ISLAMABAD - A consortium led by China Machinery Engineering Corp is set to finance a coal-based power plant and a mining project being developed by Engro Corp, a Pakistani firm.

The first phase of the $2 billion project will consist of a coal-based power plant with two 330-megawatt units in Thar Block II in the Sindh and a coal mining project for power generation.

The project is also part of the cooperation along the China-Pakistan Economic Corridor, which runs about 3,000 kilometers from Gwadar to the northwestern Chinese city of Kashgar, Xinjiang Uygur autonomous region, a part of the ancient Silk Road linking Eurasia and Africa, CMEC said in a statement.

Zhang Chun, president of CMEC, said that it is the first integration project of coal mining and coal-based power plant among the projects in the China-Pakistan Economic Corridor, which is expected to push forward the economic development in Pakistan. “I think we have opened a new chapter in the overseas market with this project,” Zhang said.

“Since our strength lies in foreign engineering project contracting, it will become a model project in Pakistan.”

According to China Daily, the deal follows President Xi Jinping’s state visit to Pakistan in April, when the two sides agreed to set up an economic corridor to bolster China’s new trade initiatives - the Silk Road Economic Belt and the 21st Century Maritime Silk Road. Wang Shida, an expert on Afghanistan at the Beijing-based China Institute of Contemporary International Relations, said that the project will help bolster Pakistan’s energy supplies, something that has hindered local economic development.

He said Pakistan relies heavily on imported crude oil, diesel and natural gas, with less than 0.1 percent of energy coming from coal-fired power stations, leaving much potential for growth in coal-based power projects.

“The cost is very high due to the reliance on imports. Construction of more coal-powered plants will ease the demand-supply gap in Pakistan,” he said.

China has already invested more than $40 billion for development of the China-Pakistan Economic Corridor with energy projects being a major focus including hydropower plants, coal-fired stations and wind farms, experts said.

The signing ceremony also involved financial groups like China Development Bank and Habib Bank Ltd in Pakistan.