China agrees to provide $1.5b for Thar coal project
KARACHI: The Sindh Engro Coal Mining Company and Engro Powergen Thar Limited inked financing agreements with local and foreign financing institutes in China amounting to $1.5 billion, securing the funding necessary for the mining and power plant project.
Under the finance agreements signed, a syndicate of local banks including conventional and Islamic financing institutes would be providing Rs 52 billion for the mining project being undertaken by Sindh Engro Coal Mining Company and Rs 22 billion for associate power plant being established by Engro Powergen Thar Limited.
The syndicate is led by Habib Bank Limited (HBL), United Bank Limited (UBL), Bank Alfalah Limited (BAFL) and Faysal Bank Limited (FBL). The foreign syndicate consists of Chinese Banks namely China Development Bank (CDB), Construction Bank of China (CBC) and Industrial & Commercial Bank of China (ICBC) are providing loans amounting to $820 million.
The drafts of the aforementioned agreements were approved by the Ministry of Finance earlier this year and the Government of Pakistan has provided sovereign guarantee of $700 million to underwrite the loan taken by SECMC fully backed by Government of Sindh. The project’s addition to the China Pak Economic Corridor (CPEC) as ‘priority’ earlier this year paved the way for it’s financing to be completed in a timely fashion.
In addition, sponsor support agreements for both projects were also signed, whereby the sponsors, namely Government of Sindh, Engro Powergen Limited, Thal Limited, Hub Power Company, Habib Bank Limited, and China Machinery Engineering Corporation agreed to inject $490 million into the project to ensure that the companies have the funds available for smooth execution of the project.
The project is expected to be commissioned by 2018. In phase 2 of the project, the mine will would be expanded to a capacity of 7.6 mtpa and another 660 MW power plant facility would be added, this expansion has also been included into the CPEC.
Earlier this month, the Sindh government signed an implementation agreement with SECMC and water utilisation agreement with Engro Powergen Thar Limited. Under the implementation agreement with SECMC, the government committed to provide the required infrastructure to facilitate the mining project amounting to $600 million (Rs 60 billion).
The project would prove to be a game changer, providing a sustainable energy landscape for Pakistan by utilising its indigenous energy resources at the same time bringing prosperity to the local people of Thar.