Sindh Engro Coal Mining Company

CREDIT RATING REPORT | Jul-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
18-Jul-25 AA A1+ Stable Maintain -
19-Jul-24 AA A1+ Stable Maintain -
19-Jul-23 AA A1+ Stable Maintain -
19-Jul-22 AA A1+ Stable Maintain -
19-Jul-21 AA A1+ Stable Maintain -
About the Entity

Sindh Engro Coal Mining Company Limited is a public unlisted company, incorporated in Pakistan on October 15, 2009. The Company was formed under a Joint Venture Agreement between the Government of Sindh (GoS), Engro Energy Limited (EEL) and Engro Corporation Limited for the development, construction, and operations of an open-cast lignite mine in Block-II of Thar Coal Field, Sindh. Currently, the Company’s ordinary shares, ~91.5% of the total equity, are owned by Government of Sindh (~54.70%), Engro Energy Limited, (~11.90%), Thal Limited (~11.90%), Habib Bank Limited (~9.50%), HUBCO (~8%), and CMEC Thar Mining Investments LTD (~4%). While preference shares, ~8.5% of the total equity, are owned by Huolinhe Open Pit Coal (HK) Investment Co. Ltd (100%). The board of SECMC comprises of a total number of twelve directors (including the CEO), out of which five directors are nominated by the Government of Sindh, and the remaining directors (including the CEO), are nominated by Engro and its affiliates.

Rating Rationale

The Rating reflects the ownership stake of Sindh Government in the Company (Sindh Engro Coal Mining Company’s/SECMC) along with the strategic importance of the project for a sustainable energy solution of the Country. The entity is overseen by Government of Sindh which provides support to the stability of the company. Comfort is also drawn as the country’s biggest conglomerate, Engro Corporation Limited (ECorp), has its stake in the company through its subsidiary company, Engro Energy Limited, and HUBCO. SECMC holds the lease for Block-II (out of twelve blocks) of the Thar coalfields, which has sufficient reserves to support large-scale power generation over the long term. The Policy for Coal Tariff Determination offers a guaranteed internal rate of return, cost indexation and pass-through tariff structure for SECMC. Business risk is considered low, exhibited by demand risk coverage as SECMC has signed a Coal Supply Agreements with companies, Engro Powergen Thar Limited (EPTL) for annual supply of 3.8 million tonnes of coal for Phase-I and with Thal Nova Power Thar (Private) Limited (TNPTL) and Thar Energy Limited (TEL) for annual supply of 1.9 million tonnes of coal to each for Phase II and with Lucky Electric Power for annual supply of 3.8 million tonnes of coal for Phase-III. After successful commissioning of Phase-I on 10th July 2019, the COD of Phase-II is achieved on September 30, 2022. The Project Completion date (PCD) of Phase-I has been achieved in May 2023. Phase-III is in pipeline and its financial close is expected in the near future. SECMC has reported its topline of PKR 23bln during 1QCY25. Net profit for the period stood at PKR 5,291 million, reflecting a decline from PKR 11,259 million in the corresponding period last year. Strong equity base and liquidity support the timely repayment of phase-I and II project debt. The debt for Phase-I comprises a mix of local and foreign financing, while Phase-II is financed entirely through local sources.

Key Rating Drivers

Adherence to good financial discipline towards both financial and commercial obligations is considered a strength. Meanwhile, upholding strong operational performance in line with agreed performance levels remain important. Effective management of the project, favorable regulatory regime, and consistency in related policies remain critical for the Ratings. The Ratings also incorporate the prevailing challenges on account of circular debt crisis.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Sindh Engro Coal Mining Company

rating analysis

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Profile
Legal Structure

Sindh Engro Coal Mining Company Limited is a public unlisted company, incorporated in Pakistan on October 15, 2009. The Company has its registered office at The Harbor Front Building, Clifton, Karachi. 


Background

The Company had commenced an initial feasibility study of the project in November 2009 through a team of International Consultants and local experts to confirm the technical, environmental, social and economic viability of the Project. The study was carried out on an area of 79.6 sq. km allocated to the Company in Thar Coalfield which was approved by the Technical Committee of the Government of Sindh on August 31, 2010.


Operations

The Company was formed under a Joint Venture Agreement, dated September 8, 2009, between the Government of Sindh (GoS), Engro Energy Limited (EEL) [formerly Engro Powergen Limited (EPL)] and Engro Corporation Limited for the development, construction and operations of an open-cast lignite mine in Block II of Thar Coal Field, Sindh.


Ownership
Ownership Structure

The Company’s ordinary shares, ~91.5% of the total equity, are owned by Government of Sindh (~54.70%), Engro Energy Limited (~11.90%), Thal Limited (~11.90%), Habib Bank Limited (~9.50%), HUBCO (~8%), and CMEC Thar Mining Investments LTD (~4%). While preference shares, ~8.5% of the total equity, are owned by Huolinhe Open Pit Coal (HK) Investment Co. Ltd (100%).


Stability

Majority shareholding owned by Government of Sindh provides support to stability of the Company. Comfort is also drawn as the country’s biggest conglomerate, Engro Corporation Limited (ECorp), has its stake in the company through its subsidiary company, Engro Energy Limited, Thal Limited and HUBCO.


Business Acumen

Government of Sindh holds SECMC as its strategically vital asset, whereas more technical knowledge flows in from Engro, Thal Limited, HUBCO & CMEC. The business acumen of sponsors of the Company is considered strong.


Financial Strength

Joint ownership from the Government of Sindh (GoS) and association of financially sound conglomerates provide absolute financial strength to the company. Given the strategic importance of SECMC to the GoS, in terms of its socio-economic policies and its quest of reducing the import bill, the probability of sovereign support, in case the Company requires it, remains high.


Governance
Board Structure

The Board of Directors of SECMC comprises twelve experienced professionals. Five members represent the Government of Sindh, while Engro Corporation has two nominees. Thal Limited is represented by two members as well. Additionally, one board member each is nominated by Habib Bank Limited, HUBCO, and Huolinhe Investment Company. This diverse representation reflects a strong institutional backing and promotes a balanced governance structure.


Members’ Profile

Mr. Amir Iqbal is the Chief Executive Officer of Sindh Engro Coal Mining Company and Thar Foundation. He has over 34 years of experience in general management and has led various teams in sales and marketing function across Pakistan, Australia, and Africa. Mr. Najam Ahmed Shah serves as the Acting Chairman of the Board and represents the Government of Sindh. He brings over two decades of experience in government service, spanning the energy and health sectors in Punjab, and has held key administrative positions, including Secretary Finance in Sindh. The Company’s Board comprises highly qualified professionals with substantial local and international experience across various areas of the industry.


Board Effectiveness

During CY24, the Board held eight meetings to address the strategic decisions of the company. There are six committees at the Board level, namely i) Audit Committee, ii) Risk Management committee, iii) Peoples Committee, and iv) Procurement committee, V) CSA committee, and Vi) expansion committee. The TORs of all the committees are formally defined and they maintain a strong control environment over the organization.


Financial Transparency

A. F. Ferguson & Co., a member firm of PWC, is the auditor of the company. They expressed an unqualified opinion on the company’s financial statements at end-Dec'24. Though the company is non-listed, still financial statements have been being prepared in a timely fashion to maintain financial transparency intact.


Management
Organizational Structure

Company’s organization is structured around the effective functioning of seven major departments. Each department is headed by an experienced professional, reporting directly to the CEO. The departments comprise: a) Finance and IT, b) HR & Admin, c) Site Operations, d) Mine Tech & Expansion, e) Water Resources, f) Commercial Operations, & g) Audit


Management Team

Mr. Amir Iqbal is the Chief Executive officer of the Company, He has over 34 years of experience in general management and has led various teams in Sales and Marketing function across Pakistan, Australia and Africa. He has managed various global and local mega brands and led cross functional teams to deliver business results. Mr. Muhammad Muddasir is the CFO of the Company, an FCA, he got overall experience of ~21+ years.


Effectiveness

To oversee the management of the company, SECMC has constituted an internal management committee comprising of executives from SECMC and of all subsidiaries Engro Energy Limited. The purpose of the committee is to drive the strategic decision making for the company and formulates new strategies to deal with developments that the company encounters.


MIS

SECMC uses SAP as its Enterprise Resources Planning (ERP) Software specifically the FICO (Finance Module), MM (Material Management) and, S&D module (Sales and Distribution) for maintaining its financial database. SAP FI is made up of submodules. The sub-modules that are often used to generate reports of accounts receivables, accounts payables, asset accounting, general ledger accounting and bank accounting.


Control Environment

SECMC maintains an effective control environment with defined policies and procedures. Company’s internal audit function performs regular reviews on the financial, operational and compliance controls and reports directly to the audit committee for all critical issues.


Business Risk
Industry Dynamics

Pakistan’s total coal reserves stood at ~185,175mln tonnes and is ranked seventh amongst the lignite (coal) rich countries of the world. Of all the reserves ~99% of the reserves are present in Sindh province, while Punjab, and Baluchistan shares ~0.1% each to the total reserves. The country’s largest coal reserves are located at Tharparkar District in the south-eastern province of Sindh, where about ~175,506mln Tonnes is identified, which is ~94% of the total reserves and ~95% of the reserves in Sindh Province.


Relative Position

SECMC project is being developed in Block II. It has the total reserves of ~1,584mln tonnes which is ~1% of the total reserves in Thar region of Sindh. It is estimated that SECMC holds the lease for Block-II of the Thar coalfields, which has sufficient reserves to support large-scale power generation over the long term.


Revenues

The Company's revenues come from two sources i.e., capacity payment and revenue received against coal supply. The Company started its operations in July-19 and is currently supplying coal to three customers EPTL, TEL and TNPTL having annual capacity of 7.6 MTPA. The current prevailing coal tariff is year 3 of Phase II COD stage tariff of USD 48.27 per ton. During 1QCY25 the Company’s revenue generation is reported at PKR 23,047mln (1QCY24: PKR 27,334mln) representing a dip of 15% which can be attributable to the change in the trend of power generation.


Margins

During 1QCY25, the Company reported a gross profit of PKR 10,170 million, compared to PKR 17,192 million in 1QCY24. Net profit for the period stood at PKR 5,291 million, reflecting a decline from PKR 11,259 million in the corresponding period last year. The decrease was primarily attributable to two key factors. Firstly, delayed payment interest declined during the period, mainly due to improved collections and a reduction in KIBOR rates. Secondly, other income also decreased, driven by lower bank profit resulting from reduced KIBOR rates compared to previous periods. Consequently, the net profit margin declined to 23%, down from 45.7% in 1QCY24, indicating pressure on profitability due to reduced margins.


Sustainability

Coal is mostly imported in Pakistan to meet domestic demand and, although imported coal is a cheap source of fuel compared to imported oil. With the development of Pakistan’s huge coal reserves at Thar, the country will be able to substitute its use of imported oil and, through the use of affordable and sustainable energy sources.


Financial Risk
Working capital

At 1QCY25, the Company's net working capital cycle stood at 307days compared 276 days in 1QCY24. SECMC manages its working capital cycle through mix of internal cashflows and short term borrowings. During review, Company’s reliance on short term borrowings stands PKR 2,400mln.


Coverages

FCFO of the Company, which are closely linked to overall profitability, stood at PKR 8,477 million during 1QCY25, compared to PKR 18,829 million in 1QCY24. The decline reflects reduced cash generation from core operating activities. As a result, coverage metrics were also impacted, with the FCFO-to-finance cost coverage ratio declining to 3.8x from 4.7x in the corresponding period last year.


Capitalization

The total project cost of phase I was ~USD 626.8mln which is being financed with a debt to equity ratio of 75:25. Debt portion is a mix of local and foreign financing. The first principal payment for the same was due in June-20 and the respective obligation is timely fulfilled by the entity. Phase II has a total project cost of USD 173mln. Phase-II is financed entirely through local sources.
 
 

Jul-25

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Sindh Engro Coal Mining Company

financial summary

(PKR mln)

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Mar-25
3M		 Dec-24
12M		 Dec-23
12M		 Dec-22
12M
A. BALANCE SHEET
1. Non-Current Assets 95,618 96,929 96,323 97,007
2. Investments 0 0 0 0
3. Related Party Exposure 50,229 4,666 238 206
4. Current Assets 128,028 161,449 136,343 105,009
a. Inventories 1,352 1,224 1,770 994
b. Trade Receivables 86,864 65,732 66,557 46,616
5. Total Assets 273,875 263,044 232,905 202,222
6. Current Liabilities 46,046 32,354 27,069 59,028
a. Trade Payables 0 0 0 0
7. Borrowings 76,667 87,114 103,662 84,111
8. Related Party Exposure 112 82 73 0
9. Non-Current Liabilities 31,173 28,906 21,857 0
10. Net Assets 119,878 114,588 80,244 59,083
11. Shareholders' Equity 119,878 114,588 80,244 59,083
B. INCOME STATEMENT
1. Sales 23,047 101,266 118,384 51,598
a. Cost of Good Sold (12,877) (44,523) (62,271) (31,947)
2. Gross Profit 10,170 56,743 56,113 19,651
a. Operating Expenses (403) (2,584) (1,823) (808)
3. Operating Profit 9,766 54,160 54,290 18,843
a. Non Operating Income or (Expense) (1,548) 625 8,520 (2,174)
4. Profit or (Loss) before Interest and Tax 8,218 54,784 62,810 16,670
a. Total Finance Cost (2,695) (15,197) (26,560) (7,202)
b. Taxation (232) (2,244) 1,888 (1,574)
6. Net Income Or (Loss) 5,291 37,343 38,137 7,894
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 8,477 52,348 49,068 24,446
b. Net Cash from Operating Activities before Working Capital Changes 13,178 59,221 56,852 17,321
c. Changes in Working Capital (9,633) 12,345 (44,241) 4,846
1. Net Cash provided by Operating Activities 3,545 71,566 12,610 22,168
2. Net Cash (Used in) or Available From Investing Activities (335) (6,637) (5,300) (12,700)
3. Net Cash (Used in) or Available From Financing Activities (10,998) (35,416) (14,791) 6,437
4. Net Cash generated or (Used) during the period (7,788) 29,512 (7,481) 15,904
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) -9.0% -14.5% 129.4% 31.9%
b. Gross Profit Margin 44.1% 56.0% 47.4% 38.1%
c. Net Profit Margin 23.0% 36.9% 32.2% 15.3%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) -5.0% 63.9% 4.1% 56.8%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 18.1% 38.3% 54.7% 19.1%
2. Working Capital Management
a. Gross Working Capital (Average Days) 307 244 179 283
b. Net Working Capital (Average Days) 307 244 179 283
c. Current Ratio (Current Assets / Current Liabilities) 2.8 5.0 5.0 1.8
3. Coverages
a. EBITDA / Finance Cost 4.1 3.7 3.1 3.4
b. FCFO / Finance Cost+CMLTB+Excess STB 1.8 2.2 1.9 1.8
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 2.9 1.9 2.5 4.6
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 39.0% 43.2% 56.4% 58.7%
b. Interest or Markup Payable (Days) 121.9 23.0 40.3 56.3
c. Entity Average Borrowing Rate 10.4% 15.4% 17.1% 8.8%

Jul-25

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Sindh Engro Coal Mining Company

rating scale

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Jul-25

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Sindh Engro Coal Mining Company

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
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