Engro Powergen may pull out of $3 billion coal mining

Engro Powergen may pull out of $3 billion coal mining

Tuesday, April 3, 2012: Engro Powergen, a subsidiary of Engro Corporation, is considering pulling out of its joint venture with the Sindh government for a $3 billion coal mining and power generation project after the government
has failed to meet certain commitments.

As per the regulations, the government had to clear the energy sector’s circular debt which they failed and they also failed to honour the sovereign guarantee to provide 100 million cubic feet of gas per day to Engro’s $1.1 billion
fertiliser plant in Daharki.

Engro has gone about as far as it can on its own in this partnership. It has conducted a bankable feasibility study for a 6.5-ton per day coal mining and 1,200-megawatt power generation project. Were the project to go ahead on
time, it would cost about $3 billion and be completed by 2016.

Commendable sources within the company said, “It is now close to getting into the project execution stage and being able to attract financing and investors.”

The source further added that Engro’s management is tentative to pull the trigger on the project for a variety of reasons. The main reason appears to be the government’s failure to provide the promised gas to Engro’s plant at Daharki,
for which the company raised $1.1 billion mostly in debt. While the company is not facing immediate financial difficulty, its ability to continue expansion depends on the success of its previous projects.

“The government also appears non-serious. They have not developed the infrastructure that they promised they would. There is a lack of incentives, and there is low coordination between the provincial and federal governments. And
they have not even resolved the issue of tariffs and coal pricing.”

In addition, the company appears reluctant to trust the government’s ability to pay the promised tariffs, even once they are agree upon, given the fact that many other independent power producers have been forced to invoke their
sovereign guarantees several times in order to get paid.

Short URL: https://www.newspakistan.pk/?p=18032

Posted by Wajahat Javed on Apr 4 2012. Filed under Business, Pakistan. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry