ICBC contributes to $1.364 billion syndicated loan for 1320MW Thar Coal Block-1 Power Plant Construction Project (Linked to Record ID#54013, 53674, 92627, 92628)

Project narrative

To facilitate the financing, development and operations of a 1320MW coal-fired power plant at the Thar Block-1 coalfield, a special purpose vehicle called Thar Coal Block-1 Power Generation Company (Private) Limited (TCBPGCPL or 塔尔发电公司) was established on January 28, 2016. TCBPGCPL is jointly owned by Shanghai Electric Investment (Dubai) Limited (99.9997% equity stake) and 2 Chinese individuals in equal proportions (0.0003% equity stake). On July 20, 2016, the Government of Pakistan’s Private Power and Infrastructure Board (PPIB) issued a Letter of Support (LoS) to TCBPGCPL, which was amended on September 15, 2017, January 12, 2018, August 17, 2018, February 22, 2019, July 10, 2019, December 10, 2019, March 19, 2020, July 10, 2020, February 24, 2021 and August 24, 2021. Then, TCBPGCPL entered into Implementation Agreement (IA) on December 12, 2019 with the President of Pakistan for and on behalf of Islamic Republic of Pakistan. Then, on August 27, 2019, TCBPGCPL signed a Power Purchase Agreement (PPA) with Central Power Purchasing Agency (Guarantee) Limited (CCP-G). The Government of Pakistan not only issued a CCP-G payment guarantee but also a 20% return on equity (ROE) guarantee to TCBPGCPL. TCBPGCPL agreed to sell power to the PPIB at a tariff rate of PRs.4.98/kWh ($0.0176/kWh), which was expected to save the Government of Pakistan $500 million in foreign exchange each year. The total cost of the 1320MW Thar Block-1 Integrated Coal Mine and Power Project is $1.9122 billion. It is being implemented as an Independent Power Project — as part of the CPEC initiative — and financed according to a debt-to-equity ratio of 75:25. On January 19, 2020, TCBPGCPL signed a $1,364,000,000 syndicated term facility agreement (TFA) with a group of Chinese banks for the 1320MW Thar Coal Block-1 Power Plant Construction Project. However, TCBPGCPL did not achieve financial close (and meet the conditions precedent for the loan’s initial disbursement) until December 14, 2023. The members of the loan syndicate included the Industrial and Commercial Bank of China (ICBC), China Development Bank, Bank of Communications Co. Ltd., China Minsheng Bank Corporation, Postal Savings Bank of China Co., Ltd., and Agricultural Bank of China. The estimated (original) borrowing terms of the loan included a 14-year maturity, a 4-year grace period, an interest rate of 3-month LIBOR plus a 4.5% margin, and a 7% Sinosure insurance premium. However, the loan's interest rate was reportedly reset to 3-month SOFR plus a 0.26161% credit adjustment spread (CAS) and a 4.5% margin after the loan agreement was finalized. The borrower purchased a buyer’s credit insurance policy from Sinosure and was required by its lenders to maintain a minimum cash balance of $79 million in a debt service reserve account (DSRA). TCBPGCPL also acquired 232.32 acres of land within the Thar Coalfield Block-I and the Government of Pakistan allowed TCBPGCPL to mortgage the land to its lenders. The loan's (principal) amount outstanding was $1.3 billion as of July 2024. The purpose of the project was to construct a 1320 MW supercritical indigenous coal-fired generation facility/thermal power plant at the Thar Block-1 coalfield. The power plant was to consist of two, 660 MW supercritical units having supercritical variable pressure operation coal-fired tower type boiler with single furnace, extraction condensing steam turbine and inner-cooled generator. It was also envisaged that the power plant would eventually be connected with the 660kV Matiari-Lahore HVDC Transmission Line Project (as captured via Record ID#54013). An estimated 600 families were to be displaced due to the coal mine and installation of the power plant. The Thar Block-1 covers approximately 122 km2 in the southern part of the Thar coalfield area in the Thar Desert in the Sindh province of Pakistan, approximately 380km east of Karachi. The Thar coalfield area covers approximately 9,000 km2 and is bounded by the Pakistan-India border to the north, east, and south. The 1.3GW coal-fired power plant being developed as part of the integrated project is located approximately 5km away from the pithead of the Thar Block-1 coal mine. CCTEG Shenyang Engineering Company (a subsidiary of China Coal Technology Engineering Group) was the contractor responsible for project design. Shanghai Electric Engineering Consulting Company Limited and Shanghai Electric Hongkong International Engineering Company Limited were the EPC contractors responsible for project implementation. Although an ESIA was completed, local populations were not consulted and received minimal land compensation. Civil works began in October 2019. However, project implementation was temporarily suspended during the Covid-19 pandemic. Then, in August 2020, a batch of 500 Chinese workers and managers arrived in Pakistan by a special chartered flight, which accelerated the implementation of the project. Work on the plant’s chimney was completed by October 2020. The power plant successfully completed a 168-hours full load reliability run test (RRT) on February 4, 2023. The originally expected commercial operations date (COD) of the 1.32GW Thar Block-1 Integrated Coal Mine-Power Project was September 30, 2022. Its actual COD was February 5, 2023. 4,767 people were reportedly employed by the project (of which 1381 were Chinese and 3386 were Pakistani). There are some indications that the syndicated loan for the 1320MW Thar Coal Block-1 Power Plant Construction Project has financially underperformed vis-a-vis the original expectations of lenders. In July 2024, the Government of Pakistan reportedly requested that ICBC, China Development Bank, Bank of Communications Co. Ltd., China Minsheng Bank Corporation, Postal Savings Bank of China Co., Ltd., and Agricultural Bank of China grant a 5-year maturity extension to TCBPGCPL. However, as of November 2024, a debt reprofiling agreement had not yet been finalized.