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By Ajaz Ali Khan Managing DirectorThar Coal & Energy [email protected]
Thar Coal- A new Horizon for
Investment in Pakistan
Review of Pakistan Coal Industry Now & the Future
Scheme of Presentation
• How will coal change the power scene in Pakistan?
• Strategy to attract private investments in the coal to power sector.
• Review of power purchase guarantee scheme.
• Strategic alliance between the coal & power sector.
2www.sindhcoal.gos.pk
3
Coal’s Significance in Global Energy Scenario
� Global energy consumption will rise by 50% by 2030. In
non-OECD region, it will rise by 85% (International Energy
Outlook Report 2008)
� Coal use is likely to grow from 40% to 44%, as a source for
power generation, by 2030* due to energy security and
price volatility.
� Besides use in power generation, various countries have
initiated projects to produce Coal-to-Liquids, that entail
producing diesel and other liquid products and Coal
gasification projects in China, US, India and South Africa.
� World Proven Coal Reserves – Over 860 billion tons.* Source IEA Report 2009 www.sindhcoal.gos.pk
World Coal Resources
billion tonnes %age
World Coal reserves 860
– Bituminous & anthracite 405 47
– Sub Bituminous 260 30
– Lignite 195 23
According to Survey of Energy Resources 2010 by World Energy Council
– The use of coal to rise by 60% by 2030
– Coal’s Share in Power generation is set to increase from 41% to 44% by 2030*
* ( Source- 2010 survey of energy Resources- world energy council)4www.sindhcoal.gos.pk
Coal Used in Electricity Generation & Lignite Reserves% age of Electricity
Generated from Coal
Lignite Reserves Billion
tonnes
South Africa 94 30.15*
Poland 93 1.37
China 81 18.6
Australia 76 37.2
Israel 71 -
Kazakhstan 70 12.1
India 68 4.5
Czech Republic 62 0.98
Morocco 57 -
Greece 55 3.02
USA 49 30.16
Germany 49 40.6
World Average 41 195.38
Pakistan 0.1 186.2**
* Sub bituminous & Anthracite reserves only
** Thar Coal Resources are 175 billion tonnes Proven Reserve in 9 explored Blocks alone is 20 billion tonnes
( Source,2008, IEA)5www.sindhcoal.gos.pk
World Power Generation fuel Mix 2008-09
World Pakistan
A Comparison of Power Generation fuel Mix
Hydro 16%
Gas 20%
Oil 6%
Coal 41%
Others 2%
6www.sindhcoal.gos.pk
• 1.4 billion people are denied access to electricity around the world
• 2.7 billion people rely on the traditional use of biomass for cooking.
• Lack of access to modern energy services is a serious hindrance to economic and social development
7
Energy Poverty & Pakistan
Per Capita Primary Commercial Energy Use
(TOE/capita)2007 2030
Pakistan 0.42 0.77
World average 1.82
• Electrification rate in Pakistan is 62.4%• Population without electricity in Pakistan is 68
million (40% of Population of Pakistan in 2010)www.sindhcoal.gos.pk
Widening Demand & Supply Gap Projection for Pakistan
Current Installed Capacity (MW)Project Demand
Gap (MW)Year MW
19,566
2010 24,474 6,577
2015 36,217 18,320
202054,359 36,462
202580,566 62,669
2030113,695 95,798
Future Energy Demand Supply Gap is Alarming!
Source: Pakistan Electric Power Company (PEPCO)
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9
Ensuring Economic Growth through affordable energy
Social cost of load shedding
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• Pakistan is facing acute Energy crisis leading to socio-economic costs.
• Economic cost of load shedding is estimated at $37B between 2007 and 2012*
• Loss of Rs 219 billion to industrial sector alone during 2008 in Pakistan**
Socio-economic Impact of load shedding
** Source: IPP estimates listed in Beacon House National University publication: State of the Economy – Emerging from Crisis 2008
* Source: Planning Commission of Pakistan, Draft Pakistan Integrated Energy Model by IRG-2010
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• Rebalance the Energy Mix• Ensuring economic Growth through affordable
energy to reduce Energy poverty • Cost per Kwh RFO vs Coal• Means to end Circular debt of Rs 400bn
(US$ 3.5 Billion)• Increasing industrial competitiveness• Checking drain on foreign exchange• Putting idle human capital to productive use
Coal- a means to long term Energy Security for Pakistan
www.sindhcoal.gos.pk
Pakistan’s Coal Reserves
SindhSindh
186.560 billion tonnes
PunjabPunjab235 million tonnes
BalochistanBalochistan217 million tonnes
NWFPNWFP90 million tonnes
Azad KashmirAzad Kashmir9 million tonnes
Thar
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BLOCK-1
BLO
CK
-IVBLOCK-V
BLOCK
-VI
BLOCK-II
BLOCK
-III
BLOCK-III (B)
BLOCK –VII
BLOCK –VIII
BLOCK-III (B)
BLOCK –VII
BLOCK –VIII
SCA(DRD)
BLOCK- I
BLOCK- II
BLOCK -I II
BLOCK- I V
BLOCK- I
BLOCK- II
BLOCK -I II
BLOCK- I V
BLOCK-V
BLOCK –VI
BLOCK-V
BLOCK –VI
SCA (CNGB)
GSP
BLOCK
-VII
BLOCK
-III(B)
BLOCK-VIII
Thar Coal175 Billion tonnes of lignite
Block I, IIIB. IV & VII are being offered for Investmentwww.sindhcoal.gos.pk
CREDIBILITY OF RESERVESCREDIBILITY OF RESERVES
Studies Conducted By:
� United States Geological Survey� John T. Boyd� RWE of Germany� M/s Shenhua of China � Geological Survey of Pakistan� Sindh Coal Authority
► All studies confirm presence of huge coal reserves
14www.sindhcoal.gos.pk
Comparison of Thar with Other International Mines
Deposit Stripping Ratio (m³ : t) Heating Value
(MJ/kg)
Thar 6.6 : 1 11.6
Kosovo 1 : 1 7.8
Rhenish Area, Germany 4.9 : 1 8.9
Hambach, Germany 6.3 : 1 10.5
Hungary 9 : 1 7.1
Greece 10:1 5.02
15
COMPARISON OF STRIPPING RATIO, HEATING VALUE & COMPARISON OF STRIPPING RATIO, HEATING VALUE &
GENERATION OF LIGNITE IN OTHER COUNTRIESGENERATION OF LIGNITE IN OTHER COUNTRIES
www.sindhcoal.gos.pk
Lignite
Coal
Combustion (Steam)
Gasification
Ash
Tar
Naphta
Phenol
Catechols
Carbon Dioxide
Dephenolized Cresylic Acid
CH4
CO2
H2
H2S
NH3
CO
H2
Ethanol
Jet Fuel
Diesel
Petrol
Paraffin
Chemicals (Ethylene �
Polymers
Ammonia
Fertilizer
Explosives
Fisher Tropsch
Synthesis
Crude Oil -
Refinery
Electricity (Steam Turbines)
Coal to Liquid
Source: Syngas and Coal Technology, R & D, SASOL – Mr Johannes Van Heerdeen
Uses of LigniteUses of Lignite
16 www.sindhcoal.gos.pk
“To develop Thar Coal as a major source of power generation
for Energy & Economic Security of the country and as a Hub
of Petro Chemical Industry”
Goal
To generate at least 10,000 MW by 2020
offer
• Huge proven reserves with attractive incentives
• Higher returns for investors
• Business friendly policies & environment
• Excellent incentives, concessions & protections
17
Vision for Thar Coal
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18
Strategy to attract Private Investment
• Attractive incentives Concessions & protections for Investors
• Power Purchase guarantee Scheme
• Provision of Robust Infrastructure
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Thar Coalfield is declared as Special Economic
Zone, and the projects of development of Thar (also including coal mining and power generation) declared as ‘Projects of National Security’
Rate of Return
•20% ($ Based) IRR to firms which achieve Financial Close before 31st December 2015 for Mine & Power Plants based on indigenous coal and additional half a percentage IRR i.e. 20.5% IRR for firms which Financial Close by or before 31st December 2014.
19
Thar Coal -Special Economic Zone
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Exemptions/Concessions
• Zero percent customs duties on import of coal mining equipment and machinery including vehicles for site use.
• Exemption on withholding tax to shareholders on dividend for initial 30 years.
• Exemption on withholding tax on procurement of goods and services during project construction and operations.
• Exemption for 30 years on other levies including special excise duty, federal excise duty, WPPF and WWF.
20www.sindhcoal.gos.pk
Protections
Currency Exchange Rate Protection
Mining & Power Producers are protected from the impact of exchange rate variation up to Commercial Operation Date (COD).
EPC Cost Escalation
Cost escalation between the date of application and the Financial Close permissible as per Power Policy 2002
Return on Equity
US Dollar based Return on Equity
21www.sindhcoal.gos.pk
Power Purchase Guarantee Scheme
• GoP guarantees obligations of power purchaser
• GOP provides protection against political force majeure, change in law and change in duties & taxes
• Payment of compensation in case of termination due to GOP default
• Tariff adjustments for variation in currency exchange rates, fuel prices and inflation
• Government ensures conversion of Pak Rupee & remittance of foreign exchange for project-related payments
22www.sindhcoal.gos.pk
INFRASTRUCTURE AVAILABLE AT THAR
ROAD NETWORK
70 tonnes load carrying capacity metalled road is available up to Coal field area.
ELECTRICITY
11 KV feeder emanating from Islamkot Grid Station to Thar Coal Project areas with 200 watts transformer is available.
COMMUNICATION
Telephone & Internet communication through Optic fiber cable is available up to Thar Coalfield area.
DRINKING WATER
29 Reverse Osmosis Plants in Thar are available for provision of portable water to residents as well as project staff free of cost.
23www.sindhcoal.gos.pk
AIRPORT AT ISLAMKOT
The work for construction of Airport near Islamkot has been started.
LODGE AT THAR
Lodge at Thar with 20-bedded accommodation to facilitate foreign and local investors is available at Islamkot. It has fully furnished 10 chalets and a dormitory.
RESCUE STATION
Rescue Station in coal mining area at Thar coalfield covering an area of 8,200 sq. ft. is completed
LIBRARY
A Coal library is situated at office of Sindh Coal Authority, Karachi.
INFRASTRUCTURE AVAILABLE AT THAR
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Thar Coal Block Status
Block-II
Sindh Engro Coal Mining Company
(JV: 40% Sindh Government; 60% Engro)
2X600 Power Plant planned
Open Pit Mining @ 6.5 Mtpa
Bankable Feasibility completed 31st August 2010
Project financing activity initiated.
Block III-A
Cougar Energy (UK)
400 MW Planned
Under Ground Coal Gasification Project
Ergo Exergy Technology planned
Pilot Burn planned in 36 Months
Desktop studies under process.
Block-V
UCG Project
Under Ground Coal Gasification Project
2X50 MW IGCC Power Plant Planned
Unit gasifier design prepared,
Technical team mobilized and desktop studies under
process.
Drilling in Process by GSP
Pilot Burn Planned March 2011
Block-VI
Oracle Coalfields, PLC (UK)
Strip mining;
MoU signed with KESC for 300MW
Geotechnical drilling in process through DRD
3D Block Model to be developed by Mid Nov 2010
Hydro-geological Drilling to be completed by Nov 2010
BFS completion December 2010
ESIA completed
Status of Blocks
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BUSINESS FACILITATIONBUSINESS FACILITATION
Strategic alliance between Coal & Power sector
► High powered Thar Coal Energy Board (TCEB) established as one stop org. with Federal and Provincial agencies to facilitate investors.
► TCEB is a decision making body on Thar Coal Mining and Power Generation Projects.
► TCEB facilitates and coordinates with all the projects related to Thar Coal.
►Causing concerned agencies to improve infrastructure
►To act as coal Pricing agency
www.sindhcoal.gos.pk
Composition of the Board is:
i. Chief Minister Sindh Chairmanii. Federal Minister for Water & Power Vice-Chairmaniii. Federal Minister for Finance Memberiv. Federal Minister for Law and Justice Memberv. Deputy Chairman, Planning Commission Membervi. Provincial Minister (Irrigation & Power) Membervii. Provincial Minister (Revenue & Relief) Memberviii. Female MNA from Thar Region Memberix. Federal Secretary, Ministry of Water and Power Memberx. Chief Secretary, Govt. of Sindh Memberxi. Secretary, Coal & Energy Development Dept. Memberxii. One eminent Person Memberxiii. Managing Director, TCEB Member/Secretary
Thar Coal & Energy BoardThar Coal & Energy Board
27www.sindhcoal.gos.pk
Block III-B Area 76 Sq Km
Moisture %: 47.72%
Ash %: 9.30%
Volatile Matter %: 25.49%
Fixed Carbon%: 16.79%
Sulphur %: 1.15%
Heating value Btu/lb: 4808Coal Reserves
Measured 225.94 million tones
Indicated 938.91 million tones
Inferred 288.33 million tones
Total Reserves 1453.18 million tones
Block VII Area 100 Sq Km
Moisture%: 48.27%
Ash%: 8.83 %
Volatile Matter%: 25.30%
Fixed carbon%: 19.56%
Sulphur%: 1.15%
Heating value Btu/lb: 5440.95 Btu/lb
Reserves
Measured 572.12 million tons
Indicated 1514.51 million tons
Inferred 89.15 million tons
Total Reserves 2175.78 million tons
Block I Area 122 sq km
Moisture 43.13%
Ash 6.53%
Volatile Matter 30.11%
Fixed Carbon 20.11%
Sulphur 0.92%
Heating Values Btu/lb 6398
COAL RESERVES
Measured 620.42 Million tones
Indicated 1918.06 Million Tones
Inferred 1028.43 Million Tones
Total 3566.91 Million Tones
Blocks Available for Investment
Block IV Area 82 sq km
Moisture 43.24%
Ash 6.56%
Volatile Matter 29.04%
Fixed Carbon 21.13%
Sulphur 1.34%
Heating Values Btu/lb 5950
COAL RESERVES
Measured 684.09 Million tones
Indicated 1711.28 Million Tones
Inferred 176.14 Million Tones
Total 2571.51 Million Tones
28www.sindhcoal.gos.pk
1. Coal MiningInvestors interested only in mining may apply for a mine lease for mining the coal.
2. Integrated Coal & Power Generation ProjectInvestors may also opt for investing an integrated coal mining and power generation projects.
3. Mine Mouth Power ProjectThar coalfields present best opportunity for mine mouth power projects in view of the great demand for energy in the country.
Investment Options
29www.sindhcoal.gos.pk
Investment Options
4. Coal Gasification
Investors may propose to convert coal into gas and market the syngas and bye products in open market, or may develop a forward integrated project on any one or more bye products from gasification project
5. Coal to Liquid Projects
Investors may propose to convert coal into Liquid and market the byproducts in open market, or may develop a forward integrated project on any one or more bye products from CTL project
30www.sindhcoal.gos.pk
Thank You
31www.sindhcoal.gos.pk
PakistanThar Coal Project, Sindh
Cross-Section 11fromRE-16 to RE-21DateDrawing-No.10.12.03DesignedDrawnCheckedApprovedDatamineByBy
Dune Sand
Sub-RecentBara FormationCoal SeamsSandlayersBasement/Granite
Legend
1111Top Aquifer
Geology : Columnar Section
Dune Sand Aquifer
Sub-Recent Aquifer
Bara Aquifer
55-60 m
120 m
170- 180 m
32www.sindhcoal.gos.pk
PAKISTAN POWER SECTOR PAKISTAN POWER SECTOR PAKISTAN POWER SECTOR PAKISTAN POWER SECTOR ---- TOTAL INSTALLED CAPACITYTOTAL INSTALLED CAPACITYTOTAL INSTALLED CAPACITYTOTAL INSTALLED CAPACITY
MW %
Public Sector
WAPDA/SHYDO
/NA/AJK 11603 55
PAEC 462 2
Sub-Total 12065 57
Private Sector
IPPs 7253 35
KESC 1756 8
Sub-Total 9009 43
G. Total 21074 100
Public Sector
Thermal
4900 MW
Nuclear
462 MWPublic Sector Hydel
6703 MW
IPPs
9009 MW
33www.sindhcoal.gos.pk
PAKISTAN POWER SECTOR PAKISTAN POWER SECTOR PAKISTAN POWER SECTOR PAKISTAN POWER SECTOR PAKISTAN POWER SECTOR PAKISTAN POWER SECTOR PAKISTAN POWER SECTOR PAKISTAN POWER SECTOR –––––––– KEY PLAYERSKEY PLAYERSKEY PLAYERSKEY PLAYERSKEY PLAYERSKEY PLAYERSKEY PLAYERSKEY PLAYERS
Ministry ofWater
& Power
PakistanAtomic Energy
Commission
NEPRA
WAPDA AEDB PEPCO PPIB
Mega DamsWater
ProjectsGENCOs DISCOs NTDC
CHASNUPP KANUPP
GOVERNMENT OF PAKISTAN
PrivateSector
IPPs SPPs/CPPs KESC
TCEB
Thar Coal
Based IPPs
34www.sindhcoal.gos.pk
POLICY FOR POWER GENERATION 2002POLICY FOR POWER GENERATION 2002POLICY FOR POWER GENERATION 2002POLICY FOR POWER GENERATION 2002
SALIENT FEATURESSALIENT FEATURESSALIENT FEATURESSALIENT FEATURES
Exemption from corporate income tax, turnover tax and withholding tax,
no sales tax, only 5% concessionary Import Duty on plant & equipment
not manufactured locally
GOP guarantees obligations of power purchaser and provinces
GOP provides protection against Political Force Majeure, Change in Law
and change in duties & taxes
Power Purchaser to bear hydrological risk for hydropower projects
Payment of compensation in case of termination due to GOP default
Tariff adjustments for variation in currency exchange rates, fuel prices
and inflation
Government ensures conversion of Pak Rupee & remittance of foreign
exchange for project-related payments35
www.sindhcoal.gos.pk
POWER POLICY 2002POWER POLICY 2002
PROCESSPROCESS
Raw site advertisement
Pre-Qualification• Technical
Strength• Financial
StrengthTimeline:
2 - 6 months
Feasibility Study
Monitoring & evaluation by
POETimeline:
18 -36 months
LO
I
NEPRA Tariff
Determination
FinancialClose
LOS
COD
3636www.sindhcoal.gos.pkwww.sindhcoal.gos.pk
IPPs IN OPERATIONIPPs IN OPERATIONIPPs IN OPERATIONIPPs IN OPERATIONIPPs IN OPERATIONIPPs IN OPERATIONIPPs IN OPERATIONIPPs IN OPERATIONAltern Energy Ltd, AttockAltern Energy Ltd, Attock 2929 Jun 2001Jun 2001
Japan Power Generation, LahoreJapan Power Generation, Lahore 120120 Jan 2000Jan 2000
Kohinoor Energy Ltd., LahoreKohinoor Energy Ltd., Lahore 131131 Jun 1997Jun 1997
Southern Electric Co., LahoreSouthern Electric Co., Lahore 135135 Jul 1999Jul 1999
Saba Power Company, LahoreSaba Power Company, Lahore 114114 Dec 1999Dec 1999
AES Lalpir Ltd., MultanAES Lalpir Ltd., Multan 362362 Nov 1997Nov 1997
AES Pak Gen, MultanAES Pak Gen, Multan 365365 Feb 1998Feb 1998
Fauji Kabirwala Co., MultanFauji Kabirwala Co., Multan 157157 Oct 1999Oct 1999
Rousch Power, MultanRousch Power, Multan 412412 Dec 1999Dec 1999
KAPCO, Muzaffargarh (privatized from KAPCO, Muzaffargarh (privatized from public sector)public sector)
16381638 Jun 1996Jun 1996
Attock Gen, RawalpindiAttock Gen, Rawalpindi 165165 Mar 2009Mar 2009
Atlas Power Ltd., SheikhupuraAtlas Power Ltd., Sheikhupura 225225 Nov 2009Nov 2009
Nishat Power Ltd., LahoreNishat Power Ltd., Lahore 200200 Nov 2009Nov 2009
Saif Power Ltd., SahiwalSaif Power Ltd., Sahiwal 229229 Apr 2010Apr 2010
Orient Power Ltd., Balloki, KasurOrient Power Ltd., Balloki, Kasur 229229 May 2010May 2010
Nishat Chunian Power Ltd., LahoreNishat Chunian Power Ltd., Lahore 200200 Jul 2010Jul 2010
Hub Power Project, HubHub Power Project, Hub 12921292 Mar 1997Mar 1997
Uch Power Ltd., UchUch Power Ltd., Uch 586586 Oct 2000Oct 2000
Habibullah Coastal, QuettaHabibullah Coastal, Quetta 140140 Sep 1999Sep 1999
TNB Liberty Power Ltd., DharkiTNB Liberty Power Ltd., Dharki 235235 Jun 2001Jun 2001
Tapal Energy Ltd., KarachiTapal Energy Ltd., Karachi 126126 Jun 1997Jun 1997
Gul Ahmed Energy Ltd., KarachiGul Ahmed Energy Ltd., Karachi 136136 Nov 1996Nov 1996
Engro Energy Ltd., Qadirpur, SindhEngro Energy Ltd., Qadirpur, Sindh 227227 Mar 2010Mar 2010
MULTAN
PUNJABPUNJAB
BALOCHISTANBALOCHISTAN
SINDHSINDH
Tot. Capacity: 7453 MW
3737www.sindhcoal.gos.pkwww.sindhcoal.gos.pk
IPPs in operation
Sponsors
� AES, USA
� El Paso, USA
� Warstilla, USA
� Tanaska, USA
� Hawkins, USA
� National Power, UK
� Siemens, Germany
� ABB, Switzerland
� Xenel, KSA
� Mitsui Japan
� TNB, Malaysia
� Attock Oil, UK
� Orastar Limited, UK
� Oman Oil Company
� DEG Germany
etc
Lenders
� IFC� ADB,� J-Exim� ABN AMRO� EDC, Canada� Finnish Export Credit� World Bank� COFACE� MITI, Japan� CDC� SACE� US Exim Bank � Nations Banks of Texas� Toronto – Dominion Bank� DEG Germany� PROPARCO� FMO� SWEDFUND
etc
INTERNATIONAL INTEREST IN INTERNATIONAL INTEREST IN
PAKISTAN PAKISTAN ––
POWER SECTORPOWER SECTOR
3838www.sindhcoal.gos.pkwww.sindhcoal.gos.pk
ECONOMIC IMPACT DUE TO ENERGY DEFICITECONOMIC IMPACT DUE TO ENERGY DEFICIT
• Cost to the Industrial Sector Rs 157 billion
• Cost to the other sectors of industrial Loss on a/c of Value Addition
Rs 53 billion
• Total cost of industrial load shedding to the economy Rs 219 billion
• Cost as percentage of GDP 2 %
• Loss of employment in the economy 400,000
• Loss of exports Rs 75 billion
(equivalent to US $ 1
billion)
Source: IPP estimates listed in Beacon House National University publication: State of the Economy
– Emerging from Crisis 2008 39www.sindhcoal.gos.pk
Neyvelli lignite 7:1Heating value = 5200 Btu/lbTotal generation = 2,740 MW
Lignite 6:1Heating Value: 6200 ~ 11,000 Btu/lbTotal generation = 0 MW
COMPARISON OF STRIPPING RATIO, HEATING VALUE & COMPARISON OF STRIPPING RATIO, HEATING VALUE &
GENERATION OF LIGNITE IN OTHER COUNTRIESGENERATION OF LIGNITE IN OTHER COUNTRIES
IndiaRhineland lignite 4.9:1 (m3:t)Heating value = 4,514 to 11054 Btu / lbTotal generation = 10,289 MW
Germany
Hungary lignite 9:1 (m3:t)Heating value = 3,035 Btu / lbTotal generation = 1,852 MW
Hungary
THAR COAL
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41
UNDERGROUND WATER RESOURCESUNDERGROUND WATER RESOURCES
Three water aquifers at an average depth of 50m, 120m and more
than 200 meters:
► First aquifer above the coal zone
► Second aquifer within the coal zone at 120 meters depth:
Varying thickness upto 68.74 meters
► Third aquifer below the coal zone at 200 meters depth:
Varying thickness upto 47 meters
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