MoF approves draft for SECMC foreign currency loan agreementNovember 10, 2015
KARACHI: Government of Pakistan’s (GoP) has committed to provide sovereign guarantee to Sindh Engro Coal Mining Company for its Thar coal mining project. Based on GoP’s commitment, the Ministry of Finance (MoF) has now approved a draft for a foreign currency loan agreement and sovereign guarantee document. The foreign currency loan for the project, which is a part of China Pakistan Economic Corridor (CPEC), is being provided by a consortium of top Chinese banks led by China Development Bank. Other banks in the Chinese consortium include ICBC.
Moreover, MoF has also given a go-ahead to the terms and conditions of the local currency loan for the project needed for finalization of local currency loan document and associated GoP guarantee. Sovereign guarantee for the project by GoP will be issued by a provision of backup guarantee by Government of Sindh. This now paves the way for the company to achieve financial close within this year.
The associated power plant being established by Engro Powergen Thal Limited (EPTL) is also well on its way to achieve Financial close in the same time frame while the sponsors of the SECMC and EPTL have spent approximately Rs. 4 billion to kick start work on the project before financial close. Physical work is continuing at both sites in earnest and companies hope to achieve grid synchronization by 2018.
SECMC is developing a 3.8 mtpa mine and EPTL is developing a 660 MW project at Thar. The capital cost of both projects is approximately USD 2 billion. Earlier in August this year a landmark agreement was signed to finance Pakistan’s first open-pit coal mine in the natural-resource rich Tharparkar district, which boasts holding 180 billion tons of coal but could not be exploited since it was discovered in the early 1990s.
A consortium of local banks that include HBL, UBL and Bank Alfalah will lend $500 million (Rs50 billion) – one of the largest project financing deals in recent years – to Sindh Engro Coal Mining Company (SECMC), a joint venture between Sindh government and five private companies.
Both the companies and its sponsors appreciate the help and support provided to these projects by the federal and provincial governments whose support has been instrumental in harnessing the untapped potential of Thar coal to change the energy landscape of Pakistan. Companies are committed to complete the project as early as possible to help eliminate load shedding in the country besides uplifting the lives of the people of Thar.