Sindh Engro Coal Mining Company

Thar Block II Coal Mining Project

Indigenous Fuel is the Key to Energy Security of Pakistan

Khalid Mansoor,Oct 22, 2011

Pakistan’s Power Demand-Supply Forecast

Peak Demand

Supply

Daimer – Basha Dam (4500 MW)

Only plants that have achieved or are likely to achieve financial close included in the supply forecast

Average 2% Growth rate assumed

Thar Coal (1200 MW)

Average 3% Growth rate based on GDP & Population

Growth

Impact of Energy Crisis

Impact / Year

Total cost of load shedding to the economy 2.5 Billion USD

Cost as percentage of GDP 2 % decrease

Loss of employment in the economy 400,000 jobs

Loss of exports 1 Billion USD

Electrification Rate : 56%

Supply Shortfall : 1100 – 5000 MW

Power Outage per day : 8 – 16 hours / day

Source: State of the Economy – Emerging from Crisis 2008, Beacon House National University publication

Wrong Fuel Choice

Source: 1) State of Industries Report 2010, NEPRA 2) Integrated Energy Plan

• Due to lack of indigenous natural gas shortages, reliance on expensive imported RFO has increased and exacerbated Circular Debt problem

• If Coal had been used instead of RFO to make up for indigenous natural gas shortage, it would have reduced energy import bill by USD 600 M and direct saving of USD 280 M to electricity consumers

• 50% reduction in use of RFO for power generation would reduce Pakistan’s energy import bill by USD 900 M and benefit electricity consumers by USD 400 M

• Existing RFO based power plants can be retrofitted to operate on local coal thereby reducing the fuel cost & eventual power tariff significantly

CountryPower Generated from

Coal (%)

Australia 80

China 78

India 53

USA 50

Germany 47

UK 30

World Average 42

Pakistan 0.1

Thar Dream Promises Better Life Tomorrow for all Pakistanis!

Salient Features of Thar Coal Mining & Power Project• Sindh Engro Coal Mining Company (SECMC) is a joint venture company between Engro Powergen Ltd. (60%) and the

Government of Sindh (GoS) (40%) with a vision to:

“Develop a technically and commercially viable Coal Mining Project in Thar Block II to generate electric power using indigenous lignite and bring energy security to Pakistan”

• GoS is responsible for coordination with Federal & Provincial Governments for obtaining relevant approvals and timely delivery of infrastructure including water supply, roads, transmission line and effluent disposal etc

• Engro Powergen is responsible for development, financing, execution management & operations of the Projects

• Total Lignite reserve in Block II is 2 Bt, which can support 5,000 MW for ~50 years

• SECMC plans to develop integrated Mining & Power Projects of 6.5 Mt/a and 1,200 MW capacity respectively which will eventually be scaled up to a 22.8 Mt/a Mine and 4,000 MW Power Plant

PROJECT STATUS :

• Technical, environmental and social viability of the Project has been confirmed in Detailed Feasibility Study meeting all international standards (IFC/World Bank, ADB, etc.)

• Average lignite quality : (Heating Value ~ 5000 Btu/lb , Ash 7.3 %, Moisture 47.48 %, Sulphur 1.1 %), Seam Thickness 32 m

• Firm cost effective Engineering Procurement & Construction (EPC) proposals have been finalized with leading Chinese company for Mining & Power generation projects on turnkey basis

• Mine construction is targeted to start by 2013 & lignite production/Power generation by 2016

• SECMC in coordination with Chinese EPC firm, held meetings with Chinese Financial Institutions/Minister of Energy under the platform of Joint Energy Working Group, to explore the financing options for Thar Block II Projects

• Chinese Financial Institutions/Energy Ministry showed interest in Financing the Projects owing to its significance for energy security of Pakistan and readiness of EPC Proposals

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

• Import substitution of expensive RFO or Natural Gas – Due to import substitution benefits, Thar mining will act as a direct “foreign exchange earning sector“ and help lower the adverse impact of imported fuel on Pakistan’s Trade Balance

• 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

THANKYOU

Engro’s Subsidiaries/Affiliates

Year of Establishment Engro’s Stake Key Equity

Partners Business Areas

Engro Fertilizer Limited 2010 100% None Fertilizer

Engro Vopak Terminal Limited 1997 50 % Royal Vopak

(Netherlands)Bulk Chemical Handling

Jetty

Engro Polymer & Chemicals Limited 1999 56 % Mitsubishi

Corp/IFCPVC & CausticManufacturing

Avanceon 2003 63 % Wain Family Industrial Automation

Engro Foods Limited 2005 100% None Food Processing & Marketing

Engro Eximp 2006 100% None Commodity Trade Business

Engro PowerGen (Pvt.) Limited 2008 100% None Power Project

Development

Engro Corp at a GlanceEngro was founded in 1964 as Joint Venture between Esso and Government of Pakistan to setup a first Urea plant in Pakistan

Total Assets (USD M)

Profit After Tax (USD M) Double digit earning growth since 1995 Currently has long term credit rating of AA from Pakistan Credit Rating Agency Recently completed World Biggest Single train Urea Plant Investments from 2007 to 2010 amounted to over USD 1.6 Billion Fertilizer(USD 1.1B), PVC (USD 260M), Foods (USD 200M), Chemical handling (USD 35M),

Industrial Automation (USD 10M), Power (USD 200 M)

Consolidated Financial Performance

* Including eliminations due to intra company usage of assets etc

All amounts in USD M

Engro Group Snapshot

Period Total Assets Turnover

2010 1,940 940

2009* 1,560 690

Profit After Tax

80

44

Turnover (USD M)

Bankable Feasibility Study Consultants

SECMC

RWE-Germany

* Environment and Social Impact Assessment

SGS Pakistan

Sampling/CoalAnalysis Contractor

SRK-UK /Hagler Bailly Pakistan

ESIA* Consultants

North East Coal Bureau(NECB) China

Hydrological Field Work Contractor

SINOCOAL Intl. China

Bankable Feasibility Study Consultant

Hydrological Model & GW Abstraction

Consultant

DRD-Pakistan

Drilling Work

Sub-contractor

RWE-Germany

Owner‘s Consultant