China Development Bank has agreed to extend $262 million in financing to set up a local coal-fired power plant in Thar, an amount which is more than half of the estimated cost of the 330 megawatts project.

The bank signed the financing agreement with equity partners of Thar Energy Limited (TEL), a company set up for coal power projects, a statement said on Friday.

“The Hub Power Company Limited (Hubco) along with other equity partners has signed financing documents for its 330MW Thar Energy Limited power project during joint coordination committee meeting held in Beijing on December 20, 2018,” Hubco said in a filing with the Pakistan Stock Exchange.

“The company has engaged China Development Bank as the lead arranger for the foreign financing from China and Habib Bank Limited as the lead arranger for the local financing.” The project cost was estimated at $498 million, based on the debt and equity of 75 and 25 percent, respectively.

Hubco established TEL by partnering with Fauji Fertilizer Company Ltd and China Machinery Engineering Corporation (CMEC) to set up 330MW mine-mouth lignite-fired power plant, one of the first power projects to utilise the local lignite at Thar coal Block-II for power generation. The company signed a shareholders’ agreement with Fauji Fertilizer Company Limited and CMEC TEL Power Investments Limited for equity investment of 30 percent and 10 percent, respectively, in the project.

TEL is a part of the larger 1,320 megawatts (four 330MW power plants) integrated-mining and power plant plan under the China Pakistan Economic Corridor (CPEC) program – more than $50 billion worth of projects envisaged by China to connect its western province with Gwadar port.

Thar Energy Limited signed engineering procurement and construction contract for the first coal power project with CMEC, which has started preliminary activities on the site to expedite the project construction and achieve the commercial operation date during the first half of 2021.

Thar desert in Sindh possesses the country’s biggest coal reserves of 185 billion tons. In 1991, the Geological Survey of Pakistan and the United States Agency for International Development discovered the reserves. The quality of lignite in Thar is highly suitable for power generation, according to studies. The Hub Power Company Limited currently produces 1,600 megawatts through its three power plants in Hub, Narowal and Azad Kashmir, roughly generating eight percent of the total power generation in the country. The company is the only power producer in Pakistan with two upcoming projects listed in the CPEC: imported coal-based China Power Hub Generation Company (Private) Limited in Hub and TEL.