Oracle Coalfields PLC Determination of Feasibility Stage Coal Price (4870B)
June 17 2016 - 2:00AM
UK Regulatory
TIDMORCP
RNS Number : 4870B
Oracle Coalfields PLC
17 June 2016
Determination of Feasibility Stage Coal Price
Released : 17 June 2016
RNS Number :
Oracle Coalfields PLC
17 June 2016
17 June 2016
Oracle Coalfields PLC
("Oracle" or the "Company")
Determination of Feasibility Stage Coal Price
Oracle Coalfields PLC (AIM:ORCP), the UK energy developer of a
combined lignite mineral resource and mine mouth power plant
located in the Thar desert in the south-east of Sindh Province,
Pakistan, announces that the coal price, based on the mine
feasibility study, has been determined by the Thar Coal and Energy
Board ("TCEB"), Government of Sindh, at an average price of
US$60.23/tonne for an annual production of 4.0 million tonnes per
annum.
Highlights :
-- Coal price regulated at an average of US$60.23/tonne over the
thirty year period of the lease for a 4.0 million tonne per annum
mine;
-- Mine capital costs (including financing costs) reduced from
US$879 million, as included in the original coal price petition, to
$673 million, as determined by the regulator;
-- 70:30 debt to equity financing structure permitted;
Shahrukh Khan, CEO of Oracle, said :
"The determination of our coal price by TCEB is an important
milestone for the Company and represents the latest step towards
our goal of developing a producing mine capable of supplying
indigenous coal. The regulated coal pricing mechanism that applies
to Thar coal isolates the project from the price fluctuations of
internationally traded coal and provides an element of certainty to
the equity investor.
"We thank the relevant authorities in Pakistan for their work in
determining our coal price. We remain steadfast in our
determination to develop a long term sustainable solution to the
acute shortage of power in Pakistan.
"I look forward to updating the market on further progress in
due course."
To encourage the development of the major coal resource
discovered in the Sindh Province, the Government of Sindh has put
in place fiscal incentives that include a cost-plus arrangement,
under which holders of mining leases in the Thar desert are allowed
a coal price and electricity tariff that give a US Dollar based
project internal rate of return of 20%.
On the basis of this determined coal price, the Company will
proceed to apply to the National Electricity Price Regulation
Authority for an initial electricity tariff for the power plant. To
ensure that the internal rate of return is sustained throughout the
thirty year lifetime of the project, the Thar Coal Tariff
Determination Rules 2014 (the "Rules") allow for further coal price
petitions as costs change. These can be submitted at:
-- Contract Stage, when the Engineering Procurement and
Construction (EPC) contract price is agreed with the mining
contractor;
-- Financial Close, when all costs of finance have been agreed; and
-- Commercial Operations Date and periodically thereafter
through the lifetime of the project, to reflect actual costs.
The electricity tariff is adjusted through a similar process, on
the basis of the changing coal price and other input costs, to also
maintain the allowed internal rate of return.
The price as determined by the TCEB is lower than the original
price petitioned by the Company ($76.48/tonne). This is due to the
TCEB applying lower capital and operating costs than presented in
the Company's original petition. Financial close is to be achieved
on or before 31 December 2016 for this feasibility stage tariff to
remain valid. The Company is confident that, if the need be, it can
ask the TCEB for an extension of this date. When capital and
operating costs are finalised with the mining contractor, a
Contract Stage petition will be submitted so that the coal price is
adjusted to maintain the allowed project internal rate of return of
20%.
In addition, further to the announcement of 3 June 2016, the
Company is continuing to progress matters in relation to the
Shareholder Framework Agreement, which is subject to conditions
precedent, which include inter alia the finalisation of terms
sheets in respect of the EPC and Operation and Maintenance
contracts for both the mine and power plant, completion of an
environmental and social impact assessment and submission of an
electricity tariff petition for the Power Plant. The Shareholder
Framework Agreement will enable the parties to enter into a
shareholder agreement, subject to the satisfaction of the
conditions precedent. The Chinese partners are leading discussions
on financing with Sinosure, the Chinese Export Credit Corporation.
The Company will make further announcements as matters
progress.
The detailed Determination can be viewed on the Company's
website, www.oraclecoalfields.com.
For further information:
Oracle Coalfields PLC +44 (0) 203
Shahrukh Khan 102 4807
Brandon Hill Capital Limited +44 (0)203
Oliver Stansfield 463 5000
Peterhouse Corporate Finance +44 (0)20 7220
Charles Goodfellow 9791
Grant Thornton UK LLP
Salmaan Khawaja, Richard Tonthat, +44 (0) 207
Daniel Bush 373 5100
Blytheweigh
Tim Blythe, Camilla Horsfall, +44 (0) 207
Megan Ray, Anna Worboys 138 3204
Fortbridge Consulting +44 (0) 7966
Matt Beale, Bill Kemmery 389196
This information is provided by RNS
The company news service from the London Stock Exchange
This information is provided by RNS
The company news service from the London Stock Exchange
END
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