PPIB Managing Director Shah Jahan Mirza and SEGC Director Meng Donghai signed the letter of interest at the Ministry of Water and Power here on Friday.
Under the agreement, SEGC will set up two power plants of 660MW each in Thar and consume lignite coal, which will be supplied by Sino-Sindh Resources – the lease-holder of Thar block-I. The project is expected to start commercial production in 2018.
Earlier, sponsors of the project had signed an equity investment agreement with China Coal Technology and Engineering Group Corporation and a joint venture agreement with Shanghai Electric Group Company during the visit of Chinese president to Pakistan.
In a statement, the PPIB said the project reflected the government’s interest in utilising Thar coal for power production and it would help in reducing the country’s reliance on costly oil-based power generation, saving millions of dollars in imports.
The 1,320MW power project will utilise the steam turbine technology and sell electricity to NTDC under a 30-year power purchase agreement.
The SECG’s project is in the list of priority schemes of the China-Pakistan Economic Corridor (CPEC) programme.
Speaking on the occasion, Water and Power Minister Khawaja Muhammad Asif said the abundant coal resources in the country, estimated at around 186 billion tons, had largely remained untapped. Of the total, 175 billion tons are found in Thar alone.
“The government is committed to developing local coal resources and utilising them for power generation to realise our dream of making Thar the energy capital of Pakistan in coming years,” he commented.
Sino-Sindh Resources, a mining company working on block-I of Thar coalfield, has won financing from the Industrial and Commercial Bank of China (ICBC), which has agreed to fund a major chunk of the project.
“ICBC has issued a letter of interest for providing $1 billion in the form of a 10-year loan to help extract coal from the Thar field,” said Chaudhary Abdul Qayyum, CEO of Sino-Sindh Resources, earlier this year.
This covers 75% of the capital cost of phase one of the project while 25% will be equity, which will be raised by a consortium.
It is expected to start coal extraction soon after achieving financial close. Initially, 6.5 million tons will be produced per annum from the block, which has estimated reserves of 2.5 billion tons. This coal production will be enough to run four power plants of 350MW each.
Coal extraction could be scaled up to 20 million tons per annum for its sale to other power plants or export to foreign markets.