While it is the private companies that made most of the acquisitions in the international coal market last year, there is no shortage of money in the war chests of India’s state-owned coal firms
Author: Shivom Seth
Posted: Tuesday , 17 Jan 2012
In September last year, Coal India’s plans to buy coal mines abroad hit a major stumbling block. the country’s coal minister said his ministry was not keen on the firm acquiring foreign assets, saying he would rather it focus on local production of the fuel. But, in the early days of January 2012, the world’s largest listed coal miner by capacity was back on the prowl for overseas mining assets.
Though imported coal costs at least 60% more than the domestically mined fuel, with almost zero growth in output, officials at Coal India have been forced to rethink the strategy in order to bridge the domestic shortfall and have earmarked $1.16 billion for coal mine buys.
Similarly, integrated mining and power producer Neyveli Lignite Corporation, which is exploring the possibility of buying coal mines in Indonesia and South Africa, has set aside a war chest of $7.7 billion to increase its mining capacity by 2017.
The company is government-owned and operates predominantly in South India.
The company is ready to shell out $77 million for a 2.5 million tonnes per annum coal mine. Talks are that they could be looking at Universal Coal for take-off agreements or investment.
In 2010, National Thermal Power Corporation (NTPC) also readied a war chest of around $31 billion (Rs 1.6 lakh crore) for use over the next five years to source fuel for its power projects. Major coal consumers, Steel Authority of India (SAIL), NTPC and Rashtriya Ispat Nigam have also been looking for coal assets abroad.
“India is seeking coal to fuel rocketing growth. For some time now, despite adequate cash reserves, government control and delayed clearances from the Vigilance Commission and the Comptroller and Auditor General has prevented Coal India from making any aggressive bids,” said Santosh Dalvi, an analyst with a broking firm.
But, while Coal India has so far succeeded in getting only two blocks in Mozambique, with fears of corruption charges sapping management confidence, said Dalvi, private firms have been on a shopping spree.
Gujarat-based Adani Group bought Linc Energy’s Queensland coal tenements in a deal worth $2.72 billion. The company again paid $2 billion cash for the Abbot Point Terminal near Bowen. Another firm, Lanco Infratech signed a $730 million deal for Griffin Coal’s mines in Western Australia. The buying spree ended with Gina Rinehart’s Hancock Coal which sold a 79% stake in its thermal coal assets in Queensland’s Galilee Basin to GVK for $1.26 billion.
And, Monday, International Coal Ventures, a special purpose vehicle formed by five leading firms in India to scout for assets abroad, said it is exploring the possibility of a tie-up with the UK-based mining major Anglo American.
Anglo American is one of the world’s largest mining companies focusing on platinum group metals, diamonds, copper, nickel, iron ore, metallurgical and thermal coal. C S Verma, Chairman of Steel Authority of India met Anglo American CEO Cynthia Carroll to identify areas of mutual cooperation in the mining sector, particularly in coking coal.
Coal India’s local output in the financial year ended March 31, 2011, was almost flat at 431.32 million tonnes. Though its production in the April-June quarter rose 1.5% to 96.3 million tonnes, it missed the target of 98.7 million tonnes.
The company is set to miss the revised target of 440 million tonnes of production growth this fiscal, say analysts. Having recorded production of 292 million tonnes till Q3 2011-12, which was approximately 9 million tonnes short of the corresponding period in the previous fiscal, the coal major is trying to match last year’s production of 431 million tonnes.
In December 2011, Coal India produced 43 million tonnes, up 2 million tonnes from the same period in 2010. Analysts say the company has to produce nearly 139 million tonnes in the January-March 2012 period to tally with the previous fiscal.
Moreover, the firm is also eyeing its energy counterpart GVK Power and Infrastructure which is planning to set up a 2,400 mw thermal power plant in Andhra Pradesh with an investment of about $1.9 billion (Rs 10000 crore), with fuel from its newly acquired Hancock coal asset in Australia.
iPad Version: Picture – A labourer lays coal balls out to dry at a factory in Kolkata: REUTERS/Rupak De Chowdhuri