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.
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).
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.
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.