2. Infrastructure – Public Sector Projects
Infrastructure Projects in a narrow sense are those undertaken exclusively by public sector
• Objective of such projects is to provide a broad public service to the community – Like railway,
roads, utilities and sewerage system, large dams etc.
• Such projects have low return, but they serve the community. Difficulty in pricing of benefits
from such projects due to service to large community make it imperative that such projects are
only undertaken in public sector especially in developing countries
However, in a broader sense, infrastructure projects also entail those project that provide input for the
other industry
• For instance, power Projects which are basically key input for the other industry are serve as
inputs to other sector of the economy -
THAR COAL IS OUR EXPERIENCE IN INFRASTRUCTURE PROJECTS WHICH WILL BE KEY
INPUT TO FUTHER DOWNSTREAM POWER & OTHER PROJECTS
3. Thar
PAKISTAN
Thar Desert contains the world’s 7th largest coal reserves:
Location of Thar Coal Field
175 Billion Ton = 50 Billion TOE = 2000 TCF
Total Thar Coal Reserve More than Saudi Arabia 68 times higher than
& Iranian Oil Reserves Pakistan’s total gas reserves
Source: GSP data/report – Energy equivalent is based on Shenhua report/RWE
1% = 25%
Pakistan’s Power
Generation Capacity in
2010
Thar Coal Reserve
Development of Block II alone would bring in
investment of USD 12 Billion
Entire Thar Coal Reserves can be used to
generate 100,000 MW of electricity for over
200 years
The Heating Value of the Lignite Reserves of
Thar Coal is 50% compared to Bituminous Coal
Bituminous Coal is High Rank High Grade Coal
Why Thar Coal
4. Type & Rational of the Project
Type of the infrastructure project considered, would depend on the following –
• The necessity of development in a given environment/economy - For instance Thar coal
rationale is :-
• Bridge the demand supply gap for power in the country
• Economic Return
• Opportunity to Earn a higher guaranteed return due to special incentives for development of
Thar Coal
• It also provides opportunity for down stream industries like gasification
• Market Pioneers – First mover advantage:-
• First Movers have better incentives
• Bring about a positive change for the country , for example , Thar Coal would develop
indigenous mining industry for the country
• Fiscal and Foreign exchange benefits associated with the project - Thar Coal would substitute
import of expensive RFO or LNG thereby :-
• Resulting in reduced power cost for the economy
• Saving of precious Foreign Exchange
5. Type & Rational of the Project
• Market Demand - Thar Coal
• Demand Supply Gap : The current demand supply gap in the power sector is about 7000 MW
• Competitive Advantage : RFO and LNG are expensive alternates and local Gas supplies are
depleting due to low discoveries
• Positive Externalities from development of an infrastructure project
• Creation of social assets: education institutions, medical facilities & vocational training
institutes will enhance human capital, facilitate knowledge transfer and build capacity
• Infrastructure development: sewerage system, provision of clean drinking water
development of roads and other infrastructure will also benefit the community
• Increased economic activity: will generate employment opportunities for local residents
Development of Thar Mining & Power projects will contribute to economic and social uplift
of the entire Thar region
6. Type & Rational of the Project
Other long term benefits
• Indirect Benefits : With greater availability of Coal Generated Power, gas will be
spared for other key sector where its a key input like fertilizer
• Success of one Project will eliminate barriers to entry for further Coal Mining, this in
turn would increase competition, resulting in reduced project cost due to scale and
eventually coal price
• This can open up avenue for other uses of coal like Coal Gasification and even diesel
production from coal
7. Project Scope
Scale of the Project
• Need to maintain the balance b/w size ( economies of scale ) and do-ability of size both in in terms
of capital and technical resources
• A large project would make financing difficult due to quantum of funding needed
• Smaller than optimal size may make the project economically unviable
• For Thar coal, project size was selected based on practicality of
• Scale that makes the coal price comparable with imported coal
• Associated power plant size – 1200 MW was considered optimal size
• Hence initial mine size of 6.5m ton per annum was considered optimal in terms of project cost
of USD 1.3 BN, and lowest Annual Capital Cost and Opex and manageability of funding
9. Project Scope
Conceptual design of the project
Technology Consideration :
• For coal it will be mine design like slope, dumping plans, Excavation plan of the project
• Further two technologies can be used for coal mining
• Surface Opencast Mining
• or Underground Mining
After due consideration to geology and opinion of consultants, opencast mining was selected for Thar
coal, as due to loose soil, the mine would collapse incase of underground mining
• In Opencast mines, available options were Truck & Shovel or Bucket & Wheel technology can be
used
• Truck & Shovel : This technology is used for soil which is loose near the surface and is more
feasible for projects under 19 Mt/a Mine
• Bucket and wheel which is more productive to use to remove overburden but is more feasible
for use of larger mines above 19 Mt/a Mine
• Based on above, Truck & Shovel method was selected for initial mining
10. Shovel
Mine (-115m Above Sea Level)
Shovel
Outside Dump
(+180 m Above Sea Level)
Technology Selection – Incase of Thar Coal
S/T Equipment Variant for Overburden
Shovel
Mine (-115m Above Sea Level) Crusher
Stockyard
(+80m Above Sea Level)
S/T Equipment Variant for Lignite
11. Project Scope
Detailed plan of the project
• Once basis technology is finalized, schedule of the project is finalized
• Selection of main and sub-contractors
• Specific equipment needed for specific technology and location is then determined
• Detailed project scheduling including work hours – 24 hours or daytime, downtimes,
planning for specific seasons like monsoon season planning
Requisite service areas for the project
• Service areas for maintenance of equipment
• Storage areas, power supply areas etc
Human Resource management
• Manpower requirements: Manning requirement during the construction phase and later at
the operations stage is managed
• Colonies needed for housing the resources during and after construction - For instance
Thar Coal would require 1300 skilled/ semi skilled workforce will be required for mine
operations & maintenance
• Mobilization of skilled and unskilled resources
• Training
12. Risks and its Mitigants
Risk Mitigants
Construction Delays • Back to back LDs covering delay risk
• Performance guarantees issued by banks on behalf of contractors
• Coverage though insurance of property damage or delayed COD in the event of
machinery break down, floods earth quakes etc
Imported Coal Risk : Imported Coal Cheaper
than Local Coal
• Economic model should ensure that the price of coal is competitive with imported
coal and if required may ask for tariff protection in initial years
Law & Order Situation • Necessary Security Measures taken – Security provided for Foreign Contractors &
Employees traveling to the risk area
• Make an effort to get project declared as “Projects of National Security” which can
augment security available from law enforcement agencies
• Engaging contractors from countries with less stringent travel advisories like
China to reject project delay risks in case of deteriorating in law and order
situation
• Investment ins training to local engineers to reduce dependence on foreign
experts
• Partial coverage through Terrorism insurance
13. Risk and its Mitigation Measures – Govt Guarantee in case of Thar
Risk Mitigation
Payment Risks • Long term contracts, with take or pay agreement for off take of Coal incase it is with a
public company it will be backed by the IA
• Agreements with GOP to guarantee obligation of coal buyers in public sector
• Nationalization, Acquisition of Shares
or assets
• GOP/Power Purchaser event of default,
Change in Law or Pakistan Political
Forced Majeure Event
• IA Guarantee of GOP
14. Environment and social Impact Management
• Impact and mitigation measures due to factors like noise, dust, hydrology at the site are assessed
– Like in the case of Thar Coal No significant or unmanageable environmental threats and social
implications are indicated
• Waste water drainage facilities were evaluated – Effluent Disposal System Feasibility Study for
Thar Block-II conducted by GoS
• GoS already engaged to ensure completion of waste water drainage
• Expected changes in demography, social aspects due to the project are also assessed
• Resettlement and relocation plan of communities and compensation mechanism are also evaluated
In the case of Thar Coal , some villages will need to be relocated
• Resettlement cost, strategy, and timing are integal part of the project
15. Laws & Regulations
• Laws, Regulations and Policies are reviewed – In the case of Thar coal, since coal is a provincial
subject, Thar Coal Energy Board (TCEB) was created with the authority to act as a prime regulator
for coal pricing and regulations
• Similarly, other steps were taken to add Thar coal within power policy framework of PPIB
Key Agreements
• Engineering and Procurement Contract
• Construction Contract
• Implementation Agreement
• Purchase Agreement
• Fuel Supply Agreement (For Diesel for running the equipment)
• Senior Lenders Agreement
• Financial/ Working Capital Agreement
• O&M Contract /Other Service Agreements
16. • Fiscal Incentives are studied to evaluate advantageous to a specific infrastructure project
• The fiscal incentives package approved by ECC for Thar includes time bound exemptions from
corporate taxation, withholding tax and some levies
• Thar Coal field be declared Special Economic Zone and Thar Coal Development Projects (including
Coal Mining & Power Generation) be declared as “Projects of National Security”)
• Other concessions were sought to make the project attractive for investors following which NEPRA
has allowed and 20% USD IRR for power projects on Thar coal
Fiscal Incentives
17. Engagement of Consultants/Experts for feasibility study
Requisite consultants with the required expertise are partnered with to ensure the success of the
project, for instance in the case of Thar Coal World renowned consultants were inducted to carry
out the Detailed Bankable Feasibility Study of the Project :
• Detailed Feasibility Study – Sinocoal, China
• Hydrological Study - Northeast Coal Bureau, China
• Drilling Fieldwork – Deep Rock Drilling, Pakistan
• Environmental & Social Impact Assessment – Hagler Bailly Pakistan/ SRK, UK
• Ground Water Modelling & Mitigating Strategy for ESIA – RWE, Germany
• Financial Model and Economic Viability Assessment – RWE, Germany
18. Stakeholders of a Project
Major Stakeholders would depend on the need of infrastructure like in the case of Thar Coal GoS
wanted to partner with a capable infrastructure developer.
Thar coal is a Joint Venture (JV) Company Structure :
• 40% Government of Sindh (GoS) - GoS would assist in timely availability of all relevant data, requisite
approvals from Federal and Provincial Governments and timely delivery of infrastructure requirement for the
Project including water, roads, transmission line and effluent disposal
• 60% Engro PowerGen Limited (EPL) and other JV partners - Engro PowerGen will lead development,
financing, management and execution of the Project in a professional and fast track manner
Other Stakeholders of the Project include
• Employees
• Local Residents – It was decided that spend 2% of Profit Before Tax on community and social development
programs improving socio-economic indicators of the area and reducing burden on PSDP*
• Contractors
• Transporter - Diesel and Coal transporters
• Lenders
*Public Sector Development Program
19. Thar Coal Infrastructure Development Factors
3D Geological Model
Well & Village
Water Analysis
Mine Cost
Model
Thar Block II Coal Mining Project
Bankable Feasibility Study
HR & Operations
Strategy
Hydrological Study
Mine Equipment
Planning
ESIA Mitigation
Plans
Transmission Line
Road Network
Water Provision
Govt. & Multilaterals
Support for Project
Financing
Numerical GW
Model & Dewatering
Disposal of Ground
Water & Effluent
Training Institutes
Infrastructure
Development
Mining Policy Reform/
Mining Lease , Govt.
Approvals
Re-settlement
Framework
Economic &
Commercial Viability
Assessment
Environment & Social
Impact Assessment
(ESIA) and Mitigation
Technical Viability
Assessment
Feasibility Scope & Critical Success Factors
Groundwater Impact
Assessment
Social Impact
Assessment
Viability
Assessment
Scalability &
Sensitivity Analysis
Federal/ Provincial
Govt. Scope
Power Requirement
Financial Model
Mine Service Facilities
Mine Planning
Coal Pricing Mechanism
/ Fiscal Incentives
Ecology &
Biodiversity Survey
Air Quality
Monitoring
Environment Impact
Assessment
Safety & Rescue
Centre
20. Project Cost & Economic Analysis :
• Major Assumptions for Cost & Economic Analyst , Contingencies, Investment & Replacements
• EPC costs, owners cost, capital structure, O&M quotes are then taken from different contractors
• Due consideration was given in the cost structure to ensure its competitiveness against
imported coal
21. Project Implementation Schedule
Project Implementation Schedule is then finalized with specific Milestones & Timeline
• Feasibility Study Completion
• Issuance Mining Lease incase of SECMC
• Completion of Economic Viability Assessment / Approval of Infrastructure Projects by the competent Authority
• Signing of Coal off take agreement
• EPC Bids negotiation
• Selection of EPC Contractor
• Financial Close for the project
• Award of EPC Contract
• Construction Phase
• Production
• Commissioning of the infrastructure project
22. Safety
Health Safety Environment (HSE)
• HSE philosophy will be developed to ensure compliance with all local laws in accordance
with consultant studies
Disaster Management
• Emergency and Disaster Response
• Medical Emergency Plan
23. Benefits of Thar Coal Development
• To overcome the current energy crisis, Pakistan has no other alternative except development of
indigenous energy resources
• Investment in Thar Mining & Power projects will provide the following benefits :
•Strategic energy resource that will guarantee energy security to Pakistan in the decades to come
•Lower power tariff for Coal fired Power Plants as compared to RFO based power tariff
•Socio-Economic Development of Thar region - Presently Thar District ranks lowest on all socio-
economic development indicators in Sindh
•Development of indigenous coal mining industry will lead to skilled job creation and transfer of
technology
•Potential for future downstream industries in Petro-chemical and Fertilizer products
Thar Coal is a fortune turning opportunity for Pakistan
