KARACHI: The inclusion of Thar coal mining and power generation in the list of priority projects of the China-Pakistan Economic Corridor (CPEC) has helped speed things up a bit, and the financial close is expected by the end of the year.

“The CPEC is surely an enabler. Moreover, no one was ready to finance the project other than China,” Shamsuddin Shaikh, CEO of Engro Powergen and the Sindh Engro Coal Mining Company (SECMC), told Dawn in an exclusive interview.

The SECMC is a joint venture between the government of Sindh and a bunch of private companies including House of Habib’s Thal Ltd, Hub Power Company, HBL, China Power International and China Machinery Engineering Corporation.

Also read: China agrees to raise financing for Thar coal project

The total financing required for mining is $845 million, of which $211m is equity and the rest is debt. Engro’s subsidiary Engro Powergen Thar (Pvt) Ltd will then use that coal to generate electricity; the cost of the project is estimated to be around $1.1 billion, including $277m equity and the remainder is debt, he added.

So the total investment for the integrated project comes to around $2bn, including a debt component of $1.5bn.

As for mining, debt from local banks has been raised at an interest rate of Kibor plus 1.75pc and from Chinese lenders at Libor plus 3.3pc. By contrast, debt for the power project has been raised at Kibor plus 4.5pc and Libor plus 3.5pc.

In August, a consortium of local banks including HBL, UBL, Bank Alfalah and Faysal Bank agreed to lend $500m (around Rs50bn) to the mining company. The China Development Bank and the Commercial Bank of China will be among the foreign lenders.

Most recently, on Nov 10, the Ministry of Finance approved a draft for a foreign currency loan agreement and sovereign guarantee document. The draft for the government sovereign guarantee is expected to be finalised later this month, said Shaikh.

Thar coalfield, which spans over 9,000 square kilometres, sits on top a vast potential source of 175bn tonnes of lignite. By some estimates, these reserves are equivalent to combined oil reserves of Saudi Arabia and Iran in terms of heating value.

The area has been divided into a dozen blocks for extraction. The SECMC is working on Block-II, which covers nearly 100 sq km and is estimated to have around 2bn tonnes of coal. The company says that would be enough to generate 5,000MW for 50 years.

Block-I has been allotted to Sino-Sindh Global Mining, Block-III to Asia Power Group Ltd, Block-IV to China’s Harbin Electric Company and Block-VI to UK-based Oracle Coalfields.

In the first phase, the SECMC aims at extracting 3.8m tonnes of coal a year to fuel a proposed power plant of 660MW. The mining capacity will later be expanded to 6.5m tonnes annually to power 3,960MW plants, six each of 660MW.

The government has included both the mining and the power generation projects in the list of CPEC’s priority projects and the initial 660MW coal-based power project is expected to come on stream by early 2018.

Critics have expressed concern over such coal-fired projects, saying that the “dirty fuel” would add to air pollution. Some think delays have been terribly excessive.

“It has been almost eight years and people everywhere asked me: ‘When are we going to see the coal?’ Well, all I can now say is we’ll see that very soon,” Shaikh said.

Published in Dawn, November 17th, 2015