LAHORE: The anticipated investment by a major Chinese turnkey power projects contractor and power equipment manufacturer of equity into the Sindh Engro Coal Mining Company (SECMC) is expected to provide a big impetus to the early development of Thar Coal mining and power projects.

An SECMC, a joint venture of the Sindh government and Engro Corporation set up to exploit the huge Thar coal reserves for cheaper power production, announcement on Tuesday said it had signed a Memorandum of Understanding (MoU) with China’s TBEA Co Ltd to jointly play a lead role in developing the Thar coal mining and power projects.

The Chinese company will not only invest equity into SECMC but also help raise funds for the project from China.

According to the MoU, the parties have reached an intention of jointly developing, coal mining and power projects.

An SECMC executive told Dawn that the company expects to start mining Thar coalfields by March and achieve the financial closure for setting up a 600 megawatt coal-based power station by the middle of next year.

He said the company had already received five bids for the construction of the power station while the bids for coal mining contract were expected next month.

The federal government has already given sovereign guarantee of $700 million for the mining project. SECMC has been allocated one out of 12 blocs of Thar coal for developing it for mining.

The executive said the company was negotiating a loan of $1.2 billion for the $1.6bn (mining and power) projects from a consortium of banks led by a major Pakistani and a Chinese bank. The remaining cost of the project, $400 million, will be invested by the Sindh government, Engro and TBEA as equity.

While the Sindh government will contribute 51 per cent of the total equity, the other shareholders contributions were yet to be determined.

The power station will complete in three years after the financial closure, according to the executive. The cost of power production (at current prices) is estimated at $0.8 a unit. “We plan to increase generation to 3600 megawatts in next 10 years, which will bring down the generation cost to $0.5-0.6 a unit,” the company executive said.

“TBEA wants to enter Pakistani energy sector with the long-term vision to develop Thar Coalfields as it agrees that Thar coal is a technically and economically viable indigenous resource for power generation, and will provide a sustainable solution to future energy needs of Pakistan,” SECMC said.

Thar coalfields contain the world’s seventh largest coal reserves estimated at 175 billion tons capable of producing 100,000 megawatts of electricity for the next 200 years.