Karachi, Sindh Engro Mining Company SECMC plans to develop integrated coal mining and power project in first phase with capacity of 6.5 million tons per annum and 1200MW electricity at total cost of over $3.0 billion from Thar coal fields having estimated lignite reserves of 175 billion tons says government should provide sovereign guarantee for Thar mining and power projects.
SECMC and Thar Coal & Energy Board TCEB made several presentations to the President, Prime Minister and Federal Finance Minister highlighting socio-economic benefits of Thar project along with its contribution to reduce country’s dependence on imported fossil fuels. Government must act quickly to ensure all required policies, incentives and directives are issued without any delay to start Thar coal project – key to Pakistan’s energy security, said President & CEO Engro Corporation Limited Muhammad Aliuddin Ansari.
Talking to newsmen, he said due to current circular debt and Pakistan’s financial situation coupled with Engro’s own financial limitations as a result of gas curtailment to its $1.1 billion urea plant in the country, it is difficult for Engro to secure financing for its equity and debt for integrated mine and power project of $3.0 billion.
He said considering its strategic nature and readiness, Thar coal and power projects were selected as key energy projects for Pakistan in Pak-China Joint Energy Working Group JEWG meeting in August 2011 at Beijing to support Pakistan’s energy projects through Chinese financing.
Engro, GoS and GoP have been seriously pursuing financing of project through JEWG and at its second meeting at Islamabad in May 2012, Chinese banks agreed to conduct due diligence of Thar mining and power projects to develop way forward for their financing.
According to Ansari to mitigate risks of circular debt impacting their loan repayments, Chinese banks asked for direct and independent sovereign guarantee by GoP for both mining and power projects.
He said target for financial close of SECMC mining and power project is IQ, 2013 and target to commence project April 2013. In second and third phase, mining operations will be scaled up to 13Mt/a & 22MT/a, which will ultimately be sufficient to fuel about 4000MW electricity generation.
He said SECMC completed bankable feasibility study for Thar block II coal mining project by engaging internationally renowned consultants meeting all national, world standards. Feasibility confirmed technical and commercial viability of project. There are no significant or unmanageable threats, social implications associated.
He said TCEB should finalize coal pricing mechanism and upfront tariff for Thar coal. NEPRA and PPIB develop a policy framework and decide upfront tariff for new power plants based on Thar coal. Government finalize policy for conversion of all RFO based power plants to Thar coal vs imported as well as policy to set up all new coal based plants on Thar coal. Restore gas supply to Engro’s new fertilizer plant at Daharki in Sindh province.
Ansari said without steady gas supply and income stream, company is facing strong financial pressure to fulfill its debt covenants for $1.1 billion plant while at same time trying to raise equity for $3.0 billion Thar coal mining and power project.