The Pakistan Credit Rating Agency Limited
Press Release


Anam Waqas Ghayour

Applicable Criteria

Related Research

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 Maintains the Entity Ratings of Thar Energy Limited

Rating Type Entity
(12-Sep-22 )
(23-Sep-21 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch Yes Yes

The Hub Power Company Limited of Pakistan along with Fauji Fertilizer Company Limited, are setting up a 330MW coal power plant, under the umbrella of Thar Energy Limited (TEL). Both major shareholders collectively represent 90% shareholding, and have very strong credentials, as also reflected by their Entity Ratings (AA+). The financial strength and experience in the energy chain of the sponsoring companies is positive to the ratings, while the controlling interest lies with HUBCO. TEL has been 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 that they have relevant experience. The EPC contractors 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, providing coverage of six months on its long-term loans till maturity. The Company has successfully started testing of its plant, during 1st week of August 2022, and achieved the momentous milestone of synchronization with the national grid. The actual COD will be expected to achieve in Sep’22. The Company’s coal-supplier, Sindh Engro Coal Mining Company (SECMC), is one of the largest public-private partnership in the energy sector and has an annual production capacity of 3.8mln tons. Currently, the second phase of the SECMC mine is under development, and will achieve its COD along with the COD of Thar Energy Limited, which will increase its production capacity to 7.6mln tons per annum with a cumulative power generation of 1320MWs.
The Company had 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 payments at applicable tariff rates. The Government of Pakistan has provided 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. Going forward, the performance benchmarks achieved and timely repayments of the debts will also remain imperative for the ratings.

About the Entity
Thar Energy Limited was incorporated in Pakistan on May 17, 2016 as a limited company under the repealed Companies Ordinance, 1984. The 330MW coal IPP is setting up 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 two decades of experience in the energy and manufacturing sectors. He holds an MBA degree in Finance. The actual cost of the project stands at USD 520mln. The debt financing constitutes 75% of the project cost i.e., USD 390mln, which has been financed through the consortium of local and foreign financial institutions. The equity financing constitutes remaining 25% of the project cost i.e., USD 120mln, which has completely been injected through the sponsors. Both the local and foreign loans have 10 years repayment period, with semiannual repayments.

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.