Sindh Engro Coal Mining Company seeks increase in tariffs

KARACHI: Sindh Engro Coal Mining Company (SECMC) sought increase in tariffs for mining as the company planned to scale up coal production to meet the growing demand of the cheap source of power generation, documents showed on Monday.

SECMC, with revised expansion plans, approached Thar Coal Energy Board (TCEB), seeking contract stage coal tariff of $57/ton at 5.7 million tons per annum (mtpa) of mining capacity and $46.84/ton at 7.6mtpa of mining capacity.

TECB convened a meeting on July 30 (Monday) to determine tariffs, a 20 percent equity return and $235.2 million project cost of mining, the document said.

In June 2015, TCEB awarded a levelized composite tariff (phase-I) of $46.126/ton for the mine having a capacity of 3.8mtpa, leading to 6.5mtpa capacity mine. The phase-1 is to meet 3.8mtpa requirement of 660 megawatts plant of Engro Powergen Thar Limited, 1.9mtpa demand of another 330MW power plant and supply 0.8mtpa to Jamshoro Power Company Limited.

SECMC, however, revised up its expansion plan due to surge in demand for Thar coal after the financial close of phase-I. The capacity of mine is expanded to 7.9mtpa, and will serve two 330MW power plants to be located next to the mine.

Both Lucky Energy and Siddiqsons Energy signed agreements for receiving 1.9mtpa of coal each. The box-cut will be expanded to 1,000 meters over a course of 33 months during the expansion.

An official said Lucky Energy requested coal offtake within 30 months of financial close while Siddiqsons Energy will be ready within 33 months of the financial close.

Last month, Lucky Electric Power Company announced the financial close for its $1.081 billion of Thar coal-based power project.

“The mines expansion has been designed to cater to supply to both coal purchasers as per their required timelines,” a SECMC’s document said. “Based on precedence, the power plants being developed by both coal purchasers will have to be completed before SECMC can declare commercial operation date (COD).”

The, however, said a delay in completion of the projects of either of projects might delay the COD of the project’s expansion and thus delay the lowering of the coal tariff.

SECMC sought TCEB’s permission to declare COD even if one out of the two coal buyers achieves commercial operations. The complete capital cost will be divided over 5.7mtpa, which will still result in a lower tariff as compared to the tariff in respect of a capacity of 3.8mtpa. Once the second coal purchaser achieves commercial operations, SECMC will request TCEB to revise the capacity of the mine to 7.6mtpa, thus lowering the tariff further.

Thar coal field, having 175 billion tons of coal reserves, is the world’s seventh biggest coal reservoir. The field accounts for 95 percent of the total coal reserves in the country. Thar coal is of lignite quality, and suitable for electricity generation.

“The development potential is huge. Even if in the future the development scale of Thar coal field is expanded to 100 million tons, it is sufficient to supply the fuel demand of Pakistan for several centuries,” a report related to China-Pakistan Economic Corridor said.