Analyst
Hashim Yazdani
hashim.yazdani@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Assigns Preliminary Ratings to ThalNova Power Thar (Pvt.) Limited | PPSTS | PKR 5bln | TBI
Rating Type | Debt Instrument | |
Current (31-May-24 ) |
||
Action | Preliminary | |
Long Term | AA- | |
Short Term | A1 | |
Outlook | Stable | |
Rating Watch | - |
ThalNova Power Thar (Pvt) Limited (“the Company”) has set 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 38.3% in the Company. Being on local coal Thar coal which is being supplied by Sindh Engro Coal Mining Company, the plant reduces dependence on imported fuels and resultantly positively affects the overall basket price of the electricity generated. The plant is prioritized in the merit order list by NTDC, which also translates into the assigned ratings. Additionally, the plant efficiency and utilization factor are high. Previously, the evacuation issue from the Thar Block, now stands resolved by NTDC, as a result the plant is supplying uninterrupted electricity to the National Grid, which further provides comfort. ThalNova has been awarded an upfront tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. The plant successfully achieved its Commercial Operations (COD) on 17th February 2023. In accordance with the agreement, Hub Power Services Limited (HPSL) an associated company will provide Operations and Maintenance (O&M) services for the plant. The O&M contractor will be responsible for maintaining the operational benchmarks (Availability: 85%, Efficiency: 37%). Total electricity produced from the plant during 1HFY24 stood at 1,009GWh with a load factor of 76% while meeting its operational benchmarks. Repayment against the project debt has started which will be completely repaid over a period of 10 years. The smooth operations of the plant since its COD and timely payment of the debt is also an added consideration to the ratings. The plant is expected to receive payments from CPPA-G on a priority basis considering its importance to the energy sector.
Going forward, the capacity of the Company to generate stable cash flows in order to make timely repayments against the project debt remains crucial. Further, with rising concerns about circular debt, the trend of payments received from CPPA-G against invoices and any, regulatory changes might impact ratings.
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.
About
the Instrument
ThalNova is in the process of issuing an unsecured, privately placed short term sukuk of PKR 5bln in June 2024 to finance the Company's working capital requirements. The Privately Placed Short Term Sukuk, having a tenor of six months, carries an indicative profit rate of 6M KIBOR + 0.50%. The profit and principal will be paid in bullet at the time of maturity.