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ISLAMABAD: A Florida, United States, based company M/s Spinnaker- Project 1, LLC has offered minimum quantity of 0.5 million tons of coal to Pakistan per annum on 270 days revolving credit facility against GoP guarantees, well informed sources told Business Recorder.

The offer has been made by Michael O’Drrick of Spinnaker- Project 1 to Ministry of Energy through a letter of June 13, 2022.

M/s Spinnaker- Project 1, LLC, that introduces itself as one of the coal suppliers based in the United States of America has claimed that its team of experienced professionals are able to deliver high quality coal to Port Qasim.

According to the company, it understands that Pakistan is currently facing foreign exchange liquidity challenges and therefore financing its imports, especially in the energy sector, could be of benefit.

“The situation we understand has become more alarming world-wide due to escalating prices of various fuels including coal,” said Michael O’Drrick, adding that Pakistan’s economy is also under severe pressure due to ever increasing energy costs.

Further, the company understands that in the recent past a number of imported coal-based projects in Pakistan have been shut down due to financing challenges.

Pakistan's electricity generation cost up 131% YoY

“Through the diligent and persistent efforts of Spinnaker, there is an opportunity to secure a 270 day revolving credit facility for the supply of coal for one year. Pakistan will be able to direct and prioritize, at its discretion, the requirement for coal use at each of its coal based power projects,” he said.

The company further maintained that to move forward, the financial institutions will require a binding contract with Spinnaker, a draft Letter of Credit and other documents requested by the financial institutions. This credit facility will be made possible through credit enhancements and support fostered by Spinnaker, as well as, a sovereign guarantee.

“The credit facility can only be provided under a fully enforceable contract. The quantity of coal can be supplied if the orders for 5,000,000 or more tons can be placed and L/C’s are duly opened prior to the coal being loaded on the train at the mine load-out,” Michael O’Drrick maintained.

Citing an example, he further stated that the payment for an L/C opened in June 2022 will become due by March 2023, giving enough space to the Government of Pakistan to use the current available foreign exchange to meet its other urgent requirements.

Again by example, a 9 month credit facility on revolving basis at an average rate of US$ 330/ton comes to approximately $1.400 billion. As a result of the availability of credit facility, Pakistan can save substantial amounts currently getting accrued due to delayed payment to coal based Independent Power Producers (IPPs), the letter further states.

“If discussions regarding financing fail, the order and contract will be null and void, unless other terms are mutually agreed upon by the parties,” he said.

Meanwhile, Sarah Saeed, Special Secretary to the Prime Minister, has sought update from Ministry of Energy on the offer of M/s Spinnaker- Project 1, LLC.

Copyright Business Recorder, 2022


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