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The Pakistan Credit Rating Agency Limited
Press Release

Date
16-Feb-23

Analyst
Hashim Yazdani
hashim.yazdani@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Upgrades Entity Ratings of ThalNova Power Thar (Pvt) Limited

Rating Type Entity
Current
(16-Feb-23 )
Previous
(17-Aug-22 )
Action Upgrade Maintain
Long Term A A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - Yes

ThalNova Power Thar (Pvt) Limited (“the Company”) is setting up a 1x330 (gross) mine mouth Thar coal-based power plant located at Block – II, Thar Coalfield, District Tharparkar, Sindh. The Hub Power Company Limited (HUBCO) holds significant stake of 38% in the Company. HUBCO’s financial strength and commendable experience in the power sector compliments the assigned ratings. ThalNova was awarded an upfront tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. China East Resource Import & Export Corporation and China Machinery Engineering Corporation are the EPC contractors. Comfort is drawn from their ~30 years of global experience. Under the amended Power Purchase Agreement (PPA), the plant’s Required Commercial Operations Date (RCOD) was extended till 30th June, 2022. However, due to delays in construction activity, the management expects achieve COD by mid of February 2023. The Company will be liable to pay Liquidated Damages (LD) to CPPA-G resulting from the delay. The EPC contractors have provided bank guarantees in the form of performance bond and warranty bond. These bank guarantees provide additional cushion for the sustainable financial risk profile. Further, the company will maintain the Debt Service Reserve Account, which will be filled by 6 months SBLCs or cash deposit, providing coverage of six months on its financial obligations till maturity. The Company will procure Thar coal from Sindh Engro Coal Mining Company (SECMC) under its Coal Supply Agreement. The assigned ratings take comfort from the successful synchronization of the plant with the National Grid.
Going forward, the plants successful commissioning is crucial to avoid further delays that might stress the Company’s financial risk profile in the form of LDs from the power purchaser. The Company signed Power Purchase Agreement (PPA) with CPPA-G and as per the PPA, in case of no demand from the power purchaser, CPPA-G shall be liable to pay the capacity and energy payments at applicable tariff rates. The Government of Pakistan has given payment guarantee against dues from CPPA-G. The Company has adequate insurance coverage to cover the risk of business interruptions, marine & erection, startup-delay etc.

About the Entity
ThalNova Power Thar (Pvt.) Limited was incorporated in Pakistan on April 18, 2016 as a limited company under the repealed Companies Ordinance, 1984. The 330MW coal IPP is being constructed in the energy park located in Block II of the Thar coalfields in Sindh. Mr. Saleemullah Memon is the CEO of the company. Mr. Memon has over twenty years of experience in the energy and manufacturing sector. Mr. Memon holds an MBA in Finance. The total cost of the project is USD 527mln, debt financing constitutes 75% of the project cost i.e., USD 395mln, which is financed from local and foreign financial institutions. Both the local loan and foreign loan has a tenure of 14 years with repayment in 10 years. Furthermore, the key sponsor HUBCO has an exclusive focus on the different dimension of the energy sector.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.