PACRA Maintains Entity Ratings of Thar Energy Limited

Thar Energy Limited (TEL or “the Company”) operates a 330 MW mine-mouth lignite-fired power plant at Block II, Thar Coalfield, District Tharparkar, Sindh, forming part of the energy projects under the China-Pakistan Economic Corridor (CPEC).
As of FY25, Pakistan’s power sector generated 127,160 GWh - 6% below the reference target, despite an installed capacity of 45,888 MW. Hydropower and nuclear led the mix with 31.4% and 17.7%, respectively, while local coal contributed a solid 12.2%, underscoring its growing role in ensuring stable base-load generation. Indigenous Thar coal has emerged as a key pillar of energy security, offering cost-effective and reliable power compared to imported fuels. Although imported coal generation rose and comprised of 7.1% of the energy generation due to competitive dispatch, the strategic shift toward local coal is expected to reduce foreign exchange pressures, enhance supply security, and enhance the country’s energy independence in the years ahead.
TEL has signed a Fuel Supply Agreement with Sindh Engro Coal Mining Company for annual procurement of around 1.9MT of lignite coal. The arrangement ensures fuel cost stability and entails minimal resource risk throughout the project’s life, supported by a back-to-back Liquidated Damages (LD) mechanism. The plant benefits from priority dispatch on ISMO’s merit order list due to its low-cost generation profile. For the July–September 2025 quarter, TEL’s generation tariff comprised a capacity charge of PKR 11.8134/kWh and an energy purchase price of PKR 1.0420/kWh. Leveraging its dispatch priority, the plant generated 1,594 GWh in FY25 (FY24: 1,940 GWh) at a load factor of 61.0% (FY24: 73.4%), while maintaining strong operational performance benchmarks.
Financially, Receivables from CPPA-G increased to PKR 18,320mln in FY25 (FY24: PKR 15,364mln), continuing to strain liquidity and leading the Net working days to stand at 22 days as of FY25. However, TEL has repaid ~15% of its project debt to date, reducing the Company’s leverage to 64.3% in FY25 from 72.0% in FY24. In addition, the Company is also disputing USD 23mln HVDC charges linked to COD delays; management, backed by legal counsel, expects no financial liability. A standby letter of credit (SBLC) of up to USD 31mln has been arranged for the benefit of lenders to cover potential cost overruns, financing needs, or funding shortfalls, as per the Sponsor Support Agreement dated January 8, 2019. The SBLC will remain valid until January 2034 or until full repayment of the project debt.
Following the ESG practices according to the HUBCO’s report, environmental standards are taken care of at TEL where all ash yards are lined with geo-membranes to prevent leaching. Further, in reference to HUBCO’s report they are actively pursuing fly ash reuse in cement, roadworks, and recycling partnerships, which are expected to reduce waste management costs.
The ratings reflect TEL’s strong operational performance, demonstrated by its consistent achievement of efficiency and availability benchmarks that support its favorable merit order position. Timely repayment of project debt and effective cash flow management remain essential for maintaining credit strength. However, sector-wide challenges persist, and there has been no update regarding the Company’s tariff structure. Any future regulatory changes or measures introduced under the ongoing power sector reforms by the Task Force may affect the Company’s ratings.

About the Entity
Incorporated on May 17, 2016, under the repealed Companies Ordinance, 1984, TEL is a 330MW mine-mouth lignite-fired IPP located at Thar Block II, Sindh. HUBCO holds 60% ownership and management control, followed by Fauji Fertilizer Company Limited (30%) and China Machinery Engineering Corporation through CMEC TEL Power Investments Limited (10%). The plant achieved COD on October 1, 2022, operates under long-term Power Purchase and Coal Supply Agreements. Mr. Amjad Ali Raja, appointed CEO in July 2024, has over 22 years of sector experience and reports to a Board of seven directors chaired by Mr. Muhammad Kamran Kamal.