ISLAMABAD: Chinese banks are showing reluctance to finance Thar Coal Project on sovereign guarantees of the Pakistani government.
Sindh Engro Coal Mining Company (SECMC) Chief Executive Officer (CEO) Shamsuddin Ahmed Shaikh during a press briefing to a group of journalists regarding Thar coal power project, said: “Chinese banks want Engro and SinoSure (China Export & Credit Insurance Corporation) to share 50 percent each.” Shaikh said that Engro had already taken loan from banks and hoped that the issue would be resolved during Prime Minister Nawaz Sharif’s visit to China in November.
Shaikh said that Sinosure should accept 80 percent risk while banks should accept the remaining 20 percent. “This project is of national importance and major political parties like the PML-N, PPP and even the PTI were supporting it,” he said.
He maintained that SECMC would invest $2 billion in the project – $0.9 billion for coal mining and $1.1 billion for installation of plant while Chinese banks were to give $560 million as loan.
“Thar coal project has been put in early harvest projects to be implemented with Chinese cooperation but Chinese banks including Exim Bank, China Development Bank and Industrial and Commercial Bank of China (ICBC) are reluctant to extend financing,” he said. “We have no issue for financing of coal mining project as local banks and firms have also agreed to extend financing but there are issues in seeking financing from China,” he said, adding that National Electric Power Regulatory Authority (NEPRA) had allowed a spread of 4.5 percent over LIBOR rate. But, he said, Chinese banks did not accept it and demanded for 5.5 percent. He maintained that the regulator had capped upfront SinoSure fee at 7 percent; however, due to prevalent circular debt situation in Pakistan, it was asked for 9 percent credit risk insurance. “Therefore, Sinosure fee capping needs to be aligned with market rate,” he added.
“Thar coal project cannot be implemented unless these issues with China are resolved,” he said adding that China was only country which had agreed to extend financing. He said that they were facing problems at domestic level as Economic Coordination Committee (ECC) had approved a package to treat this project on IPP model but that no SRO had been issued.
“Four vehicles of the project have been stuck at the Karachi Port for last one and a half months but the Federal Board of Revenue was not clearing them,” he added.
Once the financing issues were resolved, first unit with generation capacity of 330 megawatts (MW) of electricity would be completed in 38 months while the second 330-MW unit would be installed in the next four months, he said and expressed the hope that power generation would begin by 2018.
