Oracle Coalfields signs MOUs to supply coal to Karachi Electric Supply Co. and Lucky Cement Ltd

Oracle Coalfields plc, the UK developer of a 1.4 billion t coal deposit in southern Pakistan, has announced that the company has entered into two Memorandums of Understanding (MOUs) to supply its lignite to two local customers: Karachi Electric Supply Co. (KESC) and Lucky Cement Ltd.

Supplying power to Sindh province

KESC is a major supplier of electricity in the Sindh Province, particularly Karachi, a city of almost 17 milion people.  It is fast-tracking the development of a number of new power plants in order to overcome existing and projected energy shortages in Karachi.

The salient features of the MOU are as follows: 

·       KESC is embarking on a fast-track programme to overcome the existing and projected energy shortage within its licensed area. These cover Karachi and its suburbs up to Dhabeji and Gharo in Sindh, as well as Hub, Uthal, Vinder and Bela in Baluchistan. The utility has declared its intention to develop and implement several power projects including, but not limited to, coal-fired power plant(s). 

·       Oracle has proposed to KESC the establishment of a coal-fired power plant, with an initial capacity of 300 MW and the potential to increase this to 1100 MW. The power plant will be fired by lignite coal to be mined from the Oracle’s Block VI project in the Thar coalfield in Sindh.  Sindh Carbon Energy Ltd (SCEL), Oracle’s local subsidiary, will operate the Block VI coal mine. 

·       Oracle has agreed to secure and provide to KESC long-term coal supply at competitive prices and of quality and specification as desired for the initial operation of a 300 MW coal-fired power plant – with a suitable configuration to be setup in accordance with the terms emerging subsequent to this MOU.

·       Oracle and KESC will share technical information to assist each other in the completion of their respective work, including the Environmental & Social Impact Assessment for the coal mine and power plant respectively. The ultimate objective is to enter into a Joint Venture (equity participation) or Joint Development Agreement to establish a mine-mouth power plant at the Company’s Block VI project.

·       KESC has entered into exclusivity with Oracle and shall not during the validity of the MOU or Joint Development Agreement enter into an arrangement to develop a mine-mouth power plant at Block VI with any other entity so far as Oracle and/or its local subsidiary, SECL, are in a position to meet their requirement for the delivery of the required coal in the desired time frame mutually agreed between Oracle and KESC at a price which does not affect the economic viability of the mine mouth power plant.

Building a Lucky relationship

Lucky Cement is a subsidiary of Yunus Brothers Group (YB Group), one of the largest business groups in Pakistan and is currently the largest cement company in Pakistan and the country’s largest exporter to the Middle East, India, Sri Lanka and Africa.  In 2009, LUCKY posted year-on-year revenue and operating profit growth of 55% and 135%, respectively.

The salient features of the MOU are as follows: 

·       Oracle’s primary objective is the development of its Block VI project, Tharparkar, to supply lignite coal to mine-mouth power plant(s). In addition and in the interim, the company is also pursuing the potential for early cash flow from the supply of lignite coal to the local cement industry.

·       Lucky Cement has expressed an interest in using the indigenous coal to be mined at Block VIafter techno-commercial evaluation of the coal, for its cement plants. 

·       Lucky Cement shall subsequently assess the costing for transportation and use of this lignite in its cement kilns with minimum effects on the pyro-process and shall try to reach a commercially viable solution before entering into a coal supply agreement (CSA).

·       Oracle and Lucky have agreed to cooperate on the exchange of relevant information and future planning so that they may reach a workable arrangement for Oracle through its local subsidiary Sindh Carbon Energy Ltd (SCEL) to supply coal to Lucky Cemen.

·       At an appropriate time mutually agreed by Oracle and Lucky Cement, the CSA shall be signed between Oracle/SCEL and Lucky Cement. The CSA will replace this MOU. The CSA shall be a binding document between Oracle/SCEL and Lucky Cement.

The representatives of Oracle and Lucky Cement shall meet at regular intervals to discuss the progress of the Oracle/SCEL Work Programme and also to set out a timetable for signing the CSA. This would likely be after the certification by Oracle/SCEL of the quality of coal they would be able to supply after treatment and acceptable to Lucky Cement at economical terms and conditions.

Read the article online at: https://www.worldcoal.com/coal/05022010/oracle_coalfields_signs_mous_to_supply_coal/