KARACHI, Aug 15: The sponsors of $2 billion coal-based power project — Hasan Associates — offered on Wednesday a bank guarantee to signal the commencement of the implementation of what is being described the so far the biggest and innovative private sector industrial project.

“It is a small step towards implementation of a giant project,” Farooq Hasan said while talking to Dawn on Wednesday by telephone. He now expects to receive a letter of intent from the government, which would be the first such official letter to any investor.

This would pave the way for preparation of a bankable feasibility report by internationally reputed financial and technical consultants.

“If everything goes well and on schedule,” he expressed the hope that the project may be commissioned in next four years or else it may take five to seven years. The sponsors were given a go ahead signal for the project by the Private Power and Infra structure Board (PPIB) on May 8 last.

This project is being taken up on built, own and operate (BOO) basis and will need approximately 6m tons of coal every year.

Both the president and the prime minister were given a detailed presentation on Thar coal and on the project by federal secretary of petroleum and natural resources and the Sindh minister of mineral development in third week of July.

The president is understood to have been dismayed by lack of coordination between the federal and provincial governments on the issue of Thar coal exploitation. Officials quote the president as having advised both the governments to keep each other on board on all major initiatives.

A Thar Coal Company has already been set up for mining of the coal in the area. “Almost 80 per cent of the cost is to be borne by the federal government,” an official said. The top-level meeting between the president and the prime minister in third week of July decided in principle to appoint someone from the private sector as chairman of the coal company. The Energy adviser has been asked to review composition of a technical committee of the Task Force on Thar Coal and recommend its reconstitution and empowerment to make its decisions binding.

Officials said that the Sindh government proposed in the high-level meeting that the tariff of lignite-based power projects be decided upfront in consultation with National Electric Power Regulatory Authority (Nepra).

The Energy adviser is expected to prepare a schedule of tariffs for Thar based coal power projects of different sizes in consultation with the Nepra.

Tariff has proved to be the main stumbling block in investment and officials in the Sindh government are bitter on the treatment given to the state-run Chinese company Shenhua group, which was keen to set up a 600MW power project based on Thar coal at the mouth of a mine.

Since then a few others also showed interest in setting coal based power projects. However, none of them were encouraged by the federal government agencies’ approach towards fixing tariff structure.

Hasan Associates have been given this project and they claim with confidence of implanting the project in next four years, if everything goes well and according to schedule, and in next “five to seven years”, provided not so unusual and unexpected hurdles - that come in the way - are eventually removed.

On its part, the federal government has commenced work on development of necessary infrastructure in the area under the Thar Coal Infrastructure Development with a total outlay of Rs5 billion. The provincial government, too, is supplementing these efforts of the federal government with an investment of Rs2.20bn on construction of road network.

An additional amount of Rs1.30bn is being invested for developing many other facilities.

The Water and Power Development Authority (Wapda) has been assigned to a 500KV transmission line in the area at a cost of Rs5.50 billion.

With a proven reserve of 175 billion tons, experts estimate the value of raw coal at $7 trillion.

“You generate electricity from this coal and the value addition makes it worth $27 trillion,” an official said. He said that Thar has a potential to generate 100,000MW electricity for next 150 years from existing reserves.