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PACRA Maintains the Entity Ratings of Thar Energy Limited

Lahore, September 13, 2022 (PPI-OT):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 and 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 and erection, startup-delay etc. Going forward, the performance benchmarks achieved and timely repayments of the debts will also remain imperative for the ratings.

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

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