By Ajaz Ali Khan Managing Director Thar Coal & Energy Board secy@sindhcoal.gos.pk www.sindhcoal.gos.pk

1. Thar Coal- A new Horizon for Investment in Pakistan Review of Pakistan Coal Industry Now & the Future By Ajaz Ali Khan Managing Director Thar Coal & Energy Board secy@sindhcoal.gos.pk www.sindhcoal.gos.pk

2. 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.

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. www.sindhcoal.gos.pk 3 * Source IEA Report 2009

4. Coal Used in Electricity Generation & Lignite Reserves * Sub bituminous & Anthracite reserves only ** Thar Coal Resources are 175 billion tonnes Proven Reserve in 9 explored Blocks alone is 20 billion tonnes 4 ( Source,2008, IEA)

5. A Comparison of Power Generation fuel Mix World Pakistan World Power Generation fuel Mix 2008-09 Others 2% Coal 41% Hydro 16% Gas 20% Oil 6% www.sindhcoal.gos.pk 5

6. Energy Poverty & Pakistan • 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 • 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 6

7. Widening Demand & Supply Gap Projection for Pakistan Source: Pakistan Electric Power Company (PEPCO) Future Energy Demand Supply Gap is Alarming! 3

8. Coal- a means to long term Energy Security for Pakistan • 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 www.sindhcoal.gos.pk 8

9. Pakistan’s Coal Reserves Sindh 186.560 billion tonnes Punjab 235 million tonnes Balochistan 217 million tonnes NWFP 90 million tonnes Azad Kashmir 9 million tonnes Thar www.sindhcoal.gos.pk 9

10. CREDIBILITY 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 www.sindhcoal.gos.pk 10

11. COMPARISON OF STRIPPING RATIO, HEATING VALUE & GENERATION OF LIGNITE IN OTHER COUNTRIES www.sindhcoal.gos.pk 11

12. Uses of Lignite Ethanol Jet Fuel Diesel Petrol Paraffin Chemicals (Ethylene  Polymers Combustion (Steam) Electricity (Steam Turbines) Lignite Coal Crude Oil - Refinery Gasification CH4 CO2 H2 H2S NH3 CO H2 Coal to Liquid Ash Tar Naphta Phenol Catechols Carbon Dioxide Dephenolized Cresylic Acid Fisher Tropsch Synthesis Ammonia Fertilizer Explosives Source: Syngas and Coal Technology, R & D, SASOL – Mr Johannes Van Heerdeen www.sindhcoal.gos.pk 12

13. Vision for Thar Coal • “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 www.sindhcoal.gos.pk 13

14. Strategy to attract Private Investment • Attractive incentives Concessions & protections for Investors • Power Purchase guarantee Scheme • Provision of Robust Infrastructure www.sindhcoal.gos.pk 14

15. Thar Coal -Special Economic Zone 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) IRRto 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. www.sindhcoal.gos.pk 15

16. 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. www.sindhcoal.gos.pk 16

17. 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 www.sindhcoal.gos.pk 17

18. 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 www.sindhcoal.gos.pk 18

19. 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 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. 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. www.sindhcoal.gos.pk 19

20. INFRASTRUCTURE PLANNED AT THAR TRANSMISSION LINE NTDC is conducting feasibility study for lying of Transmission Line for evacuation of 10,000 MW from Thar. In the first Phase they are planning to evacuate 1200 MW. AIRPORT The GoS has approved a scheme at the cost of Rs.972.070 million for the construction of Airport at Thar for Coal Fields of Sindh by the Civil Aviation Authority. PROVISION OF HEAVY DUTY ROAD The W&S Deptt. is upgrading the road from Karachi to Islamkot through Hyderabad- Mirpurkhas- Naukot for facilitating transportation of heavy machinery by Dec. 2012. RAILWAY LINK PRACS has been engaged by GoS to prepare feasibility for broad gauge rail link from Port Qasim to Islamkot. LODGE AT THAR Lodge at Thar with 20-bedded accommodation to facilitate foreign and local investors is being constructed at Islamkot. PROVISION OF CANAL WATER: The GoS has planned to construct a water carrier to provide 300 Cusecs water to Thar. www.sindhcoal.gos.pk 20

21. Status of Blocks www.sindhcoal.gos.pk 21

22. BUSINESS 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 22

23. Thar Coal & Energy Board • Composition of the Board is: • Chief Minister Sindh Chairman • Federal Minister for Water & Power Vice-Chairman • Federal Minister for Finance Member • Federal Minister for Law and Justice Member • Deputy Chairman, Planning Commission Member • Provincial Minister (Irrigation & Power) Member • Provincial Minister (Revenue & Relief) Member • Female MNA from Thar Region Member • Federal Secretary, Ministry of Water and Power Member • Chief Secretary, Govt. of Sindh Member • Secretary, Coal & Energy Development Dept. Member • One eminent Person Member • Managing Director, TCEB Member/Secretary www.sindhcoal.gos.pk 23

24. Investment Options 1. Coal Mining Investors interested only in mining may apply for a mine lease for mining the coal. 2. Integrated Coal & Power Generation Project Investors may also opt for investing an integrated coal mining and power generation projects. 3. Mine Mouth Power Project Thar coalfields present best opportunity for mine mouth power projects in view of the great demand for energy in the country. www.sindhcoal.gos.pk 24

25. 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 www.sindhcoal.gos.pk 25

26. Thar today www.sindhcoal.gos.pk 26

27. Thar Tomorrow Thank You www.sindhcoal.gos.pk