KARACHI: Liberty Power Holding, which this week signed a deal to buy the thermal energy assets of the country’s largest conglomerate for $125 million, is banking on its coal reserves and reforms laid out by the IMF for its investment to pay off.

Liberty Power entered into an agreement with a subsidiary of conglomerate Engro Corp to buy all its thermal assets, including the country’s leading coal producer, Sindh Engro Coal Mining Company.

The deal is among the biggest in recent times in Pakistan’s power sector, which has remained in crisis for years due to unpaid debts and chronic technical issues.

“We believe Thar Coal is the energy future of Pakistan, it’s indigenous, it’s cheap and it’s base load,” said Zain Mukaty, chief operating officer of Liberty Power, in an interview with Reuters on Friday, referring to coal deposits of the Thar desert.

The nation’s power sector has been plagued by high rates of power theft and distribution losses, resulting in accumulating debt across the production chain — a concern also raised by the International Monetary Fund (IMF). The IMF’s policy suggestions under the current $3 billion standby credit arrangements with Pakistan have been a major confidence-boosting measure for Liberty Power.

“We feel that one of the primary prerogatives of the IMF (for the next programme) will be that circular debt needs to go from standstill towards reduction,” said Mr Mukaty, a 32-year-old Wharton graduate.

The decision to go into coal for Liberty stems from Pakistan’s foreign exchange crunch and its indigenous coal reserve potential.

“It seems like foreign exchange is going to remain a challenge in the near future and the medium-term future. By working on local coal you bypass any FX requirements you have,” said Mr Mukaty, adding that the government is talking to coal-powered power plants that work on imported coal, urging them to move to local coal.

“So, for us we see this as a long-term play. We don’t feel that domestic coal is a concept or an idea that’s going to go away,” he added.

Published in Dawn, April 7th, 2024