Achi news desk-
Liberty Power Holding, a company operating within Pakistan, which recently acquired the thermal energy assets of the country’s largest conglomerate for $125 million, is betting on the latter’s coal reserves and implementing reforms suggested by the IMF to make the most of this deal.
Under the deal, Liberty Power will also buy Sindh Engro Coal Mining Company among other assets of Engro Corp, Reuters reported.
The deal is among the largest in recent times in Pakistan’s power sector, which has remained in crisis for years due to unpaid debts and chronic technical issues.
“We believe that Thar Coal is the future of Pakistan’s energy, it is indigenous, it is cheap and it is a base load,” said Zain Mukaty, Chief Operating Officer of Liberty Power, in an interview with Reuters on Friday, referring to coal deposits from the Thar desert.
The South Asian nation’s power sector has been plagued by high rates of power theft and distribution losses, leading to debt piling up across the production chain – a concern also raised by the International Monetary Fund (IMF).
The IMF’s policy suggestions under the existing $3 billion credit stand-by arrangements with Pakistan have been a major confidence booster for Liberty Power.
Leading up to national elections held in February, Pakistan was governed by a caretaker government that, among other measures, raised energy prices to prevent the build-up of revolving debt, a type of public debt that accumulates in the power sector due to subsidies and unpaid bills. – a key reform required by the IMF.
The new government of Prime Minister Shehbaz Sharif is continuing the reforms, especially as it looks to negotiate a longer-term bailout with the lender to shore up the country’s reserves and improve its risk profile.
“We feel that one of the main prerogatives of the IMF (for the next program) will be that revolving debt needs to go from stagnant towards reduction,” said Mukaty, a 32-year-old Wharton graduate student.
The decision to go coal for Liberty stems from Pakistan’s foreign exchange crunch and its indigenous coal reserve potential.
“It appears that foreign exchange is going to continue to be a challenge in the near and medium term future. By working on local coal you avoid any FX requirements you may have,” said Mukaty adding that the government talking to coal power plants. work on imported coal, encouraging them to switch to local coal.
“So for us we see this as a long term play. We do not feel that domestic coal is a concept or an idea that is going to disappear. We feel that it needs to be explored further for the benefit of Pakistan and that is why we are taking a long-term view on this,” he added.
