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. The project forms part of the energy portfolio under the China-Pakistan Economic Corridor (CPEC). In FY26, Pakistan's power sector generated 128,700 GWh, up 1.2% YoY, while total installed capacity rose 8.5% to 49,651 MW (FY25: 45,782 MW). Clean sources, comprising hydel, nuclear and renewables, led the mix at 50.8% of installed capacity (FY25: 43.3%), whereas the share of thermal declined to 49.2% (FY25: 56.7%). Coal contributed 22.9% of total generation (FY25: 19.4%), underscoring its growing role in providing stable base-load supply. Generation from imported coal rose sharply, as constrained RLNG availability and elevated LNG prices shifted dispatch toward coal. Meanwhile, indigenous Thar coal has emerged as a key pillar of energy security, offering cost-effective and reliable power relative to imported fuels. TEL sources its fuel from Sindh Engro Coal Mining Company under a 30-year Coal Supply Agreement, signed at the project's inception, for approximately 1.9 MTPA of lignite. The arrangement provides fuel cost stability and minimal resource risk over the project's life, backed by liquidated damages provisions. Owing to its low-cost generation profile, the plant continues to receive priority dispatch from the power purchaser, CPPA-G. Accordingly, generation increased to 1,822 GWh in FY26 from 1,594 GWh in FY25, with a load factor of 69%, while operational performance remained strong. The Company’s working capital remained manageable, with receivables from CPPA-G declining to PKR 17,731mln as of June 2026 from PKR 18,321mln in FY25. While working capital days increased during the year, the requirement continues to be largely managed through internally generated cash flows and short-term borrowings. Strong cash generation has also supported timely debt repayments, with around 17% of PKR debt and 27.2% of USD debt repaid to date, bringing leverage down to 63.3% in FY26 from 64.3% in FY25. The Company has also paid a healthy dividend, with the payout expected to remain a regular source of income for the sponsors going forward. The Company is also disputing HVDC charges of USD 23mln linked to COD delays; management, supported by legal counsel, does not expect any financial liability to arise. Under the Sponsor Support Agreement dated January 8, 2019, a standby letter of credit (SBLC) of up to USD 31mln has been arranged for the benefit of lenders. The SBLC covers potential cost overruns, financing requirements or funding shortfalls, and will remain valid until January 2034 or until full repayment of the project debt. On the ESG front, as per HUBCO's report, TEL adheres to sound environmental standards, with all ash yards lined with geo-membranes to prevent leaching. The Company is also actively pursuing fly ash reuse in cement and roadworks, alongside recycling partnerships, which are expected to reduce waste management costs.
TEL continues to demonstrate strong operational performance, underpinned by the consistent achievement of efficiency and availability benchmarks that support its favorable merit order position. Sustained cash flow generation and timely servicing of project debt remain central to the Company's credit strength. Developments in the power sector, including tariff adjustments, CPPA-G payment trends and circular debt, remain key monitorable. Any regulatory measures introduced under ongoing sector reforms may have implications for the ratings.

About the Entity
TEL is Incorporated on May 17, 2016. HUBCO holds a 60% stake along with 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, and operates under long-term Power Purchase and Coal Supply Agreements. Mr. Amjad Ali Raja, appointed CEO in July 2024, brings over 22 years of sector experience and reports to a seven-member Board chaired by Mr. Muhammad Kamran Kamal.