Oracle Power has agreed in principle a Memorandum of Understanding (MoU) with two Chinese state-owned enterprises for the full development and funding of its flagship Thar Coal Project in Pakistan. The parties intend to take a significant majority equity holding in return for arranging debt finance and providing EPC contractors.

AIM-listed Oracle intends to develop a combined lignite coal mine and mine mouth power plant in the Thar desert in the south-eastern Sindh Province.

Oracle says the MoU terms are being finalised and it is anticipated that the MoU will be formally signed during October. Once executed the MoU will supersede previous MoUs and shareholder framework agreements relating to the development of the mine and power projects announced by the company.

Oracle’s CEO Shahrukh Khan said, “This is a positive step-forward in taking our project through to financial close. I thank our Chinese partners for the confidence they have shown in the project and in Pakistan and I look forward to working with them.”

The MoU comes just days after Oracle Power entered into a loan agreement with its substantial shareholder Brandon Hill Capital Limited to provide the company with a working capital loan facility of up to £1 million.

Under the agreement, Oracle is able to draw down funds of up to £100,000 per month. A coupon of 12% per annum (accruing daily) will be applied only to those funds drawn by the company and will be payable quarterly in arrears or, at the option of Oracle, in full when the drawn principal is repaid.

Shahrukh Khan said “We would like to thank Brandon Hill Capital for its continued support. In the current climate we believe the terms of the loan are attractive, provides the company with non-dilutive capital and reaffirms the potential offered by the company and its flagship Thar Coal Project.

“With this facility in place, the company now has the flexibility to continue to progress its ongoing discussions with various parties with regards to the full funding of the 660MW Thar project.”