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Thar Block II Lignite Mining and Coal Fire Power Plant Project
Special Report on CPEC Projects (Energy: Part 9)

1. Brief introduction

Thar Block II lignite mining and coal fire power project is located in Tharparkar district in Sindh. The coal mine covers an area of 9000 square kilometers with about 175 billion tons of coal reserves. It is the largest coal mine in Pakistan, the largest lignite mine in Asia and the seventh largest coal mine in the world.

The project includes the open-pit coal mine and the coal-fired power plant. An open-pit lignite mine with an annual capacity 3.8 million and a 2×330MW coal-fired power station are expected to be built on the project site. The first phase of the project, with a total investment of more than USD 2 billion, will achieve commercial operation date (COD) in 2019.

The first phase of the open-pit coal mine project is to achieve an annual capacity of 3.8 million tons, and the second phase is to expand to 7.6 million tons. The total investment is about USD 850 million with a construction period of 41 months. It is developed by Sindh Engro Coal Mining Company, which is a joint venture of Government of Sindh (52.10%), Engro Powergen Limited (12.80%), Thal Limited (12.80%), Habib Bank Limited (9.50%) , Hub Power Company Limited (8.50%) and China Machinery Engineering Corporation (4.30%).

CMEC has established a joint-venture with the Pakistan partners to execute the power plant project with a total investment of about USD 1.2 billion and 42-month time limit. It is developed by Engro Powergen Thar (Private) Limited, which is a joint venture of Engro Powergen Limited (50.1%), CMEC (35%), Habib Bank Limited (9.5%) and Liberty Mills Limited (5.4%).

2. Latest progress

The design and equipment procurement of the coal mine and power plant projects have been completed. The site construction has been carried out in an orderly way. 15 million cubic meters of surface soil of coal mines have been removed. The civil works of the main equipment foundation of the power plant has been completed.

The project is a prioritized or early harvest project of China-Pakistan Economic Corridor, and the first coal-electricity integration project under CPEC as well as in Pakistan. In November 2014 and April 2015, the Memorandum of Project Financing and the Term Sheet of Loan were signed respectively.

The project is financed by a Chinese bank consortium led by China Development Bank. On April 8th, 2016, the financial close was achieved, and the project officially entered into the implementation phase.

In December 2016, China and Pakistan decided to expand another 2×330MW coal-fired power plant in Thar Block-Ⅱ, and facilitate HubcoThar and ThalNova to invest in the project.

In April 2017, ThalNova Power Thar (Private) Limited has awarded the engineering, procurement and construction (EPC) contract of the 330MW power project in Thar, Sindh to CMEC. The plant, which is being set up at a cost of USD 498.3 million, is expected to start commercial production by December 31, 2019. Consequently, the CMEC will sell power at Rs3.67 per kilowatt hour during the first 10 years of its operations, which would later be reduced to Rs1.91 per kilowatt hour for the next 20 years.

ThalNova is a joint venture, with Thal Limited and Novatex Limited as the main shareholders. One of the biggest issues of the power sector in Pakistan is expensive power generation, hence cost-effective electricity production through indigenous Thar coal will help reduce power sector’s deficit and ultimately bring down the country’s circular debt.

As per the generation license granted by the National Electric Power Regulatory Authority, ThalNova will supply electricity to the national grid for a period of 30 years. The ultimate goal is to alleviate the energy crisis in Pakistan using local fuel resources.

3. Corporate social responsibility

As Thar region is located in the desert, the local residents are generally in extreme poverty. In order to improve people's livelihood and benefit the public, CMEC prepared the staff training program at the very beginning and set up a corresponding training center. CMEC tried to train local residents into mechanical operators, truck drivers, and technicians etc. Up to now, CMEC have provided more than 1,000 jobs for the local people. In addition, CMEC found that, due to poor medical conditions, there are epidemic infectious diseases with a high fatality rate. CMEC decided to provide free civil engineering support for local hospitals, and purchased buses as mobile hospitals. CMEC hopes that the local people can get benefits from energy development.

(Li Kan, Public Relation Director, China Machinery Engineering Corporation)

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