Proactive Investors - Run By Investors For Investors

Oracle Coalfields plc assembling the jigsaw for Pakistan project

Oracle Coalfields is developing a coal mine and power project in Pakistan..
Oracle Coalfields plc assembling the jigsaw for Pakistan project
An artists impression of the project in Pakistan....

Oracle Coalfields PLC’s (LON:ORCP) told investors on March 18 that its huge Thar coal and power project in Pakistan emerged from last year as one of the more "exciting" projects in a gloomy commodities sector.

Despite this background, and the many boxes that need to be ticked to get such a thing off the ground, the firm is steadily plodding towards financial close for the project and has made material progress in recent months.

The idea behind the 4Mtpa mine and a first stage 600MW power plant at the mouth is based on figures like these - that the current shortfall in Pakistan of generating capacity of 5,500MW will continue until at least 2020.

The cost of realising this project is expected to be $1.6bn, of which $1bn will be debt,  and the firm is now finalising agreements and contracts, including an EPC (engineering, procurement and  construction) term sheet and contracts with its Chinese partner SEPCO for both mine and plant.

Signing that term sheet will then trigger discussions on all important financing through credit giant Sinosure and the Chinese banks. Previously the firm has said financing would be made up of 70% debt and 30% equity.

A key milestone came in November last year when the group received a ‘no objection’ letter from a key agency - the Central Power Purchasing Agency Guarantee Limited (CPPA) -  which buys electricity on behalf of Pakistan’s state-owned electricity grid operator NTDC.

It means power from the Thar project can be transmitted into the grid.

That came a month after Oracle inked a consortium agreement with the its Chinese partner Shangdong Electric Power Corporation of China (SEPCO), which said Oracle will hold 90% of owner/ operator Thar Electricity (Private) Limited, while SEPCO has the remaining 10%.

The agreement formed part of a key submission to Pakistan’s Private Power and Infrastructure Board (PPIB), which is expected to lead to a power purchase agreement with NTDC that would, importantly from  Oracle's point of view, include a government guarantee for payment.

In full year results today, the company said that work in 2016 would concentrate on formalising agreements and contracts to bring the project to "full implementation" along with securing all the financing arrangements, including equity for funding.

Last year the firm said first power delivery was targeted for late 2018.

It ended 2015 with £1.86mln compared to £383,063 so it still has considerable financial wherewithal to continue plans.

What the broker says

City firm Shore Capital said on Friday: "A quick skim of the 2015 results revealed no surprises. Oracle is still working towards a power purchase agreement (PPA) and other key agreements required ahead of a Letter of Intent (LOI) for financing.

"The LOI had been expected by the company by late 2015, but we opined that sometime in 2016 was more likely."

Yuen Low added that a financing deal is still possible for 2016 but sees potential for further delay to 2017 if key agreements not reached within next few months.

Oracle shares were  down 0.97% to 2.55p.

View full ORCP profile View Profile

Oracle Power Plc Timeline

Big Picture
November 24 2017

Related Articles

Burning coal
November 24 2017
The coal mine and mine mouth power station developer expects 2018 will be a game changer as its Pakistan project takes shape
Picture of coal coming off conveyor belt
April 18 2018
Studies indicate that the Nuurstei project could become a competitive near-term producer of coking coal.

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use