Analyst
Hashim Yazdani
hashim.yazdani@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains the Rating of Engro PowerGen Thar (Private) Limited | PP Sukuk
Rating Type | Debt Instrument | |
Current (28-Feb-24 ) |
Previous (28-Aug-23 ) |
|
Action | Maintain | Maintain |
Long Term | AA- | AA- |
Short Term | - | - |
Outlook | Stable | Stable |
Rating Watch | - | - |
Engro Energy Limited (EEL) along with China Machinery & Engineering Corporation (CMEC) has set up first Thar coal based (2 x 330 MW) power plant (Complex) - Engro PowerGen Thar (Pvt.) Limited (EPTL). Since its COD in July’19, EPTL is running its operations smoothly and sustainably and achieving operational benchmarks. The primary fuel is local Thar Coal. A 30-year Coal Supply Agreement is signed with Sindh Engro Coal Mining Company (SECMC), which is operating a coal mine in Thar Block-II. The Company's both units are successfully providing electricity to the national grid. The plant will supply electricity under the 30-year Power Purchase Agreement signed with CPPAG. During CY23, the plant generated Net Electrical Output of 3,623 GWh while maintaining its required availability benchmark of 85.5%. Simultaneously, the Company reported Net Revenues of ~PKR 108,478mln (CY22: PKR 74,860mln) during CY23 from Energy and Capacity invoices to CPPAG. The financial strength and experience in the energy chain of the sponsoring companies – EEL and CMEC – is positive to the ratings. EPTL has built its own financial strengths in a short span of time by adding to its equity base.
Going forward, the Company’s main focus would be to meet the operational benchmarks. The Government of Pakistan has given payment guarantee against dues from CPPA-G. However, the payments of outstanding receivables against energy and capacity invoices remain vital to supply liquidity to the Company.
About
the Entity
EPTL, incorporated in September 2014, has set up a 2 x 330 MW Coal-based Power Plant under the 2002 Power Policy. The Company is a special purpose vehicle. It is the first indigenous coal based Power Plant of Pakistan in Thar Block – II, Sindh, for a total cost of USD 1.1bln, having a D/E ratio of 75:25. EPTL's majority ordinary shares are owned by Engro Energy Limited (EEL)(50.1%) and China Machinery Engineering Corporation (CMEC) (35%), while the remaining stake is owned by Habib Bank Limited (HBL) (9.5%) and Liberty Mills Limited (LML) (5.4%). Engro Energy Limited (EEL) is 100% owned subsidiary of Engro Corporation.
About
the Instrument
EPTL issued a secured, & privately placed sukuk of the amount PKR 3bln on 2nd August 2019. The instrument carried a profit rate of 3MK + 110bps with a tenor of five (5) years. The purpose of the Sukuk is to meet the Company's working capital requirement. The instrument has a call option attached to it which will enable the Company to redeem the Sukuk issue in part or whole. As of November 2023, the Company has paid markup of ~PKR 1,506mln along with PKR 1,500mln of the principal amount.