Thar Energy Limited (TEL), an independent power producer (IPP), has established a 330 MW coal-fired power plant in Thar Block II on a Build-Own-Operate (BOO) basis. The plant commenced commercial operations on October 1, 2022.

TEL is awarded a levelized tariff by NEPRA of US¢ 8.5015/KWh and Rs. 8.2550/KWh for coal-power projects. The tariff control period is 30 years from the Commercial Operations Date (COD). The tariff is indexed to the Pakistan Rupee-US Dollar exchange rate, US & Pakistan CPI inflation, and interest rate benchmarks such as KIBOR / SOFR. Principal & interest repayments, return on equity (ROE), insurance, fixed and variable O&M costs form part of the adjustable/scalable component; fuel price variations and all taxes/levies are fully passed through to the power purchaser. Under the decision for the July-September 2025 quarter, the capacity charge is Rs. 11.8134/KWh and the energy purchase price is Rs. 1.0420/KWh.

As per NEPRA’s tariff determination, TEL is entitled to a Return on Equity (ROE) of 30.65% per annum, applicable to the project with a 40-month construction period. Since the plant achieved commercial operations in October 2022, this ROE is embedded in the approved tariff and contributes to the company’s regulated returns.

Thar Energy Limited (TEL) is sponsored by The Hub Power Company Limited (HUBCO), Fauji Fertilizer Company Limited (FFC), and China Machinery & Engineering Corporation (CMEC) through CMEC Tel Power Investments Limited (CMEC Dubai). HUBCO holds the controlling stake of 60%, followed by FFC with 30% and CMEC with 10%. As part of the HUBCO Group’s growth strategy, TEL forms a key component of its coal-based portfolio under the China-Pakistan Economic Corridor (CPEC), reflecting strong collaboration between local and international partners.

Stability is underpinned by the long-term strategic investment of its sponsoring groups, including The Hub Power Company Limited (HUBCO), Fauji Fertilizer Company Limited, and China Machinery & Engineering Corporation (CMEC) through CMEC TEL Investments. This strong and diversified sponsorship ensures TEL’s long-term sustainability and operational resilience.

The sponsor groups have a proven track record in developing and operating power projects across Pakistan, spanning thermal, coal, and renewable energy sources. HUBCO, as the major sponsor, is the country’s largest independent power producer with a total installed capacity of 3,581 MW, held through its wholly owned subsidiary, Hub Power Holdings Limited (HPHL).

Diversified across multiple sectors, HUBCO and the Fauji Group are among Pakistan’s top conglomerates, supported by strong financial foundations. Their partner, China Machinery & Engineering Corporation (CMEC), brings global engineering expertise and international project experience, further reinforcing TEL’s operational and strategic strength.

TEL’s Board of Directors comprises seven members, including six non-executive members and the CEO. HUBCO has four nominees on the board (including the Chief Executive Officer), Fauji Fertilizer Company Limited (FFC) is represented by two members, while China Machinery Engineering Corporation (CMEC) has one nominee. The current board members are Mr. Muhammad Kamran Kamal (Chairman), Mr. Aly Khan, Mr. Muhammad Saqib, and Mr. Amjad Ali Raja (CEO) as Hubco nominees; Mr. Jahangir Piracha and Mr. Syed Atif Ali as FFC nominees; and Mr. Zhao Wenke as the CMEC nominee. The Company Secretary is Ms. Zamzam Sohail Kassamal.

Mr. Kamran Kamal is the Chairman of the Board of Directors of TEL and also the CEO of The Hub Power Company Limited (HUBCO). He has been associated with HUBCO Group in various capacities and brings vast experience of the local power sector. The remaining members also possess sufficient experience in their respective fields.

The board conducts regular meetings to discuss matters relating to the Company's operations and financials, along with providing supervision and granting approval for other policies of the Company.

The management ensures timely preparation of accounts along with maintenance of financial records relating to invoices to the power purchaser. A. F. Ferguson & Co. Chartered Accountants are the external auditors of the company.

IPPs are generally featured by a flat organizational structure, mainly comprising finance and technical staff, while the engineering, construction and operations of the plant are outsourced.

Mr. Amjad Ali Raja has been appointed as the new CEO in July 2024. He has been associated with HUBCO group since 2013. With an engineering background, Mr. Amjad brings 22 years of experience in the energy sector. The remaining team of individuals possess prerequisite qualification and experience.

The management is majorly engaged in operational matters relating to the Company including invoicing to CPPAG, internal audit, preparation of accounts and tariff determination while the plant's operations and maintenance are outsourced.

The management has developed a comprehensive internal audit function which ensures timely delivery of data and reports. Furthermore, the operation and maintenance contractors deliver reports to the management relating to the plant operations to ensure smoothness.

Thar Energy Limited has executed a 30-year Power Purchase Agreement (PPA) with the Central Power Purchasing Agency-Government (CPPA-G), under which TEL will supply electricity and issue invoices for both the Energy Purchase Price and the Capacity Purchase Price. The PPA ensures revenue certainty over the term, tying payments to availability (capacity) and actual energy supplied.

Thar Energy Limited has entered into a long-term contractual arrangement with Hub Power Services Limited (HPSL), a wholly-owned subsidiary of HUBCO, to manage the plant’s operations and maintenance. As part of this, GE Power has also been awarded equipment supply and a 12-year maintenance services agreement for TEL, covering boiler, turbine and generator support, spare parts, inspections, and advisory services.

TEL sources its coal requirements from Sindh Engro Coal Mining Company (SECMC) under a 30-year Coal Supply Agreement signed at the project’s inception. The risk primarily arises if SECMC fails to deliver the contracted coal quantity or quality, which may affect plant availability and generation. Since the plant is designed specifically for Thar lignite, the absence of alternate local suppliers further heightens dependency on SECMC. Mitigation is provided through a long-term contractual framework and regulatory mechanisms, yet supply chain disruptions, operational challenges at the mine, or policy shifts could still pose risks to TEL’s performance.

TEL has arranged comprehensive insurance policies to safeguard its assets and operations. The coverage includes material damage, machinery breakdown, third-party liability, and business interruption/delay in startup losses, ensuring protection of both physical assets and revenue streams. In addition, contractors are contractually bound to pay Liquidated Damages (LDs) in the event that benchmark performance ratios are not achieved. These measures collectively mitigate operational and financial risks associated with unforeseen events, ensuring continuity of plant operations and revenue stability.

In FY25, Pakistan’s power sector generated approximately 127,160 GWh against an installed capacity of 45,888 MW, remaining broadly unchanged from the previous year and 6% below the reference target. Hydropower dominated the energy mix with about 31%, followed by nuclear at 18%, RLNG at 17%, local coal at 12%, imported coal at 7%, gas at 9%, and solar at 1% (rising to 5% when net-metered capacity is included). Local coal-based generation was recorded at nearly 15,547 GWh, while imported coal surged to 9,066 GWh, an 80% year-on-year increase, driven by more competitive dispatch. Net-metered solar capacity grew sharply to around 2,800 MW, reflecting a shift toward self-generation, while wind maintained a modest 3% share, constrained by curtailments and grid limitations. Demand projections for FY26, under both normal and high scenarios, indicate growth of 2.8% to 5%. Looking ahead, coal, particularly indigenous lignite from Thar, is expected to remain central to Pakistan’s energy security, although dependence on imported coal continues to expose the sector to global price volatility.

Net electrical output of the plant during FY25 stood at 1,594 GWh (FY24: 1,940 GWh) with a load factor of 61%. The power purchaser continued to source electricity from the plant on priority owing to its low cost of generation.

The required availability for Thar Energy Limited under the PPA is 85%, while the required efficiency is 37%. During the period, the plant operated well above benchmarks, maintaining an average efficiency of 55.16% and meeting its contractual availability requirements.

The estimated project cost of the 330 MW plant is USD 520 million, financed through 75% debt (USD 390 million) and 25% equity (USD 130 million). The debt portion has been arranged through a mix of foreign (~67%) and local (~33%) financing. The foreign debt was provided by a consortium of Chinese lenders led by China Development Bank (CDB) and China Minsheng Banking Corporation Limited, with CDB also acting as financial advisor. The local debt was arranged by a consortium of Pakistani banks led by Bank Alfalah Limited, including HBL, BAHL, NBP, FBL, SBL, and Soneri Bank Limited, with HBL serving as local financial advisor. Foreign debt was initially priced at 6-month LIBOR plus 4.05% per annum, later amended to Daily SOFR + 0.42826% credit adjustment spread + 4.05% per annum, while local debt carries pricing of 3-month KIBOR plus 3.5% per annum, both payable semi-annually. The financing agreements were executed in December 2019, with an effective date of March 6, 2020, and repayments structured in 20 semi-annual instalments (first disbursements in March 2020 for local debt and August 2021 for foreign debt). The loans are secured against a first-ranking hypothecation charge over project assets and pledged shares of the Company in favor of the Security Trustee. Equity contributions were provided by Hub Power Company, Fauji Foundation, and China Machinery Engineering Corporation (CMEC). As of June 2025, approximately 15% of the project debt has been repaid.

TEL, under its off-take agreement with CPPA-G, is entitled to receive capacity payments as long as the plant maintains contractual availability, regardless of whether a purchase order is placed. As of June 2025, the Company’s trade receivables from CPPA-G stood at PKR 18,321 million (2024: PKR 15,364 million), including PKR 21 million overdue from 6 to 12 months. Circular debt remains a persistent challenge for the power sector, compelling IPPs to rely on short-term borrowings and internal cash generation to manage liquidity.

Due to rising trade receivables from CPPA-G, gross working capital cycle stood at 115 days as of June 2025 (June 2024: 69 days). Net working capital days were recorded at 22 days in June 2025, compared to negative 13 days in June 2024. The Company is managing its working capital requirements through a mix of internal cash generation and short-term banking facilities, while future financing remains dependent on the payment behavior of the power purchaser against outstanding receivables.

During FY25, the Company reported FCFO of PKR 24,326 million from the sale of electricity to CPPA-G, compared to PKR 25,602 million in FY24. EBITDA/Finance Cost improved from 2.0x in FY24 to 2.3x in FY25. The cash flow position is expected to strengthen with higher generation in the coming periods, as the plant is placed on priority in the merit order list, though this remains contingent on timely payments from CPPA-G.

As on June 2025, leveraging stood at 64.3% which is mainly attributable to long term project debt.