Oracle Coalfields PLC, the developer of a lignite coal mine and power plant in Sindh Province has made significant further progress towards delivering the commercial potential of Block VI in the Thar Coalfields. It has signed an Engineering Procurement and Construction (EPC) Framework Agreement with Chinese power and construction group SEPCO Electric Power Construction Corporation (SEPCO).

SEPCO has been selected as preferred contractor to enter into two lump sum turnkey EPC contracts for both the 4.2 million tonnes/annum coal mine and the 600MW power plant. The combined EPC price or transaction value is circa US$1.3 billion. This figure is subject to modification during the finalization of the detailed contracts. 

SEPCO has delivered an outline of the financing proposal for project finance loans under which Sinosure would consider securitizing up to 85% of the cost of the two EPC contracts. SEPCO has also agreed to consider taking a 10% equity stake in EPL, which is to be formed in Pakistan by Oracle, after due diligence has been completed.

A comprehensive EPC Term Sheet for the coal mine and power plant is expected to be agreed between Oracle and SEPCO by the end of 2014 in preparation for the final investment decision, and for groundwork to commence in mining and power plant development in 2015.

Oracle has appointed Turner & Townsend and Mott MacDonald, international project consultants and managers with expertise in China, as technical advisers for the coal mine and power plant respectively and to manage the process of entering into EPC term sheets and contracts with SEPCO. The EPC contracts will be developed to comply with Oracle’s technical requirements, power purchase agreement, coal sales agreement and other agreements to be entered with Oracle’s Pakistan subsidiaries, and Pakistan authorities.

Oracle and SEPCO aim to finalize the necessary documents within six months of this agreement and have entered an exclusive agreement for this period with possible extension by mutual agreement.

Oracle’s CEO Shahrukh Khan says that entering the EPC Framework Agreement with and receiving a financing proposal from one of China’s largest state-owned enterprises in the energy sector is another step towards bringing the project to reality. “SEPCO and Oracle are eager to succeed in the development of our integrated coal mine and power plant project and to play an effective role in addressing Pakistan’s energy crisis.”

SEPCO chairman Liu Chuanming says, “We at SEPCO are confident of Oracle’s endeavours to develop one of Pakistan’s largest energy projects and are delighted to be Oracle’s preferred EPC contractor and partner for the coal mine and power plant project. Oracle has demonstrated its high standards in taking their project to this level that complements SEPCO standards in project execution and financing.”

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