It is estimated that by 2030 Pakistan would need 113,695MW of energy while its economic prosperity and development was linked with availability of energy for which country needs coal-based power projects to meet energy shortfall. Pakistan’s coal is better than India in terms of heating value, sulfur, ash and moisture.
Pakistan needs a large number of coal-based power projects to bridge the widening gap between electricity demand and supply. China produces more than two-third of its electricity from coal, which cost-effectively fulfills the energy requirements of the second biggest economy of the world.
China has long been benefiting power consumers, particularly industrial and commercial category, through sufficiently meeting burgeoning power demand at much lower tariff.
Coal is a leading source of energy, has a tremendous contribution to energy mix and will continue to lead in the foreseeable future despite hype created against its use due to global warming related concerns.
The International Energy Agency (IEA) report 2015 said traditional coal-based economies like China, India, Indonesia, the Philippines and South Korea will keep pursuing coal as a fuel in future. Japan, a world’s top importer of liquefied natural gas, is aggressively opting coal for electricity generation.
Worldwide, there has been around two times jump in coal consumption between the 2000 and 2012 period.
In 2000, global coal consumption was 4.76 billion tons as against 7.69 billion tons in 2012, showing a 60 percent growth. Coal consumption will reach nine billion tons/year in 2019.
Power companies are presently building more than 500 coal-fired plants in Asia alone, with at least a thousand more standing at the planning stage. Coal is cheaper than natural gas and its import cost is lower.
China and India are increasingly using latest coal power generation technologies with the passage of time in order to address environment-related concerns. These two leading economies of the world are heavily investing in coal-based projects.
India, which produces around half of its electricity from coal, has planned a series of ultra-mega coal power projects, each having a mammoth capacity of 4,000MW or above.
Coal-fired power plants are no more health hazardous. Modern coal technologies employ fuel-saving supercritical boilers. Such boilers are meant to minimize the emission of greenhouse gases. Despite possessing one of the world’s largest coal reserves, Pakistan relies on costly fuels for power generation.
Thar is blessed with coal reserves sufficient to generate 5,000MW of electricity for five decades. This block contains about two billion tons of lignite, which is just one per cent of the total Thar coal reserves.
The expert called for concerted efforts for harnessing local coal, saying power projects can initially be set up on imported coal as a medium-term solution. Coal happens to be one of the most sustainable remedies to the energy-deficit Pakistan.
Sindh Engro Coal Mining Company and Engro Powergen Thar Limited have signed landmark financing agreements with local and foreign financing institutes amounting to US$ 1.5 billion thereby securing all funding necessary for the mining and power plant project.
Another important landmark is achieved for both the mining and associated power plant project for Thar Coal Block II as Sindh Engro Coal Mining Company (SECMC) and Engro Powergen Thar Limited (EPTL) signed local and foreign financing agreements in Beijing, China.
Negotiations to secure the loan financing for the Thar Coal Project in Thar Coal Block II have been ongoing since term sheets for the same were signed during Chinese President Xi Jinping’s visit to Pakistan earlier this year.
Under the finance agreements signed, a syndicate of local banks including conventional and Islamic financing institutes will be providing Rs52 billion for the mining project being undertaken by Sindh Engro Coal Mining Company and Rs22 billion for associate 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 Chinese banks namely, China Development Bank (CDB), Construction Bank of China (CBC) and Industrial & Commercial Bank of China (ICBC) are providing loans amounting to US$820 million.
The drafts of the aforementioned agreements were approved by the Ministry of Finance earlier this year and the Government of Pakistan has provided Sovereign Guarantee of US$ 700 million to underwrite the loan taken by SECMC fully backed by Government of Sindh
The project’s addition to the China-Pakistan Economic Corridor (CPEC) as ‘priority’ earlier this year paved the way for its financing to be completed in a timely fashion.
In addition, Sponsor Support Agreements for both projects were also signed, whereby the Sponsors, namely, Government of Sindh, Engro Powergen Limited, Thal Limited, Hub Power Company, Habib Bank Limited, and China Machinery Engineering Corporation agreed to inject US$490 million into the project to ensure that the companies have the 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 mtpa and another 660MW power plant facility will be added, this expansion has also been included into the China Pakistan Economic Corridor (CPEC).
The Government of Sindh signed an Implementation Agreement with SECMC and Water Utilization Agreement with Engro Powergen Thar Limited. Under the Implementation Agreement with SECMC, the Government committed to provide the required infrastructure to facilitate the mining project amounting to US$600 million (Rs60 billion).
This marks the start of an era, which will usher energy security and economic prosperity for Pakistan as both mining and power projects move closer to financial close, which is expected by the end of this year.
The project will provide a sustainable energy landscape for Pakistan by utilizing its indigenous energy resources at the same time bringing prosperity to the local people of Thar.