PACRA Maintains Entity Ratings of Sindh Engro Coal Mining Company

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.
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.

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.