Thar coal is undoubtedly the only sustainable solution to Pakistan's energy woes with 175Bn tonnes of coal reserves. Pakistan is fortunate to have such abundant reserves that are equivalent to the combined oil reserves of Iran and Saudi Arabia in energy equivalent terms and can produce 100,000 MW of electricity for 200 years.
Sindh Engro Coal Mining Company (SECMC) formed in 2009 has been working tirelessly on the project to develop the vast reserves of Thar. SECMC is responsible for developing Block II which has capacity to provide up to 4000 MW and it plans to develop this in phases within the next ten years. The company other than Government of Sindh and Engro is sponsored by Pakistan's reputable corporate houses including Thal Ltd (House of Habib) and Hub Power Company. The total investment for the integrated project is estimated to be US $2 billion making it Pakistan's biggest project in terms of investment being taken up by the private sector. The groundbreaking was jointly performed by Prime Minister Nawaz Sharif and former President Asif Zardari on 31st January 2014. The project has been declared as one of national importance by the honourable prime minister and assured full support of the government.
In the first phase, mine of 3.8 million tonnes per annum capacity will be developed by SECMC and the coal will be utilised by a mine-mouth power plant of 660MW which is being undertaken by Engro's subsidiary, Engro Powergen Thar (Pvt) Limited (EPTL). The company has achieved substantial progress on both projects as project development work is almost complete. Technical and environmental studies have been conducted and NOC from environmental authorities (SEPA) have been received. China Machinery Engineering Corporation (CMEC) has been selected as EPC (engineering, procurement and construction) contractor. As a world-renowned engineering contractor, CMEC is ranked among China's top 10 contractors by the business turnover and has business reach in more than 150 countries and regions. The EPC contract on turnkey basis has been signed for both projects.
Six thousand acres of land has been acquired and further work for the 113m cubic meter overburden removal in Thar Block II has started with a local contractor using equity. Use of a local contractor will help expedite the work before the Chinese EPC contractors are mobilised, saving 3-4 months in construction time. To date they have successfully removed over 1.5 million cubic meter of over burden.
For the mining project, coal pricing rules have been notified by the Sindh government and coal tariff petition has been prepared for determination by Thar Coal and Energy Board. The reference coal tariff is expected to be announced as early as next month. Furthermore, the Coal Supply Agreement between the mine and power plant is under negotiations and expected to be finalised within the coming days.
For power project, LOI (letter of intent) has been issued to EPTL by PPIB and application for Generation License has been submitted to NEPRA, which is expected to be received within this month. NEPRA has already announced tariff for Thar coal-based power generation. Moreover, drafts of security package agreements (ie PPA and IA) have been shared by PPIB and discussions are underway. Security package is expected to be finalised by next month.
The Government of Sindh, on the other hand, as the joint venture partner and developer of Thar, has been diligently working on the necessary infrastructure development. Operations in Thar require critical infrastructure, which includes a fresh water supply scheme and an effluent disposal line for disposal of groundwater. These are being executed as per the project requirements and SECMC has been made responsible for supervising the technical specifications for both these critical infrastructure projects. Other infrastructure requirement such as the transmission line, which is the responsibility of the NTDC, has also been assured.
Furthermore, the widening and rehabilitation of the road network is also proceeding at a fast pace, with expansion work being done on bridges, culverts and bypasses of small cities. To further reduce travel time, an airport is being constructed in Islamkot, whose airstrip has been completed and the construction of terminal building has to be initiated. It is expected to be completed by end-2015.
On the financing front, tremendous support has been provided by the federal and Sindh government in achieving financial close. With their support, both the projects have been listed among 'prioritised projects' under the China-Pak Economic Corridor based on readiness. The Chinese government has already approved 14 power projects that have the ability generate 10,400 megawatts (MW) of electricity. China and Pakistan have agreed to give due priority to the development and utilisation of indigenous resource in Pakistan and is not only willing to provide the technical expertise for exploiting these resources but also help in financing it. Lately, on 8th November 2014, MoU on financing for both the projects was signed in presence of Honourable Prime Minister and Chinese President. The presence of both gentlemen greatly enhanced the profile of the projects and significant progress has been made on the financing front. A series of meeting was held with Chinese Authorities - NEA (National Energy Commission) and Sinosure in Beijing to resolve Chinese financing issues.
For mining project, USD ~600M financing is being sought against Sovereign Guarantee for which indicative term sheets for financing of USD ~400M have been received from leading local banks. The balance amount will be financed through Chinese banks for which discussions are underway. For the power project, USD ~ 800M financing is being sought backed by Sinosure Coverage, IA and PPA. Majority of this loan will be raised from China for which discussions are in advanced stages. Equity requirements for both projects are already complete. SECMC is confident that with continuous support from both federal and provincial government they should be able to achieve financial close by April 2015; and gird synchronisation is expected by early 2018.
Moreover, Engro Foundation is continuously taking CSR initiatives at Thar which includes setting up of medical camps, livestock health camps, distribution of food and provision of technical training to students The project employs over 100 local staff and they strongly believe that Thar Coal Project will open up immense economic opportunities for this deprived region and will catalyse the creation of social assets ie education institutions, medical facilities, infrastructure development etc and employment.
The wait is finally over and Thar dream is on the verge of realisation; this has been made possible through the federal and provincial governments' unwavering commitment towards the development of indigenous resources. Thar truly is the most viable power generation option for Pakistan and offers a fortune-turning proposition for Pakistan, which will not only address the severe power shortage crisis in medium to long term but also bring energy security to the country.
(The writer is CEO of Sindh Engro Coal Mining Company)
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