pakistan during FY23, Lucky Renewables has filed a petition for true-up with the government and expects a resolution by the end of December 2023. The company’s trade debts to sales ratio has remained high due to the country’s intercorporate debt issues, and intermittent payments from CPPA-G have led to elevated liquidity risks. Nevertheless, Lucky Renewables has consistently met its financial obligations on time, supported by related party loans, although leverage indicators remain high.
The ratings remain sensitive to the finalization of the true-up tariff and any subsequent improvement in the company’s financial indicators, highlighting the importance of regulatory decisions in the renewable energy sector.
For further details on this rating announcement, interested parties can reach out to VIS Credit Rating Company Limited at the mentioned contact information.
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