PACRA Maintains Entity Ratings of Engro PowerGen Thar (Pvt.) Limited

Engro Powergen Thar (Pvt.) Limited (“EPTL” or “the Company”) operates Pakistan’s first 2x330MW indigenous lignite coal–fired, mine-mouth power plant. Since its COD on July 10, 2019, the plant has operated reliably, consistently meeting its Power Purchase Agreement (PPA) benchmarks of 85.5% availability and 37% efficiency, with both units supplying electricity to the national grid. The assigned ratings underpin the strength of the Engro Group, one of Pakistan’s leading conglomerates with a well-established track record in the energy sector, its strong financial backing, and the support of a regulated business framework that provides revenue certainty through guaranteed returns, cost indexation, and a pass-through tariff mechanism, provided the plant continues to meet the agreed operational benchmarks. Fuel supply risk is considered low, as EPTL has signed a Coal Supply Agreement with Sindh Engro Coal Mining Company (SECMC) for the annual supply of 3.8mlnMT of coal under a dedicated 30-year arrangement. As of March 2025, Pakistan’s installed power capacity stood at 46,605 MW, generating 90,145 GWh (46.3% fossil, 30.4% hydro, 19.1% nuclear, 4.2% renewables). Despite gradual growth in renewables, sector challenges, transmission bottlenecks, rising costs, and circular debt, persist. The Rs1,275bln circular debt management plan aims to improve sector liquidity through partial settlements and stricter payment mechanisms, though timelines and implementation remain uncertain, which may weigh on receivables. During 1HCY25, the plant generated ~1,867 GWh with net sales of PKR 55.5bln (CY24: 3,592 GWh; PKR 120.7bln). Owing to the use of local coal, the relatively lower tariff placed the plant higher in the merit order maintained by the National Power Control Centre (NPCC) resulting in better dispatches. Receivables, backed by sovereign guarantees, stood at PKR 38.3bln as of June25, though collections face some delays due to the sector-wide circular debt issue. Working capital requirements are managed through stretched payables leveraging related-party support. In addition, short-term bank borrowings of PKR 19.23bln were arranged, of which PKR 16.19bln remained utilized as of 1HCY25. The capital structure remains moderately leveraged, with gearing stood at 58.9% as of 1HCY25 (CY24: 61.8%), largely comprising project-related loans. Repayments are progressing as scheduled, with ~49% of foreign and ~38% of local obligations already settled, driving a steady decline in leverage. Non-project-related borrowings, mainly short-term working capital facilities, made up ~13% of total debt. Free cash flows from operations of PKR 24.8bln in 1HCY25, coupled with strengthened coverage ratios, EBITDA-to-finance cost improving to 3.8x (CY24: 2.6x), provide adequate comfort for timely debt servicing. Equity rose to a strong PKR 89.4bln, providing further support to the capital structure.
Ratings remain sensitive to the plant’s availability, compliance with PPA terms, and timely debt servicing. Sustaining prudent financial metrics and preserving strong cash flow generation will be critical to maintaining the current profile. In addition, developments around sector reforms, regulatory changes, and the outcome of the circular debt refinancing plan, particularly given EPTL’s CPEC-linked structure and reliance on Chinese financing, remain key external considerations.

About the Entity
Engro Powergen Thar (Private) Limited (EPTL), incorporated in 2014 under the CPEC framework, is located in Thar Block II, Sindh. The project, with a cost of USD 1.1bn, achieved commercial operations in July 2019 and was financed through a 75:25 debt-to-equity mix. EPTL’s sponsors include Engro Energy Limited (50.1%), China Machinery Engineering Corporation (35%), HBL (9.5%), and Liberty Mills (5.4%), while CMEC also holds USD 85mn in preference shares. Engro Energy Limited (EEL) is a wholly owned subsidiary of Engro Corporation.