Oracle Power expects to sign an MOU covering its combined lignite coal mine and mine mouth power plant in Pakistan later this month. The mine and power plant are proposed for Block VI of the Thar desert in the south-eastern Sindh Province of Pakistan.
The MOU was agreed in principle in late September with Chinese state-owned enterprises Sichuan Provincial Investment Group Co Limited (SCIG) and PowerChina International Group Limited.
A total capital requirement of approximately US$1.6 billion is estimated at present. This is expected now to be firmed up in discussions with the parties, which shall continue to optimise and reduce costs where applicable. The parties have concluded on a 75:25 debt to equity ratio in the MOU.
In line with the MOU, the development expenditure incurred by Oracle up to the date of signing the MOU is expected to be capitalised and the resultant shareholding and equity value will be adjusted to reflect this.
Oracle will retain a 12.1% equity stake in the flagship Block VI project while SCIG will take a 78% equity interest at the project level and PowerChina will take a 9.9% equity interest at the project level.
Oracle has also signed a consortium agreement (CA) with the parties and this runs in parallel with MOU. The CA is a formal requirement of the Private Power and Infrastructure Board (PPIB), the regulator of the Pakistan power industry. It is part of the process that leads to the issue by PPIB, first of the Letter of Intent and subsequently the Letter of Support.
It similarly records the intention of the parties to proceed to formal agreement to cooperate and collaborate in respect of investing in, setting up, constructing, owning and operating the flagship Thar project. This CA supersedes the previous consortium agreement.
PowerChina is the owner of Sinohydro as well as the Hydrochina Corporation, China Renewable Energy Engineering Institute, Shandong Electric Power Company (SEPCO) and numerous electric power design institutes and power construction companies.
It provides planning, survey, design and engineering, finance, construction, installation, and operation and maintenance for power and infrastructure projects.
PowerChina has already successfully secured financial close on several CPEC (China-Pakistan Economic Corridor) listed projects and is proceeding with these power plant project constructions in Pakistan.
SCIG invests in and manages projects in a range of sectors, including energy resources, transportation, communications, raw materials, electromechanical, agriculture and forestry.
SCIG is China’s fourth largest and Sichuan Province’s largest local electrical power investment company, having a total install capacity of 36.04GW.
Oracle’s CEO Shahrukh Khan said, “I am delighted that we have reached this important milestone in the development of our project. The company has worked tirelessly over the last few years to provide the funding framework required for such a significant project for Pakistan.
“We are delighted to move forward with PowerChina and SCIG, two pre-eminent Chinese state-owned enterprises and leaders in their field, as our chosen partners.
“The structure of the financing, particularly with investment coming in at the project level, has significantly reduced the potential dilution for the company's shareholders and has ensured the company retains a significant interest in the project."