Press Release

VIS Assigns Initial Entity Ratings to TNB Liberty Power Limited

Karachi, August 19, 2022: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A+/A-1’ (Single A Plus/A- One) to TNB Liberty Power Limited (TNBL). The medium to long-term rating of ‘A+’ signifies good credit quality and adequate protection factors. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’.
The assigned ratings take into account low business risk profile of the company underpinned by inking of 25-year long power purchase agreement (PPA) with ‘take or pay’ provision with the Central Power Purchasing Agency (Guarantee) Limited (CPPA-G). Presence of long-term PPA with guaranteed capacity payments mitigates off-take risk as obligations of CPPA-G are backed by sovereign guarantee. Moreover, upholding operational performance in line with agreed performance levels would remain a key-rating driver. Assessment of financial risk profile incorporates sound debt coverage metrics and healthy cash flows in relation to outstanding debt repayments. The ratings remain sensitive to reduction in margins expected post tariff discount implemented on company’s capacity payments and EPP’s variable operations & maintenance component; given the revision was implemented in Jan’22 the result of the same is yet to be ascertained. Further, the ratings take comfort from master agreement signed with the GoP leading to improved liquidity indicators as a sizeable chunk of the outstanding trade debts was received during the ongoing year.

The ratings incorporate change in ultimate ownership of the company leading to changes in liability profiling. The company is headed towards the end of its PPA term, the debt servicing of the aforementioned financing will be done from the company’s profit generation as opposed to normal provision in built in capacity payments. Subsequently, as an outcome of increase in borrowings, gearing has scaled upwards during the rating review period. The ratings reflect observations of external auditors involving going concern and emphasis of matter citations. Management believes that adequate mitigants for the observations are in place. The leverage indicators are expected to improve over time on account of timely repayment of debt coupled with augmentation of equity base through profit retention; the projected improvement in the aforementioned is captured in the assigned rating. Going forward, ratings remain dependent on sustained efficiency levels, improvement in leverage indicators and corresponding profitability indicators.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8010) and/or the undersigned at 021-35311861-66 (Ext. 207) or email at .

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .