KARACHI: Fauji Fertilizer Company Limited (FFC), a leading fertiliser manufacturer that has diversified into power production, has announced injection of $39 million into Thar Energy Limited (TEL), which is expected to kick-start a 330-megawatt domestic coal-fired power project by December 2020.
In addition to this, sponsors have extended a guarantee of $82 million in favour of the fertiliser company to enable it to meet debt requirement for the project from local and international investors, according to a notice sent to the Pakistan Stock Exchange (PSX) on Tuesday.
Earlier, Hub Power Company (Hubco) — the main investor in TEL — embraced FFC and China Machinery Engineering Corporation (CMEC) as equity partners of 30% ($39 million) and 10%, respectively, and slashed its own equity stake to 60%.
The TEL project is estimated to cost $497.7 million, which is a combination of debt and equity in the ratio of 75:25 ($373.27 million and $124.43 million). The three partners are supposed to make all kind of financial arrangements for the project by June this year.
According to a recent statement released by Hubco, the financial close of the project is expected in June 2018.
FFC’s share price increased 3.58%, or Rs3.35, to close at Rs96.94 with trading in 3.79 million shares at the PSX.
Hubco’s share price rose 0.98%, or Rs0.98, to Rs101.43 with a volume of 551,000 shares. The power plant is part of China-supported multibillion-dollar projects in Pakistan under the banner of China-Pakistan Economic Corridor (CPEC). It is being set up in or around the coal-mining area as it will be utilising coal extracted from Thar coal field block-II.
The project will be amongst the first in a series of power plants based on Thar coal and will lead to substantial savings in foreign exchange.
The project will help increase coal-based power generation in the energy mix by around 16%, according to the National Electric Power Regulatory Authority (Nepra).
Arif Habib Limited analyst Tahir Abbas said the power regulator had already awarded a tariff to TEL while its cost of production would gradually go down with an increase in coal production with the passage of time.
Published in The Express Tribune, April 4th, 2018.