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Oracle Power Plc: THE INVESTMENT CASE

Oracle Power sees the finish line at Thar

The coal mine and mine mouth power station developer expects 2018 will be a game changer as its Pakistan project takes shape
Burning coal
INVESTMENT OVERVIEW: ORCP The Big Picture
Plans to develop a mine mouth power station are heating up

Shahrukh Khan is confident that construction of Oracle Power PLC’s (LON:ORCP) Thar power station project will start next year.

Earlier this week, Oracle agreed a binding Memorandum of Understanding with its Chinese partners over the US$1.6bn development.

Under the terms of the MoU, Oracle will have a minimum 12.1% stake but the option to increase that to 30%.

READ: Oracle Power signs MoU with China state-owned firms to advance Pakistan coal assets

Khan, Oracle’s chief executive, said shareholders now have to decide how much of the project they want to own.

“2018 will be game changer, with partners on board, full support from the governments of Pakistan and China and Thar’s position as a priority list project for CPEC (the China Pakistan Economic Corridor)."

If Oracle shareholders want to take the stake to 30% we will position ourselves to increase the holding, he told Proactive.

The larger the shareholding, the better for the valuation over the longer term, he added.

WATCH: Oracle Power hails funding MoU with two chinese state-owned enterprises

Khan said he will be talking with investors extensively over coming months, especially now there is surety of financial close with the MoU agreed.

Thar a lignite mine and power plant

Thar is a combined lignite coal mine and mine mouth power plant in Block VI in the south-eastern Sindh Province of Pakistan.

The US$1.6bn cost of the project will be funded 75:25 between debt and equity with the first phase to be a 660Mw output power plant that will rise eventually to 1,320Mw.

Under the terms of the MoU, Oracle will hold a 12.1% equity stake while its two Chinese partners SCIG and Power China will in initially own 78% and 9.9% respectively.

Oracle will retain responsibility for applying for and obtaining all licences, approvals, permissions in Pakistan, while SCIG and PowerChina will be in charge of the Chinese end including CPEC.

Khan expects the all of permits, power and tariff agreements and financial arrangements to be finalised over the next 3-4 months and for financial close in the first half of 2018.

Construction can then get underway in the second half of the year, he said.

One of Pakistan’s largest private sector projects

As well as greenfield development it will be also one the largest private sector projects in Pakistan.

Thar has coal resources of 1.4bn tonnes in total across the block, but in the current mining area there are proven reserves of 113mln, which is sufficient to be a classified as a world class asset.

Khan said it will take a steady approach as the finish line approaches.

“It’s been long and tough journey, but ultimately should be very rewarding for shareholders and the market at large.”

Oracle Power is valued at £19.6mln with shares at 2.1p.

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