Ministry of Finance (MoF) on Tuesday approved a draft for a foreign currency loan agreement and sovereign guarantee document for Thar coal mining project.
The federal government has committed to provide sovereign guarantee to Sindh Engro Coal Mining Company for its Thar coal mining project. Now the Ministry of Finance (MoF) has formally approved a draft for a foreign currency loan agreement and sovereign guarantee document.
The foreign currency loan for the Thar coal 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.
Moreover, the finance ministry has also given a go-ahead to the terms and conditions of the local currency loan for the project needed for finalisation of local currency loan document and associated Government of Pakistan (GoP) guarantee.
Sovereign guarantee for the project by GoP will be issued by a provision of backup guarantee by Government of Sindh. The approval will 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 timeframe 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 synchronisation by 2018. SECMC is developing a 3.8 MTPA mine and EPTL is developing a 660 MW power project at Thar. The capital cost of both projects is approximately $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.
It is pertinent to mention here that the Chief Minister Sindh has recently alleged that the Federal Government has not issued sovereign guarantee for Sind-Engro Power Project, to Chinese financiers for nearly two and half years. The Federal government was asked for approval of terms of financing for the rupee portion ($500 million) and issuance of guarantee for foreign currency portion ($200 million).
However the Federal government has rejected the claim of the CM Sindh by saying that the delay was made by the Government of Sindh.