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The Pakistan Credit Rating Agency Limited
Press Release

Date
17-Aug-22

Analyst
Anam Waqas Ghayour
anam.waqas@pacra.com
+92-42-35869504
www.pacra.com

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PACRA Maintains the Entity Ratings of ThalNova Power Thar (Pvt) Limited | Rating Watch

Rating Type Entity
Current
(17-Aug-22 )
Previous
(02-Sep-21 )
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch Yes -

ThalNova Power Thar (Pvt) Limited (“the Company”) is setting up a 1x330 (gross) mine mouth Thar coal-based power plant located at Block – II, Thar Coalfield, District Tharparkar, Sindh. ThalNova was awarded an upfront tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. China East Resource Import & Export Corporation and China Machinery Engineering Corporation are the EPC contractors; comfort is drawn that they have ~30 years of worldwide experience. Under the Power Purchase Agreement (PPA), the Company's Required Commercial Operations Date (RCOD) was March 31, 2021, however, due to lockdown owing to COVID-19, the revised RCOD approved by CPPA-G is Jun’22, while the management expects it to come online till the end of this year. The power purchaser may charge LDs to the Company due to delay in achieving COD, which may not be further charged to the contractor by the management as contractor is also the shareholder and has supported the Company throughout the construction phase, The EPC contractors have provided bank guarantees in the form of performance bond and warranty bond. These bank guarantees provide additional cushion for the sustainable financial risk profile. Further, the company will maintain the Debt Service Reserve Account, which will be filled by 6 months SBLCs, providing coverage of six months on its financial obligations till maturity. The Company’s coal-supplier, SECMC, is one of the largest public-private partnership in the energy sector and has an annual production capacity of 3.8mln tons. Currently, the second phase of the SECMC mine is under development which will increase its production to 7.6mln tons per annum with a cumulative power generation of 1320MWs.
The Company signed Power Purchase Agreement (PPA) with CPPA-G and as per the PPA, in case of no demand from the power purchaser, CPPA-G shall be liable to pay the capacity payments at applicable tariff rates. The Government of Pakistan has given payment guarantee against dues from CPPA-G. The Company has adequate insurance coverage to cover the risk of business interruptions, marine & erection, startup-delay etc. Rating Watch incorporates prolonged delay in achieving COD and LDs that may be charged to the company by the power purchaser. Going forward, timely repayments of the debts will also remain imperative for the ratings.

About the Entity
ThalNova Power Thar (Pvt.) Limited was incorporated in Pakistan on April 18, 2016 as a limited company under the repealed Companies Ordinance, 1984. The 330MW coal IPP is setting up 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 twenty years of experience in the energy and manufacturing sector. Mr. Memon holds an MBA in Finance. The total cost of the project is USD 527mln, debt financing constitutes 75% of the project cost i.e., USD 395mln, which is financed from local and foreign financial institutions. Both the local loan and foreign loan has a tenure of 14 years with repayment in 10 years. Furthermore, the key sponsor HUBCO has an exclusive focus on the different dimension of the energy sector. HUBCO itself is a large RFO based power plant and has investments in Sindh Engro Coal Mining Company (SECMC), Narowal Energy Ltd, Laraib Energy, Thar Energy Ltd, Hub Power Services Ltd (HPSL) and through Hub Power Holding in addition to ThalNova Power Thar Pvt. Ltd have interest in China Power Hub Generation Company (CPHGC).

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.