Thar Coal Project

Achievement of a Workable Partnership

Khalid Mansoor April 10, 2010

Public Private Partnership a new Investment Mechanism

Public Private Partnerships (PPPs) is a new investment mechanism typified by joint working between the public and private sector. PPP investments are driven by country & sector fundamentals PPP is basically an effort to combine the best of the public and private sectors with an emphasis 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 of infrastructure 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 to provide conducive investment environment and appropriate incentive package

Catch-22 for Thar Coal Project

Should government build infrastructure first or should project demonstrate its commercial viability?
The solution is concurrent development of infrastructure and the project because commercially viable projects can only attract investments if all other prerequisites are in place

Sindh Engro Coal Mining Company

International Competitive Bidding of Thar Block II

In Block-II, GoS had invited Joint Venture Proposals for establishing Coal Mining project dovetailed with a 1000 MW Power Plant through ICB. The following six companies submitted their 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 in September, 2009

Sindh Engro Coal Mining Company

Thar Block II Project Key Milestones

Activities 2008 May Jun Apr May Jun Jul 2009 Aug Sep Oct Nov Dec

- GoS Advertisement for ICB proposals for Block II - Sinocoal, China completed screening study for Block II - EPL submitted proposal to GoS for Mining & Power - EPL selected as perferred JV Partner of GoS for Mining - EPL Board of Directors approved JV Agreement - Engro Chemical Board of Directors approved JVA - Sindh Cabinet approval for JV Agreement with Engro

19th 27th 14th 9th 20th 28th 11th 11th 15th 10-11th

- Sindh Engro Coal Mining JV Agreement Signed

- Formation of Sindh Engro Coal Mining Company - DFS Kickoff Meeting

- All DFS Consultants mobilized

Sindh Engro Coal Mining Company

Overview of 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 energy security 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 currently ongoing studies), requisite approvals from Federal and Provincial Governments and timely delivery of infrastructure requirement for the Project including water, 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 Coal reserves, raising the bar on how mega project investment is planned, prioritized, financed and delivered

Sindh Engro Coal Mining Company

Thar Coal Block II Project Overview

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 of 1200 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 capacity will 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

Sindh Engro Coal Mining Company

Mining Detailed Feasibility Study Consultants

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

Sindh Engro Coal Mining Company

Mining DFS Progress

All consultants have been issued formal notice to proceed and work is underway since mid-November, 2009
Detailed Feasibility Study (DFS) First interim review of progress completed and second is scheduled for mid-April. Future reviews 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 to Sinocoal, RWE & SRK

Groundwater Modeling to assess impact of mining on underground water is under development Environmental & Social Impact Assessment (ESIA)
HBP/SRK have completed environmental & social baseline study Preliminary resettlement assessment survey completed

Sindh Engro Coal Mining Company

Mining DFS Progress

Financial Analysis & Economic Viability Assessment
Cost Model is developed and provided to Sinocoal to obtain budgetary estimates for complete mine development Pakistan Electricity Market analysis to assess coal based electricity competitiveness underway 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, roads etc.) are being closely monitored by a GoS & SECMC steering committee to ensure timely availability

Sindh Engro Coal Mining Company

Project Development & Execution Timeline

2009
Q 3 Q 4 Q 1

2010
Q 2 Q 3 Q 4 Q 1

2011
Q 2 Q 3 Q 4 Q 1

2012
Q 2 Q 3 Q 4

2013-Q1 2016
Y 2 Y 3 Y 4

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 Generation Project Construction

Sindh Engro Coal Mining Company

Benefits of Investment in Indigenous Coal Resources

To sustain economic growth, Pakistan needs to develop its indigenous energy resources rapidly To overcome the current energy crisis, Pakistan has no other alternative except importing expensive 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 the decades 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 the adverse impact of imported fuel on Pakistans Trade Balance Lower power tariff for Coal fired Power Plants as compared to RFO based power tariff Pakistans global competiveness slumped from 107 (2007) to 120 (2008) out of 134 countries for Quality of Electricity Supply. However, Thar development will improve 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 creation and transfer of technology Potential for future downstream industries in Petro-chemical and Fertilizer products

Sindh Engro Coal Mining Company

Thank You