Fauji Fertilizer to inject $39m into Thar Energy

Sponsors have extended FFC guarantee of $82m to help meet debt requirement

KARACHI: Fauji Fertilizer Company Limited (FFC), a leading fertiliser manufacturer that has diversified into power production, has announced injection of $39 million into Thar Energy Limited (TEL), which is expected to kick-start a 330-megawatt domestic coal-fired power project by December 2020.

In addition to this, sponsors have extended a guarantee of $82 million in favour of the fertiliser company to enable it to meet debt requirement for the project from local and international investors, according to a notice sent to the Pakistan Stock Exchange (PSX) on Tuesday.

Earlier, Hub Power Company (Hubco) — the main investor in TEL — embraced FFC and China Machinery Engineering Corporation (CMEC) as equity partners of 30% ($39 million) and 10%, respectively, and slashed its own equity stake to 60%.

The TEL project is estimated to cost $497.7 million, which is a combination of debt and equity in the ratio of 75:25 ($373.27 million and $124.43 million). The three partners are supposed to make all kind of financial arrangements for the project by June this year.

According to a recent statement released by Hubco, the financial close of the project is expected in June 2018.

FFC’s share price increased 3.58%, or Rs3.35, to close at Rs96.94 with trading in 3.79 million shares at the PSX.

Hubco’s share price rose 0.98%, or Rs0.98, to Rs101.43 with a volume of 551,000 shares. The power plant is part of China-supported multibillion-dollar projects in Pakistan under the banner of China-Pakistan Economic Corridor (CPEC). It is being set up in or around the coal-mining area as it will be utilising coal extracted from Thar coal field block-II.

The project will be amongst the first in a series of power plants based on Thar coal and will lead to substantial savings in foreign exchange.

The project will help increase coal-based power generation in the energy mix by around 16%, according to the National Electric Power Regulatory Authority (Nepra).

Arif Habib Limited analyst Tahir Abbas said the power regulator had already awarded a tariff to TEL while its cost of production would gradually go down with an increase in coal production with the passage of time. 

Published in The Express Tribune, April 4^th, 2018.

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