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Thar Coal Project
Achievement of a Workable Partnership
Khalid MansoorApril 10, 2010
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Public Private Partnership a new Investment Mechanism
Sindh Engro Coal Mining Company
Public Private Partnerships (PPPs) is a new investment mechanism typified by joint workingbetween the public and private sector. PPP investments are driven by country & sectorfundamentals
PPP is basically an effort to combine the best of the public and private sectors with anemphasis on :
Value for money,
Allocating risk to the entity best able to manage it, and
Delivering quality public services
Ideally, energy/mining projects should be developed by Private Sectors but due to lack ofinfrastructure whose sole responsibility lies with Governments, are developed in PPP setting
By requiring the private sector to put its own capital at risk, Government is obliged toprovide conducive investment environment and appropriate incentive package
Catch-22 for Thar Coal Project
Should government build infrastructure first or should project demonstrate itscommercial viability?
The solution is concurrent development of infrastructure and the project becausecommercially viable projects can only attract investments if all other prerequisites are inplace
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International Competitive Bidding of Thar Block II
Sindh Engro Coal Mining Company
In Block-II, GoS had invited Joint Venture Proposals for establishing Coal Mining projectdovetailed with a 1000 MW Power Plant through ICB. The following six companies submittedtheir proposals :
Al-Tuwairqi Group of Saudi Arabia
Jahangir Siddiqui Group
Engro PowerGen
Lucky Cement (YB Group)
Giga Group
Metal Investment Holding Company (British virgin Island)
Engro PowerGen was recommended by the Evaluation Committee of TC&EB. Thereafter,TC&EB gave its approval in principle
Detailed presentations have been made to the President and Prime Minister of Pakistan,who also supported GoS JV with Engro PowerGen
A joint venture agreement between GoS and Engro PowerGen Limited was signed inSeptember, 2009
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Sindh Engro Coal Mining Company
May Jun Oct Nov DecApr May Jun Aug Sep
2009Activities
19th
27th
14th
20th
9th
11th
28th
Jul
- GoS Advertisement for ICBproposals for Block II
- Sinocoal, China completedscreening study for Block II
- EPL submitted proposal toGoS for Mining & Power
- EPL selected as perferred JVPartner of GoS for Mining
- EPL Board of Directorsapproved JV Agreement
- Engro Chemical Board ofDirectors approved JVA
- Sindh Cabinet approval forJV Agreement with Engro
- Sindh Engro Coal Mining JV
Agreement Signed- Formation of Sindh Engro
Coal Mining Company
- DFS Kickoff Meeting
- All DFS Consultantsmobilized
2008
11th
15th
10-11th
Thar Block II Project Key Milestones
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Overview of Sindh Engro Coal Mining Company
Sindh Engro Coal Mining Company
Objective :
To develop and execute technically and commercially viable Coal Mining
Project in Thar Block II to generate electric power and bring energysecurity to Pakistan based on indigenous resource
Joint Venture (JV) Company Structure :
40% Shares owned by the Government of Sindh (GoS)
60% Shares owned by Engro PowerGen Limited (EPL)
Core expertise of each JV Partner include :
GoS would assist in timely availability of all relevant data (previous and currentlyongoing studies), requisite approvals from Federal and Provincial Governments and
timely delivery of infrastructure requirement for the Project includingwater, roads, transmission line and effluent disposal
Engro PowerGen will lead development, financing, management and execution of the
Project in a professional and fast track manner
This JV reflects new strategic focus of Government & Engro to develop Thar Coalreserves, raising the bar on how mega project investment is planned, prioritized,financed and delivered
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Thar Coal Block II Project Overview
Sindh Engro Coal Mining Company
Mine & power plant to be developed in parallel :
Phase 1 of the project will be development of a 6.5 million tons/annum coal mine in parallel
with development of1200 MW capacity DFS will investigate the most appropriate mining technique :
Single Bucket Truck technology, or Bucket Wheel Excavators
Subsequently, the coal mine will be scaled up to 22.5 Mt/a capacity and power plant capacitywill be increased to 4000 MW expeditiously
Detailed Feasibility Study is underway and will be completed by End July Total Project Cost is approx 3 Billion USD. Financial Close is expected in 2012
Coal Mining and Power Generation Project will start operation by December 2016
Challenges :
Emissions Compliance to World Bank standards for mining and power generation
Aquifer Management Overburden dumping
Solid and liquid waste disposal
Washing & drying of coal
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Mining Detailed Feasibility Study Consultants
Sindh Engro Coal Mining Company
Sindh Engro Coal Mining Company has inducted world renowned consultants to carry
out the Detailed Bankable Feasibility Study of the Project :
Detailed Feasibility Study Sinocoal, China
Hydrological Study - Northeast Coal Bureau, China
Drilling Fieldwork Deep Rock Drilling, Pakistan
Environmental & Social Impact Assessment Hagler Bailly Pakistan/ SRK, UK
Develop and compile a baseline study of the Thar Block II
Groundwater analysis Impact of mining activities on groundwater regime & proposed
mitigation strategy in Consultation with RWE
Environmental & Social Impact Assessment of the Project
Ground Water Modelling & Mitigating Strategy for ESIA RWE
Groundwater Survey & Water Analyses - SGS
Financial Model and Economic Viability Assessment SECMC & RWE
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Mining DFS Progress
Sindh Engro Coal Mining Company
All consultants have been issued formal notice to proceed and work is underwaysince mid-November, 2009
Detailed Feasibility Study (DFS)
First interim review of progress completed and second is scheduled for mid-April. Futurereviews will be conducted as per agreed hold-points and milestones to ensure that content& quality of DFS meets International lenders requirements
Preliminary Geological Model has been received and is currently being evaluated
Work on Mine Plan and Mine Cost Model has commenced
Hydrological Study (HGS)
All Hydro-Geological fieldwork has been completed and results have been provided toSinocoal, RWE & SRK
Groundwater Modeling to assess impact of mining on underground water is underdevelopment
Environmental & Social Impact Assessment (ESIA)
HBP/SRK have completed environmental & social baseline study
Preliminary resettlement assessment survey completed
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Mining DFS Progress
Sindh Engro Coal Mining Company
Financial Analysis & Economic Viability Assessment
Cost Model is developed and provided to Sinocoal to obtain budgetary estimates forcomplete mine development
Pakistan Electricity Market analysis to assess coal based electricity competitivenessunderway
Coal Pricing Analysis under progress
Financial Analysis of the Coal Mining & Power Generation Project
Assessment of Social and Economic benefits of the project to Pakistani Economy
Potential international lenders and stakeholders are being engaged
Infrastructure Development :
All infrastructure related activities (raw water, effluent disposal, transmission line, roadsetc.) are being closely monitored by a GoS & SECMC steering committee to ensure timelyavailability
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Project Development & Execution Timeline
2009 2010 2011 2012 2013-Q1 2016
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Y2
Y3
Y4
JV Company Formation &Owners Consultant selection
Mining Feasibility Study & Limited ESIA
ITB Preparation
EPC Bid Submission
Selection of EPC Contractor &Project Cost Estimation
Power Generation Feasibility Study
ITB Preparation
PPIB & NEPRA Approval
EPC Bid Submission
Selection of EPC Contractor &Project Cost Estimation
Financial Close
Notice to Proceed to Contractors
Mining & Power GenerationProject Construction
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Benefits of Investment in Indigenous Coal Resources
Sindh Engro Coal Mining Company
To sustain economic growth, Pakistan needs to develop its indigenous energy resourcesrapidly
To overcome the current energy crisis, Pakistan has no other alternative except importingexpensive fuels such as RFO, increasing countrys vulnerability to high oil prices in future
Thar investment will provide the following benefits :
Strategic energy resource that will guarantee energy security to Pakistan in thedecades to come
Import substitution of expensive RFO Due to import substitution benefits, Thar
mining will act as a direct foreign exchange earning sector and help lower theadverse impact of imported fuel on Pakistans Trade Balance
Lower power tariff for Coal fired Power Plants as compared to RFO based powertariff Pakistans global competiveness slumped from 107 (2007) to 120 (2008) out of
134 countries for Quality of Electricity Supply. However, Thar development willimprove Pakistans competitiveness (Source : Global Competitiveness Report 2009)
Socio-Economic Development of Thar region Presently Thar District ranks lowest on all socio-economic development indicators
in Sindh
Development of indigenous coal mining industry will lead to skilled job creationand transfer of technology
Potential for future downstream industries in Petro-chemical and Fertilizerproducts
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Thank You