Engro Corp plans Rs2.5 billion investment in Thar coal power project

KARACHI: Engro Corporation decided to invest around Rs2.5 billion to acquire an estimated 17 percent stake in Siddiqsons Energy, which is setting up 330 megawatts of coal-run power plant in Sindh, an analyst said on Monday.

“The board of directors of the company resolved to invest up to $21.375 million by way of subscriptions of ordinary shares in Siddiqsons Energy Limited, a special purpose vehicle (SPV), set up to develop approximately 330MW of Thar coal-fired power generation facility in Block-II, district Tharparkar, Sindh on a build, operate and own basis,” Engro Corp said in a bourse filing. “The company, Siddiqsons Limited and Arif Habib Equity (Pvt) Limited have further entered into a joint venture agreement to set forth the terms and conditions governing their relationship and to record their respective rights and obligations in relation to the management and functioning of the SPV and incidental matters relating to the SPV.” Engro has also signed an agreement to manage the coal project.

Analyst Shankar Talreja at Topline Securities estimated Engro’s equity share in the project at around 17 percent. The project cost is estimated at $500 million with debt-equity ratio of 75 and 25 percent. The project is likely to commence operations in June 2021 and “will have minimal impact of around Rs1‐1.4/share to bottom line of the company,” Talreja said in flash note.

Siddiqsons Energy Limited was formed in September 2014, with a mandate to enter into the business of power generation. Last year, it relocated its supercritical coal-fired power plant to Thar – the commodity’s hotbed in Sindh – from a previously planned location of Port Qasim to curtail transportation cost.

A document said transporting one million tonnes of coal each year from Thar to Port Qasim is impractical, wasteful and hazardous. The relocation’s decision would, however, cut the plant’s production capacity to 330 from 350MW. The original project was initially being developed on imported coal and was on track to achieve its contemplated targets. However, government imposed a moratorium on the development of power projects on local financing. In 2016, government imposed ban on new power plants based on imported coal, liquefied natural gas and fuel, giving an exemption to the projects that are finalised under the China-Pakistan Economic Corridor or mutually-agreed between the governments of Pakistan and China.