THE first project to utilise Thar coal for power generation is set to achieve financial close latest by December after remaining dormant for many years.

The 660MW mine-mouth project is being established by Engro Powergen Ltd. Sindh Engro Coal Mining Company (SECMC), Engro’s joint venture company with the Sindh government and other investors. It will arrange the lignite coal from Thar for the project.

Thar coalfields, spread over an area of 9,600 sq km, have assessed reserves of 175bn tonnes of coal. The area has been divided into 13 blocks where exploration and assessment of coal resources has been completed.

The SECMC has been leasing Block-II, spread over 95 sq km and having about 2bn tonnes of reserves, since October 2009. The company has initiated work on developing the mine through an open-cast method. It will extract 3.8m tonnes of coal annually, which will be sufficient to fuel the proposed 660MW power plant.

The mining project will be developed by early 2018 at a total cost of $875m. The project’s equity — worth $263m — has been arranged by the sponsors.

A consortium of local banks, including Habib Bank, United Bank and Bank Alfalah, will lend $500m to the company, while the remaining debt financing has been committed by the China Development Bank and the Commercial Bank of China. As required, the federal government has provided sovereign guarantees to the Chinese banks.


Both the mining and the power generation projects are now included in the list of priority projects of the China-Pakistan Economic Corridor


The SECMC has signed the financing agreement with the local banks, while the term-sheet for the Chinese financing has been finalised and the processing of documents is said to be in advanced stages. The Thar Coal and Energy Board is set to determine the price of coal, awaiting a final decision by the provincial government. The National Electric Power Regulatory Authority has already announced an up-front tariff for Thar coal-based power projects.

On the other hand, a number of vital infrastructure schemes in Tharparkar district, like airport, road network, railways link, water supply and electricity transmission lines have either been completed or currently are at various stages of implementation.

The annual mining capacity of the project, initially planned at 6.5m tonnes but later curtailed to 3.8m tonnes, will be expanded in phases to reach 22m tonnes within 10 years of its operation. Similarly, the power generation capacity has also been reduced from the planned 1,000-1,320MW to 660MW in the first phase.

However, a series of four mine-mouth power projects of a cumulative capacity of 3,960MW are planned to be set up within 10 years of the beginning of commercial operations of the first plant.

The China Machinery Engineering Corporation has been appointed the engineering, procurement and construction (EPC) contractor for the power project that will use sub-critical coal combustion technology.

The 660MW power project is scheduled to come on stream by early 2018. In fact, both the mining and the power generation projects are now included in the list of priority projects of the China-Pakistan Economic Corridor (CPEC). The work is scheduled to start simultaneously on both projects, with the goal that the required quantity of coal will be available when the power plant’s machinery is at the erection stage.

The completion of the first mine-mouth power project at Thar is likely to prove to be a precursor for the development of Thar coal-based power generation on a large scale.

The second project of two 660MW plants — being developed by the Shanghai Electric Group Co Ltd of China — is already in the pipeline and its letter of interest was issued by the Private Power Infrastructure Board in August.

The joint venture has been established with Sino-Sindh Resources, which is the long-term leaseholder of Thar’s Block-I. The mine developers have signed an equity investment agreement with the China Coal Technology and Engineering Group Corp. The proposed power plant, also being set up under the CPEC umbrella, is expected to be commissioned in the last quarter of 2018.

The writer is Chairman, Institution of Engineers Pakistan

Published in Dawn, Business & Finance weekly, November 9th, 2015

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