China, Pakistan ink $820m Thar coal agreement

Published: December 22, 2015
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Under the finance agreements, a syndicate of local banks will provide Rs52 billion for the mining project, being undertaken by SECMC. PHOTO: FILE

Under the finance agreements, a syndicate of local banks will provide Rs52 billion for the mining project, being undertaken by SECMC. PHOTO: FILE

ISLAMABAD: 

Pakistan and China on Monday inked a $820-million financing agreement in Beijing, for both the mining and associated power plant project in Thar.

Sindh Engro Coal Mining Company (SECMC) and Engro Powergen Thar Limited (EPTL) signed the local and foreign financing agreements in China.

Landmark deal seals finance of Thar coal mine

Negotiations to secure loan financing for the project in Thar Coal Block II have been ongoing since term sheets were signed during Chinese President Xi Jinping’s visit to Pakistan earlier this year.

Under the finance agreements, a syndicate of local banks will provide Rs52 billion for the mining project, being undertaken by SECMC, and Rs22 billion for the associated 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 China Development Bank (CDB), Construction Bank of China (CBC) and Industrial and Commercial Bank of China (ICBC), which are providing loans amounting to $820 million.

Agha Wasif Abbas, Energy Secretary, Khalid Subhani, Engro Corporation President, and Shamsuddin A Shaikh, CEO of SECMC, signed the loan agreement. This project will be implemented under the China-Pakistan Economic Corridor (CPEC).

Thar coal mine and power project: Government finally gives sovereign guarantees

The drafts of the aforementioned agreements were approved by the Ministry of Finance earlier this year and the government of Pakistan has provided a sovereign guarantee of $700 million to underwrite the loan taken by SECMC. The project’s addition to the CPEC as ‘priority’ paved the way for its financing to be completed.

In addition, sponsor support agreements for both projects were also signed, whereby the sponsors, including the Sindh government, 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 companies have funds available for the smooth execution of the project. The project is expected to be commissioned by 2018.

Mining firm arranges funds from Chinese, local banks

In phase 2 of the project, the mine will be expanded to a capacity of 7.6 million tons per year (mtpa) and another 660MW power plant facility will be added. This expansion has also been included into the CPEC.

Earlier this month, the government of Sindh signed an Implementation Agreement with SECMC and a water utilisation agreement with Engro Powergen Thar Limited.

Under the Implementation Agreement with SECMC, the government committed to providing the required infrastructure to facilitate the mining project amounting to $600 million.

Published in The Express Tribune, December 22nd, 2015.

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Reader Comments (19)

  • Khan
    Dec 22, 2015 - 8:17AM

    the loans are not being given to government of Pakistan, but to private consortiums. Pakistan will be contractually obliged to purchase electricity at pre negotiated rates though.Recommend

  • Waqar.
    Dec 22, 2015 - 9:37AM

    Dr. Samar Mubarak Mand once stated that he can produce about 50,000 MW of electricity through gasification of Thar coal. It’s time to consult him and ask him if he was true and how it should happen as the funding is happening now. Recommend

  • Narendra
    Dec 22, 2015 - 9:50AM

    Congratulation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Recommend

  • Zaida Parvez
    Dec 22, 2015 - 10:35AM

    Pakistan is being sold to China one piece at a time.Recommend

  • Debilitator
    Dec 22, 2015 - 10:35AM

    way to go pakistan!!!!!Recommend

  • Shaikh
    Dec 22, 2015 - 10:42AM

    Welldone PMLN and I never thought I’d say this but Welldone PPP!Recommend

  • Nadeem
    Dec 22, 2015 - 11:06AM

    So many of the stake holder- committed to complete the project in 2018. I foresee that some of them would run away till the project is completed Recommend

  • Smiling Buddha
    Dec 22, 2015 - 12:09PM

    Indian is not at all concerned about chinese doing all the business in Pakistan. To be honest Pakistanis should be worried as everything going in to hands of chinese and one day it will occupy everything(nothing is free. A day will come my pakistani friends will say “we should have trusted Indians rather than notorious Chinese”Recommend

  • riz
    Dec 22, 2015 - 3:52PM

    great! All the projects be implemented at fast pace so that opponents could not prolong their propagandaRecommend

  • Muhammad Kashif
    Dec 22, 2015 - 4:37PM

    @ Waqar , Brother, some delegates of US Energy Labs tried to convince him for Transfer of Technology regarding Coal Gasification, but he insisted to produce it like missiles and their batteries. May God bless scientists like him and give them 100 more years to produce not a single MW.Recommend

  • nasser
    Dec 22, 2015 - 4:44PM

    @Smiling Buddha:
    Why it bothers you.And fdi is meant to selling of a country…then what about huge fdi pouring in to india from many countried. Does it mean india will be owned by more than one country …like Draupadi of Mahabharata fame?Recommend

  • Sultan Durrani
    Dec 22, 2015 - 5:29PM

    Entire world is closing Coal Plants having negative impact on environment. Once inquiry is conducted then nation will come to as t what damage nation has to bear. These old plants are being installed at much higher prices. Cost of Plant /MW is to be seen and also the owners of the project. A new dimension is being added to loot the country under banner of Foreign investment. May Allah Keep Pakistan safe from all such people. Rest assure a total loss to country from every aspect..Recommend

  • Hameed
    Dec 22, 2015 - 7:09PM

    China, Pakistan ink $820m Thar coal agreement

    China, Punjab ink $820m Sindh’s Thar coal agreementRecommend

  • curious2
    Dec 22, 2015 - 9:10PM

    If this is suppose to be a CPEC deal then why did Pakistan have to guarantee the debt?Recommend

  • Akbar
    Dec 23, 2015 - 4:09AM

    In my opinion, Pakistan should have asked Chinese to build Nuclear reactors based on thorium. This would be great since its non polluting and would have helped the economy a great deal.Recommend

  • Amer
    Dec 23, 2015 - 6:50AM

    @Smiling Buddha: Who said ANYTHING about the ‘incredible’ country…? Go try to save your women if you know what I mean… Recommend

  • John B
    Dec 23, 2015 - 8:30AM

    @Akbar:

    In principle I agree with your comment but pak has a long way to go for that due the military use and nuclear reactors are long term energy project. Your neighbor India is the leader in thorium reactors although an early thorium reactor was operated in the US and is no longer operational.

    PAK should have adopted in situ gasification project. It brings in cutting edge technology, will generate high paying jobs for all the college youth and add value to the low income labor force. The mining of lignite will destroy PAK environment and will return poor mass to power ratio. There are several cutting edge technology such as Solid Oxide fuel cell which can be adapted at low cost, if gasification approach is taken is efficient than conventional method as proposed.

    So where does pak commitment to global CO2 output stand based on this ! Recommend

  • Muhammad Kashif
    Dec 23, 2015 - 12:07PM

    @ John B

    May i know the cost of Solid Oxide Fuel Cell technology per MW in EPC? Pakistan lacks behing in CO2 commitment, but it also contributes minimum to global emissions as compared to India and China.Recommend

  • cautious
    Dec 24, 2015 - 7:54PM

    Last week ET reported that Thar had finalized financing for a $1.2 Billion Thar deal – now it’s finalized a $800 million deal? That’s a big shrink in one week .. lets hope it doesn’t get smaller next week.Recommend

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