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

Engro Energy Limited (EEL) along with China Machinery & Engineering Corporation (CMEC) has set up a 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 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. Company's both units were successfully connected to and are providing electricity to the grid. During 1HCY23 the plant generated net electrical output of ~1,464GWh (CY22: ~3,686GWh, CY21: ~4,225GWh) and subsequently recorded revenue of PKR ~48,240mln (CY22: ~74,859mln, CY21: PKR ~76,915mln) against Energy and Capacity invoices. Throughout the period, the plant was able to meet its operational benchmarks of availability and efficiency as agreed in the PPA. The financial strength and experience in the energy chain of the sponsoring companies – EEL and CMEC – is positive to the ratings. The Government of Pakistan has given payment guarantee against dues from CPPA-G. However, mounting trade receivables of PKR ~52,042 as on June 2023, remains a cause of concern. EPTL is efficiently managing its net cash cycle days by stretching its payables to SECMC which stood at ~PKR 46,081 as on June 2023. To finance its working capital needs, the company has availed short-term borrowing lines of PKR 18,750mln (~96% utilized) as of June 2023. Going forward, the Company plans to manage its operations through adequate cashflow generation and efficient utilization of working capital lines. The Company has successfully repaid approximately 30% of its foreign debt and 21% of its local debt relating to the plant construction cost. As of June 2023, the company has long term debt obligations of PKR 121,686mln along with current maturity of PKR 17,921mln.
The assigned ratings reflect the sponsors strength along with guarantee provided by the power purchaser. Going forward, the Company’s main focus would be to keep the plant operational and meet required benchmarks along with timely repayment of debt obligations.

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.