KARACHI: China Machinery Engineering Corporation (CMEC) has acquired a 10% stake by investing $3.9 million in Hub Power Company’s (Hubco) subsidiary Thar Energy Limited (TEL) – one of the first domestic coal-fired power projects at Thar coal block-II.
With majority shareholding of about 60% in the project, Hubco has established TEL for setting up a 330-megawatt mine-mouth lignite-fired power plant.
The company has signed a shareholders’ agreement with Fauji Fertilizer Company (FFC) and CMEC TEL Power Investments Limited (CMEC Dubai) for the rest of the equity investment – 30% and 10% respectively – in the project. FFC has already injected equity into the company earlier this year.
The investment made by CMEC has been received by TEL, which has expected commercial operation date (COD) of March 31, 2021 for the coal project.
The company engaged China Development Bank as the lead arranger for foreign financing from China and Habib Bank Limited as lead arranger for local financing.
Hubco Company Secretary Shaharyar Nashat, while talking to The Express Tribune, pointed out that Pakistan’s energy sector was now moving towards an energy mix which would also include cheaper domestic coal.
According to Nashat, with the move towards utilising coal reserves, the cost of energy will shrink as the country’s coal will be a cheaper input for power production compared to imported furnace oil, imported liquefied natural gas (LNG) and imported coal.
He said the use of coal reserves would also help ease the pressure on the foreign exchange reserves as the import bill for energy requirements would come down.
Pakistan excessively relies on energy imports in the face of unsatisfactory domestic oil and gas production. According to estimates, Pakistan meets over 70% of its energy demand through imports.
In the previous fiscal year (FY18), total imports stood at $60.86 billion, which were 2.6 times overall exports of $23.22 billion, resulting in a historically high trade deficit of $37.64 billion. A quarter of total imports were made to meet energy requirements of the country, which amounted to $14.43 billion.
Nashat said the use of Thar coal reserves would also help develop the backward Thar region of Sindh. “Hubco has plans for betterment of the region when TEL comes on line along with its core operations,” he said.
Hubco currently produces 1,601 megawatts through its three plants in Hub, Narowal and Azad Kashmir. The company has also interests in three projects of the China-Pakistan Economic Corridor (CPEC) which include imported coal-based China Power Hub Generation Company (Private) Limited (CPHGC) at Hub, Sindh Engro Coal Mining Company Limited being developed in block-II of Thar coal field and Thar Energy Limited.
Recently, Engro Power Thar Limited (EPTL) has announced that its Thar-based 660MW lignite coal power plant is five months ahead of schedule and the project, which is in its construction phase, has achieved 90% completion.
It is expected to start functioning and supplying energy to the national grid by December 2018.
Published in The Express Tribune, October 4th, 2018.