China's Belt and Road vision is an ambitious plan to build out infrastructure along the ancient Silk Road trading route. It is designed to improve trade and investment across Eurasia. The scale of the project is impressive, passing through more than 65 countries across Asia, Europe, Middle East and Africa. Bringing projects to fruition would require advisors with the ambition and ingenuity to match.

The challenge

In one of the first projects to be funded under the Belt and Road initiative, Pinsent Masons was appointed as lead advisor to the two project companies on the simultaneous development of:

  • The US$700 million Thar Block II coal mine in Pakistan
  • The US$821m financing of the two associated 330 megawatt power plants

Our stakeholders included:

  • The government of Sindh, Engro Corporation;
  • Various Pakistan and Chinese strategic and financial investors;
  • China Machinery Engineering Corporation (CMEC);
  • The power company, a joint venture of Engro, CMEC and a Pakistan financial investor,

This deal carried a deeper political significance, highlighting:

  • China's influence in the region;

A step change in Pakistani energy policy to address a dire shortage of energy and reduce dependence on imports.

The Chinese infrastructure community recognises Pinsent Masons as a firm with an innovative and truly international approach to dealmaking.

The solution

This was CMEC’s first major overseas investment project. We supported the client in engaging with unfamiliar legal issues and structures, and using its global project financing experience to help frame strategy in a broader commercial and political context.

To achieve this, we brought together a team of infrastructure finance experts from across the firm's Beijing, Hong Kong, Singapore and Dubai teams.

We recognised at the outset that this required a team with:

  • Deep understanding not just of project finance, but of the underlying energy assets;
  • the expertise to develop and deliver a financing package utilising a hybrid of Chinese and Islamic financing.

Sophisticated Chinese contractors eschewed traditional government-led lending in favour of more lucrative equity structures. This project was predicated on a 'contractor plus investment' model which offers enhanced financial rewards to contractors. It also gave greater control over projects with a seat at the table during the negotiation of crucial project contracts.

The project involved two financings, power financing of US$821m and mine of US$700m. This comprised a combination of Chinese credit from Sinosure with additional conventional and Islamic Pakistan rupee tranches.

This model has not, to our knowledge, been deployed in a project of this type or scale before.


Successfully reaching financial close on this deal represented a major milestone in what has been a lengthy assignment. The project represents a greater-than-usual set of “firsts”. It was the

  • First power project in Pakistan to utilise domestic coal;
  • First project financing of a mine project in Pakistan;
  • First project effected under the Belt and Road policy of the Chinese government;
  • First of a planned US$46 billion of investments under the China Pakistan Economic Cooperation agreements.

The Chinese infrastructure community recognises Pinsent Masons as a firm with an innovative and truly international approach to dealmaking. We have also earned a reputation as the 'go to' firm for further Belt and Road projects.

Out-Law / Your daily need to know

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