Press Release

VIS Reaffirms Entity Ratings of Lucky Renewables (Private) Limited

Karachi, January 2, 2025: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Lucky Renewables (Private) Limited (‘LRPL’ or ‘the Company’) at ‘A/A2’ (Single A/A Two). Medium to long term rating of 'A' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned rating remains ‘Stable’. Previous rating action was announced on December 20, 2023.

LRPL, was established as a Special Purpose Vehicle (SPV) under a private limited company structure to develop a 50 MW Wind Power Project in Deh Kohistan, Jhimpir, District Thatta. The Project commenced commercial operations in September 2021, supplying electricity to the national grid. LRPL is a subsidiary of Lucky Textile Mills Limited, which holds 51% ownership, with Y.B. Holdings (Private) Limited as the ultimate parent. The Company’s primary activity involves electricity generation and sale, supported by a 25-year Energy Purchase Agreement signed with the Central Power Purchasing Agency (Guarantee) Limited and an Implementation Agreement with the Government of Pakistan, both executed in November 2019. LRPL is part of the Yunus Brothers Group (YBG), a diversified conglomerate with business interests in sectors including Cement, Textiles, Power Generation, Chemicals, Automobiles, Pharmaceuticals, Healthcare, Real Estate, and Entertainment.

Assigned ratings take into account the business risk profile of the renewable energy sector, characterized by medium-to-low sector risk. The limited exposure to economic cyclicality, low competitive intensity due to regulated market structures, and long-term contractual arrangements under EPAs provide revenue predictability. Wind risk, borne by the Company, may impact efficiency; however, independent studies indicate its mitigation over time. The Company also benefits from a long-term EPA with CPPA-G, which mitigate demand and off-take risks. Furthermore, dependence on renewable resources minimizes risks associated with raw material availability. The sponsor’s strong financial profile and diversified business interests contribute to the Company’s operational synergies and overall risk profile.

Assigned ratings also consider the financial risk profile of the Company. The profitability profile improved in FY24 due to a tariff adjustment approved by NEPRA, contributing to higher gross margins and a reversal of prior net losses. The coverage profile strengthened with improvements in DSCR and STD coverage ratios, supported by enhanced funds flow from operations. Capitalization metrics improved with higher equity, driven by accumulated profits and lower debt levels. Liquidity constraints have historically persisted, though FY24 saw marginal improvements due to operational cash flows addressing working capital gaps. Meanwhile, receivables from CPPA-G accumulated at end-FY24, though were settled subsequently as per the management. Moreover, government backed guarantee on receivables mitigates the associated risks. Meanwhile, cash conversion cycle remained favorable. Going forward, ratings will remain sensitive on sustained improvement in financial metrics, particularly liquidity and coverage profiles.

For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk







Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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