PACRA Upgrades Entity Ratings of Thar Energy Limited

The Hub Power Company Limited (HUBCO) of Pakistan along with Fauji Fertilizer Company Limited (FFCL), has set up a 330MW coal power plant, under the umbrella of Thar Energy Limited (TEL). Both major shareholders collectively represent 90% shareholding, and have very strong credentials, as also reflected by their Entity Ratings (AA+). The financial strength and experience in the energy chain of the sponsoring companies is positive to the ratings, while the controlling interest lies with HUBCO. TEL has been awarded an upfront tariff, with the payments to be received from CPPA-G against Energy and Capacity, backed by the sovereign guarantee. The plant successfully achieved its Commercial Operations (COD) on 1st October 2022 and has been supplying electricity to the national grid since then. As per the Power Purchase Agreement (PPA), CPPA-G has charged Liquidated Damages (LD) to the Company for the delay in COD from the required date. The plant will operate on local Thar Coal which will be provided by Sindh Engro Coal Mining Company (SECMC) under the Coal Supply Agreement. Due to the low electricity generation cost, TEL has been prioritized in the merit order list by NTDC. In accordance with the agreement, Hub Power Services Limited (HPSL) an associated company will provide Operations and Maintenance (O&M) services for the plant. The O&M contractor will be responsible for maintaining the operational benchmarks (Availability: 85%, Efficiency: 37%). The Company has long term project debt that is repayable in a period of ten years. As per rising operational needs, the Company plans on procuring further working capital financing in the near future.
Going forward, the capacity of the Company to generate stable cash flows in order to make timely repayments against the project debt remains crucial. With rising concerns about circular debt, the trend of payments received from CPPA-G against invoices will further impact ratings.

About the Entity
Thar Energy Limited was incorporated in Pakistan on May 17, 2016 as a limited company under the repealed Companies Ordinance, 1984. The 330MW coal IPP is situated in the energy park located in Block II of the Thar coalfields in Sindh. Mr. Saleemullah Memon is the CEO of the Company. Mr. Memon has over two decades of experience in the energy and manufacturing sectors. He holds an MBA degree in Finance. The actual cost of the project stands at USD 520mln. The debt financing constitutes 75% of the project cost i.e., USD 390mln, which has been financed through the consortium of local and foreign financial institutions. The equity financing constitutes remaining 25% of the project cost i.e., USD 130mln, which has completely been injected through the sponsors.