PACRA Upgrades 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 CY23 the plant generated net electrical output of ~3,623GWh and subsequently recorded Net Revenue of PKR ~108,479mln 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 Government of Pakistan has given payment guarantee against dues from CPPA-G. However, mounting trade receivables of remains a cause of concern. 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 40% of its foreign and 30% of its local project related debt. The Company's sponsors Engro Energy Limited - holding the Engro Corporation thermal energy asset portfolio have entered into a definitive agreement with Liberty Power Holding Limited and other parties acting in concert for the sale of its entire shareholding in EPTL. The transaction is in process and expected to materialize by end of CY24.
The assigned ratings reflect the sponsors strength along with guarantee provided by the power purchaser. Furthermore, the plant has been placed at top priority due to its low cost energy generation leading to higher demand from CPPAG. Simultaneously, the plant has been successfully meeting its operational benchmarks leading to optimal efficiency. Going forward, the Company’s main focus would be to keep the plant available and operational and 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.