Oracle signs project funding MoU with Chinese SoEs

JOHANNESBURG (miningweekly.com) – UK energy developer Oracle Power has signed a memorandum of understanding (MoU) with two Chinese State-owned enterprises for the funding of a $1.6-billion lignite coal mine and power station project in Pakistan.

The MoU proposes that Sichuan Provincial Investment Group (SCIG) will be the majority shareholding in Oracle’s Pakistani subsidiaries, with an equity holding of 78%. Power China International (PowerChina) will have a 9.9% equity holding and Oracle will own the balance of 12.1%.

Oracle explained on Tuesday that the parties had agreed to a two-stage approach, the first of which involved further legal and financial due diligence, led by SCIG. The second phase would involve SCIG seeking to secure the approval for the investment in, and the development of, the project from the Chinese government. This should happen within three months of completion of the first phase. At that stage, a final investment decision would be made, which would take the project to financial close.

SCIG, PowerChina and Oracle would provide the equity funding to the project companies, proportionate to their proposed eventual equity holding in the project.

Oracle said that an adjustment to the equity holdings of the parties was expected, to reflect costs that it had already incurred in developing the project up to the date of the MoU. 

The project will be funded by debt and equity, in the ratio of 75:25. SCIG and PowerChina will be arranging the debt, exclusively from Chinese banks, and they will provide all security and guarantees that may be required as part of the bank debt.

The MoU also stipulates that PowerChina will be the engineering procurement and construction contractor for the project, while the operations and maintenance contracts will be decided by SCIG.

The project entails a combined lignite mineral resource and mine-mouth power plant in the Thar Desert in the southeast of Sindh province. Oracle believes that a power shortage in that country makes the development of Thar a compelling development.

The company’s subsidiary, TEPL, has registered the 660 MW mine-mouth power plant with the Private Power Infrastructure Board, a division of the Ministry of Water and Power, which approves independent power producer's proposals to build, own and operate power plants in Pakistan. This registration proposes an overall project of 1 320 MW to be constructed in two phases.