Interview with Amir Iqbal, CEO – Sindh Engro Coal Mining Company

Amir was appointed as the Chief Executive Officer of Sindh Engro Coal Mining Company and Thar Foundation in 2021. He has over 30 years of experience in Commercial and General Management roles across Pakistan, Australia, and Africa.

Amir has managed various global and local mega brands and led cross-functional teams to deliver business results.

In his prior roles, he has served as the Chief Executive Officer for Engro Agritrade, Chief Commercial Officer for Engro Fertilizer, and CEO and managing Director for Bayer Pakistan. He also served as the adjunct faculty at the Lahore School of Management Sciences (LUMS). Following are the edited excerpts of a recent conversation BR Research had with him:

BR Research: How much power is Thar producing today?

Amir Iqbal: Currently, the coal production capacity of SECMC’s mine in Thar Block II today is 7.6 million tonnes annually. We are producing 1320MW electricity, while Block 1 is also generating the same. These power plants are the most cost-efficient producers in the country due to the indigenous Thar coal, and hence remain one of the top ones on NEPRA’s merit order.

BRR: There are proposals of converting the imported coal plants to Thar coal. What is your take on it? Does the mine have the capacity to handle the conversion and the related cost?

AI: We took the lead last year to conduct these studies and found in desktop studies that these power plants require negligible additional investment if converted to 20 percent of Thar coal, and this conversion will require around~4 million tonnes more coal from Thar. This to me is a low-hanging fruit. Even in the case of 100 percent conversion, the return to investment is quick – although the investment increases. As far as the expansion of the mine is concerned, we are already expanding for Lucky Power where its 660MW unit on imported coal will be converted to Thar coal. We can produce approximately ~30 million tonnes from Block 2 and we have also started working on phase 4 of the mine, which is another expansion effort by us. The main auxiliary requirement for conversion to Thar coal is that of rail, which the government of Pakistan has taken up. In addition to that there is water requirement, which we can manage. We believe that once Thar rail infrastructure is developed, it will open Thar coal to the world.

BRR: You are operating Block 2 of Thar. Block 1 is with China. When will the next block be announced?

AI: The Sindh Government issues the licenses. To my understanding, another block has been issued the license to a company called Oracle. A big challenge nowadays is global coal financing; many global companies are no longer interested in financing and working on coal due to climate concerns whilst Pakistan’s credit market cannot take up such big projects. The government should work with the domestic banking sector and instruct banks to keep a part of their credit lines for Thar coal.

BRR: India is way ahead of Pakistan in coal production. We entered coal when others started leaving. Given the funding constraints, what potential of Thar coal can be exploited in the next 20-25 years?

AI: India coal production stands at 700MT of coal whereas Pakistan has recently touched 15MT coal production. China consumes 4000MT of coal. Germany, which is the largest proponent of green energy consumes 185MT of coal per year. So yes, Pakistan is 50 years late in the sector. However, the Government of Sindh has been able to build good infrastructure and created a good environment in Sindh and as pioneers, I am proud of that. What is needed to exploit Thar’s potential is that the government of Pakistan creates some kind of sovereign fund or instruments with the central bank to facilitate investment in Thar coal. Coal mining is a capital intensive and high-cost industry. Global financing is almost extinct now so public-private partnership is the way to go to get financing locally. We need tailor-made local yet out-of-the-box financial solutions for Thar.

BRR: As key Thar coal player, what opportunities do you see for Thar?

AI: There must be a focused push from the government to drive local coal. Currently, coal tariff is regulated, but there exists a huge opportunity for Thar coal in the non-IPP domain where we can take the risk of competing with international coal players. Not only in power generation, Thar coal can be used in cement manufacturing where coal is imported. Competing with the global coal players will put pressure on us to be more competitive, and if the cement manufacturers find us cost effective, they will get the coal from us. Changes in framework and regulation are also required to facilitate us in this diversification.

We must also realize that today, Thar at peak load is contributing to approximately ~10 percent of the energy sector, and it has a very positive effect. If this share is further increased to 15-20 percent, the main pain points today – electricity prices – will significantly be relieved; and, if we are facilitated like other key sectors with support from the SBP and the Ministry of Power for LCs, remittances, etc. we can expand much quicker. Today, the issues we are facing in our expansion project are the delays in equipment import.

BRR: How can you channelize local investment in Thar coal?

AI: Another major challenge for us after being in operations for almost 5 years is the liquidity stuck in the circular debt. This is around Rs60 billion, which is huge and has started to impact our cash flows. This is a critical issue for the energy sector, but it’s worse for us as we are at the end of the payment ladder.

BRR: What do you suggest that should be done to assuage your challenges?

AI: We believe that Thar should be dealt with separately because we are playing two roles. One, we are bringing down the price of the energy basket and second, we are saving foreign exchange. Thar should be dealt with priority in terms of clearing the circular debt and releasing imports because we present a strong business case. To mitigate our overdue situation, which is creating a major challenge for us, we request the Federal Government to make us a special one-time payment directly to clear the backlog and moving forward keep Thar base IPPs on priority.

Moreover, we cannot overemphasize the socio-economic potential of the project which generates 60 percent of local employment in Thar. The work done over the past 10 years has been phenomenal; ~5000 children are getting free education under our education plan – of which ~30 percent are girls. We have 24 school units and all the staff are local females. Not a single child between the age of 4-9 is out of school in Thar Block 2.

Exceptional work has also been done in empowering women of Thar. Women who used to only get out of their houses for water are now running dumper trucks, and working at RO and solar plants.

We have also done significant work on the health side as well, in collaboration with the Government of Sindh. During COVID, Thar had the highest vaccination rates and lowest number of cases. Today there are zero hepatitis and polio cases in Thar Block 2.

Thar coal would not have been possible without the support of federal government and the Government of Sindh, and we believe this is just the start of Thar potential. The sustainability and expansion of Thar coal won’t be possible without a strong commitment and support from the Government.

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