Oracle Coalfields, the UK coal developer of a 1.4 billion tonne lignite resource in the Thar Desert in Sindh Province, Pakistan, is confident it will benefit from government fiscal incentives to encourage and accelerate the development of the Thar's substantial coal resources.
The Energy Department, Government of Sindh, has issued a notification for the extension of the applicability of US dollar based 20% Internal Rate of Return (IRR) to all coal mining projects, based on indigenous Thar coal, to the companies which achieve financial close before December 31, 2016.
This incentive is a fixed 20% IRR in US dollar terms to be applied on a cost plus basis determination of the coal price.
As the government is keen to attract more investors in indigenous Thar coal based power projects to overcome the acute power shortage in the country, Oracle is confident that the fiscal incentives, inclusive of 20% IRR, shall be the operational policy of the government and, if the need be, the company can ask, on the expiry, for the required extensions of the applicability.
Oracle’s CEO Shahrukh Khan said, “The extension of the 20% IRR (in US dollar terms) demonstrates the commitment of the Government of Sindh to the development of Thar coal. This is an attractive rate of return, designed to encourage foreign inward investment for the development of Thar. Oracle is committed to this project which will help to alleviate the country’s power shortfall.”
Oracle also announces that following the recent rights issue by its subsidiary Sindh Carbon Energy Limited (SCEL), Oracle has increased its equity interest in SCEL from 80% to 98%.
The additional shares have been secured by converting the amount equivalent to £600,000 of the company’s loan to SCEL.
In the year ended December 31, 2015, SCEL had gross and net assets of approximately £2,382,000 and £6400 respectively, and made a loss of approximately £4800.
The project development is proceeding and an increase in Oracle’s equity in the increased paid up capital of SCEL will add further to the investment value of Oracle in the project, with a correspondent increase in the asset value of SCEL.