China approves $1.2b loan for Thar coal project

Final lending document expected to be signed on Dec 21 in Beijing

ISLAMABAD:

The multimillion-dollar coalmining-cum-power project in Thar has received a major boost after the China State Council (CSC) approved financing for the scheme which has assumed a vital position in Pakistan’s efforts to plug its chronic electricity shortfall.

The approval of the council will allow Chinese banks to lend $1.2 billion for the project aimed at tapping vast coal reserves in Tharparkar district of Sindh. A final lending document is expected to be signed on December 21 in Beijing.



The Chinese, in a letter addressed to Water and Power Secretary Younus Dagha, have confirmed that the CSC has approved financing of the mega project, an official statement said.

The project, which will cost nearly $2 billion and is expected to be completed by 2018, includes development of a coalmine with a capacity to produce 3.8 million tons per annum, and a 660MW power plant.

After years of hollow promises, a landmark agreement was signed in August to finance Pakistan’s first open-pit coalmine in Tharparkar, which holds 180 billion tons of coal which could not be exploited due to various reasons since discovery in the early 1990s.



A consortium of local banks, including HBL, UBL and Bank Alfalah, have already agreed to lend $500 million (Rs50 billion) – one of the largest project financing deals in recent years – to SECMC, which is a joint-venture between the Sindh government and five private companies.

Foreign currency loan for the project, which is part of the CPEC, is being provided by a consortium of top Chinese banks, led by the China Development Bank. Other banks in the consortium include Industrial and Commercial Bank of China (ICBC).



The project was initially a joint-venture between Engro Corporation and the Sindh government only, but Engro’s sponsor, Dawood Group, was later able to woo other private parties as stakeholders, which included the House of Habib and Habib Bank.

Published in The Express Tribune, December 17^th, 2015.