Karachi, December 29, 2020 (PPI-OT): 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). 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 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’. Previous rating action was announced on December 12, 2019.
The assigned ratings derive strength from the strong sponsor profile of TPPL, which operates as a wholly-owned subsidiary of Thal Limited (THAL). THAL is a diversified national conglomerate engaged in manufacture of engineering products (Karachi), jute products (Muzaffargarh), paper sacks (Hub and Gadoon) and laminated products (Hub); it also holds investments in real estate and energy sectors. TPPL was setup 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.
ThalNova is a joint venture between TPPL, Nova Powergen Ltd (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.
As at June 30, 2020, TPPL’s outstanding liabilities included Rs. 1,652.3m due to THAL. This represents an interest free loan received from THAL for purchase of shares of ThalNova. The loan will be converted into share capital based on the progress achieved by ThalNova for its underlying project. Ratings are dependent upon TPPL being wholly-owned by THAL, the unlevered capital structure of TPPL, commitment from TPPL that it will not undertake any debt in future, and that THAL, as a parent company, will be responsible as a shareholder of TPPL.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
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