[CPEC, IPP] China Eximbank contributes to $1.43 billion syndicated loan for 1320MW Thar Block-1 Integrated Coal Mine and Power Project (Linked to Project ID#54013, 92627, 92628)

On April 20, 2015, Shanghai Electric Group Company Limited (SEGCL) and Sino Sindh Resources (Pvt.) Ltd (SSRL or (華信資源有限責任 公司) — a subsidiary of Global Mining (China) that was awarded a 30-year mining lease for Thar Coalfield Block I in October 2011— signed a cooperation framework agreement. Following the signing of this agreement, the two parties sought to establish an arrangement for the supply of coal to satisfy the coal consumption needs of a 1320 MW (2 x 660MW) coal-fired power plant project at Thar Coal Block-1 within Thar District and the Province of Sindh. As part of this deal, SSRL and SEGCL also entered into a coal supply agreement, in which SSRL will extract coal and supply it to China Power International (CPI). The mine is eventually expected to reach 20 million tons per year, which will be used for additional power plants as well as for export. In 2016, Pakistan’s Private Power Infrastructure Board issued a Letter of Intent to SEGCL to set up a 1320 MW supercritical indigenous coal-fired generation facility/thermal power plant at the project site. To facilitate the financing, development and operations of the power plant as well as a 7.8 million tons annual output (7.8 mtpa) coal mine, 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). 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 March 6, 2020, TCBPGCPL signed a $1.43 billion syndicated buyer’s credit (loan) agreement with China Development Bank (Project ID#53674), China Eximbank (Project ID#92628), ICBC (Project ID#92627), and Habib Bank for the 1320MW Thar Block-1 Integrated Coal Mine and Power Project. SEGCL/SEPCO agreed to provide $478 million of equity. The borrowing terms of the syndicated loan are unknown. However, it is known that Sinosure provided buyer’s credit insurance. It is also known that TCBPGCPL 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 proceeds of the loan were to be used by the borrower to finance two contracts: a $434,750,358 commercial (EPC) contract between Shanghai Electric Engineering Consulting Company Limited（上海電 氣工程設計有限公司) and SSRL, which was signed on April 17, 2019; and a $467,956,549 commercial (EPC) contract between Shanghai Electric Hongkong International Engineering Company Limited（上海電氣香港國際工程有限公司) and SSRL, which was signed on April 17, 2019. Then, on August 27, 2019, TCBPGCPL and Pakistan’s Central Power Purchasing Agency (Guarantee) Limited (CCP-G) signed a Power Purchase Agreement (PPA). The Government of Pakistan has not only issued a CCP-G payment guarantee but also a 20% return on equity (ROE) guarantee. The purpose of the project is to construct a 1320 MW supercritical indigenous coal-fired generation facility/thermal power plant and to develop an integrated coal mine with an annual production capacity of 7.8 million tons. The power plant will 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 is envisaged that the power plant will eventually be connected with the 660kV Matiari-Lahore HVDC Transmission Line Project (captured via Project ID#54013). An estimated 600 families will be displaced due to the coal mining 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. Shanghai Electric Engineering Consulting Company Limited and Shanghai Electric Hongkong International Engineering Company Limited are the EPC contractors responsible for implementation. Mining work on the Thar Coal Block-I mine and plant began in October 2019. Then, in December 2019, the Government of Pakistan’s Private Power and Infrastructure Board (PPIB) signed an implementation agreement (IA) with Shanghai Electric for the project. Construction 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. In February 2021, almost 40% of work related to coal mining was reportedly completed and construction work was also in progress on the power station. The first unit (660MW) is expected to be operational by August 2022, while the expected commercial operations date (COD) is February 2023. 4,767 people are reportedly being employed by the project (of which 1381 are Chinese and 3386 are Pakistani).

Additional details

1. This project is also known as the 1320MW SSRL Thar Coal Block-I 7.8 mtpa & Power Plant (2×660MW), the 1.32GW Thar Block-1 Integrated Coal Mine-Power Project, the SSRL Thar Coal Block-I Shanghai Electric Coal Plant Project, the Pakistan SSRL Thar Coal Block-I Coal Plant Project, or the 2 X 660 MW Mine-Mouth Coal-Fired Power Generation Plant at Thar Block-1 Project. The Chinese project title is 与塔尔电站项目 or 巴基斯坦塔尔煤田项目 or 巴基斯坦塔尔煤田一区块煤电一体化项目. 2. According to multiple, official sources, the Government of Pakistan has issued sovereign guarantees in support of all loans issued by Chinese state-owned banks for independent power projects (IPPs) in Pakistan (see https://www.fmprc.gov.cn/ce/cepk/chn/zbgx/t1735166.htm and http://pk.chineseembassy.org/eng/zbgx/202110/t20211010_9558510.htm and https://www.dropbox.com/s/bmx3w2b38o7guxm/Debt%20Pricing%20of%20IPPs%20%28002%29.pdf?dl=0). As such, AidData assumes that the loan captured in this record is backed by a sovereign guarantee from the Government of Pakistan. The precise loan commitment date is unknown. One source (http://cpec.gov.pk/project-details/9) suggests that the project reached financial close on December 31, 2019. Another source indicated that the project reached financial close in February 2020. Still another source indicates that the syndicated loan agreement was signed in January 2020. For the time being, AidData has coded the commitment date as December 31, 2019. However, this issue merits additional investigation. 3. Thar Coal Block-1 Power Generation Company (Private) Limited (TCBPGCPL)— the SPV (project company) responsible for repaying the syndicated loan — is also known as TCB-I and 塔尔发电公司. 4. ICBC reportedly contributed $358.5 million to the $1.43 billion syndicated loan (i.e. one-quarter of the face value of the loan). The size of the contributions from CDB, China Eximbank, and Habib Bank are unknown. For the time being, AidData assumes that CDB, China Eximbank, and ICBC each contributed $358.5 million (i.e. equally sized contributions to the lending syndicate). 5. The Thar coalfield holds an estimated lignite resource of over 175 billion tons. It is spread over an area of more than 9,000 square kilometers in the Thar Desert in the southeastern part of the Pakistani province. 6. For the time being, AidData assumes that the borrowing terms of the loan are identical to those reported in NEPRA’s approval of the upfront tariff application submitted by TCBPGCPL (https://nepra.org.pk/tariff/Tariff/IPPs/003%20Coal/Thar%20Coal%20Block-I/TRF-360%20TCB-I%20Upfront%20Tariff%208694-96%2010-06-2016.PDF): 10-year maturity, 4-year grace period, and 4.95% interest rate. 7. SSRL was owned 55% by Global Mining China (GMC) and 40% by Asiapak Investments, with the remaining 5% owned by a Dubai-based company. However, in September 2018, Shanghai Electric agreed to become the controlling shareholder of SSRL.

Number of official sources

12

Number of total sources

27