ISLAMABAD: The federal government has assured Sindh that it would extend sovereign guarantee and support power generation at Thar coal directly and through federal entities to encourage domestic and international investors and financiers to be part of the Thar Coal Power Generation effort.

A senior official told Dawn the assurance was given to Sindh chief minister’s adviser on finance, Syed Murad Ali Shah, during his meeting with Finance Minister Senator Ishaq Dar earlier this week.

In a related development, Punjab government has also decided to seek acquisition of a mining block at Thar Coal that would not only support Sindh’s initiative for development of Thar coal deposits leading to power generation but also help Punjab overcome power shortage and ensure its energy security.

Separately, Sindh Engro Coal Mining Company CEO Shamsuddin A. Shaikh told journalists on Wednesday that the company was in final stages of proceeding with engineering works to contracts, and award financing and advisory mandates by next month.

He said the company was also scheduled to receive term sheets from local and international banks to formulate a syndicate to achieve financial close for the $1.6 billion Thar Coal Mining and 600MW power generation project.

The recent announcement by the Asian Development Bank to provide $900 million to Jamshoro Power Project would go a long way in utilising coal resources for cheaper power generation, he said.

He said the federal government had already approved sovereign guarantee for debt portion of mining up to $700 million. A contract with banking industry was expected to be signed this month that would ensure that the first power project comes into commercial operation by December 2017 at levelised tariff or 9.5 cents per unit. It would come down to 7.8 cents per unit when the generation capacity was increased to 1200MW within five to six years from 600MW in 2017 with minor additional investments, he said.

Mr Shaikh said the generation cost would ultimately come down to 6.7 cents per unit in 10 years when the project generation capacity from coal was increased to 3600MW.Responding to a question, he explained that contrary to general perception, quality of Thar lignite compared favourably with other lignite being used around the world for power production. Among four established quality measures of coal which are heating value, sulphur, Ash and moisture content, Thar coal was superior in three quality aspects compared to lignite currently being used in Germany, India and Bulgaria for power generation, he said.

Shams said the SECMC’s Block-2, which is only one per cent of the entire Thar coal reserve, could produce 5,000MW for the next 50 years, resulting in substantial savings both in terms of cost and foreign exchange requirement.

Speaking of the project timelines, Shaikh said world-class Chinese companies have given proposal to execute and finance both debt and equity. He said top Chinese banks were interested to finance the project. The financial closure is expected by mid-next year, he said.

He said a group of five or six independent power projects were ready to become equity partners in the project once the federal government approves a plan to issue sovereign guarantee for the power plant.

Mr Shaikh appealed for joint effort by Sindh and federal governments to make the project a reality and added that the Chinese government had also advised Islamabad to declare Thar coal among its “Priority Projects” and include it in the Pak-China economic corridor to meet a requirement of the Chinese banks.