Lahore, July 23, 2021 (PPI-OT):The ratings reflect Sindh Engro coal mining company’s ownership structure-owned by the Government of Sindh and financially sound business groups of the country. The rating also incorporates the fact that indigenous coal is expected to play a dominant role in meeting the country’s future energy requirement. SECMC has leased Block-II (out of 12 blocks) of Thar, for the period of thirty (30) years, which has a cumulative capacity of ~1.57bln tonnes of coal which could be used to produce 5,000 MW for fifty (50) years. The rating favourably factors in successful commissioning of 3.8mln TPA (Phase-I) mine on 10th July 2019, three months earlier than the Scheduled COD. The COD of Phase-II Expansion is expected to get completed in 2022 as scheduled. The Policy for Coal Tariff Determination offers a guaranteed internal rate of return, cost indexation and pass-through tariff structure for SECMC.

Comfort is drawn from China Machinery Engineering Corporation (CMEC) – the O and M operator – having significant experience of International EPC Projects in Power Plants. Business risk is considered low, exhibited by demand risk coverage as SECMC has signed a Coal Supply Agreement with its associated company, Engro Powergen Thar Limited (EPTL), incorporated to operate mine-mouth coal-fired Power Plant (2x330MW) for phase-I and with Thal Nova Power Thar (Private) Limited (TNPTL) and Thar Energy Limited (TEL) for annual supply of 1.9 million tonnes of coal to each for Phase II, having potential of soaring coal capacity to 7.6 TPA. Consistent profitability and improved FCFOs support the timely repayment of debt. Strong cash position and un-utilized short term borrowing lines depicts healthy financial position of the company.

Adherence to good financial discipline towards both financial and commercial obligations is considered a strength. Meanwhile, upholding strong operational performance in line with agreed performance levels remain important. Effective management of the project, favourable regulatory regime, and consistency in related policies remain critical for the ratings. The ratings incorporate the prevailing challenges on account of circular debt crisis. Company’s liquidity situation in terms of pending receivables seems stringent.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com