VIS reaffirms entity ratings of Thal Power (Private) Limited

January 17, 2022 (MLN): VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Thal Power (Private) Limited (TPPL) at ‘AA/A-1+’ (Double A /A-One Plus), said a statement issued by VIS on Monday.

The long-term rating of ‘AA’ signifies high credit quality and strong protection factors. Risk is modest but may vary slightly from time to time because of economic conditions. The short-term rating of ‘A-1+’ signifies the highest certainty of timely payment; short term liquidity, including internal operating factors and /or access to alternative sources of funds, is outstanding and safety is just below risk-free Government of Pakistan’s short-term obligations.

Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on December 29, 2020, the statement added.

TPPL is a wholly-owned subsidiary of Thal Limited (THAL); the assigned ratings derive strength from the strong sponsor profile. THAL is a diversified national conglomerate engaged in the manufacturing of engineering products, jute products, paper sacks and laminated products; it also holds investments in real estate and energy sectors.

TPPL was set up by THAL as a special entity for the purpose of routing its investment in ThalNova Power Thar (Private) Limited (ThalNova). Thal Ltd. owns 26% ordinary shareholding in ThalNova through TPPL.
The statement further added that ThalNova is a joint venture between TPPL, Nova Powergen Ltd (a subsidiary of Novatex Ltd), CMEC ThalNova Power Investments Limited (a subsidiary of China Machinery Engineering Corporation) and Hub Power Company Limited to set up a 330 MW mine-mouth coal-fired power generation plant located at Thar, Sindh.

This power plant will be run on indigenous coal extracted from the mine operated by Sindh Engro Coal Mining Company Limited. The Power Plant is listed under Priority Projects under the China Pakistan Economic Corridor (CPEC). ThalNova achieved its Financial Close on September 30, 2020. The Project is expected to come online in 2022, the statement noted.

THAL has undertaken to invest PKR equivalent of USD 34.3m in the project and of this, USD 13.0m has already been injected. The balance commitment of the investment is USD 21.3m in PKR equivalent for which a standby letter of credit is in place, with validity until 2023, to be periodically extended and amount to be adjusted in line with PKR devaluation.

The project is exposed to completion risk and any adverse changes in regulatory framework or delay in achieving commercial operations date may impact the assigned ratings, it said.

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