Power trader PTC India Ltd, which plans to diversify into the coal business and supply fuel to companies from which it will buy power, will create a $1 billion fund for the acquisition of overseas coal blocks. The fund will be part of the overseas arm PTC is setting up to acquire these blocks.
PTC is also looking to divest 70% stake in this overseas arm.
“The offshore firm will be registered in Singapore and we will own a 30% stake in the firm. To start with, PTC India will put Rs300 crore in the fund. The rest of the money will be brought in by the firms that will take the balance 70%,” said a senior PTC official who did not wish to be identified. He declined to name the overseas firms that PTC is in talks with.
After looking for coal supplies from Australia, South Africa and Indonesia in an international market that is becoming increasingly competitive, PTC has decided to focus on Indonesia, prompted by the proximity of the South Asian country to India, which will mean lower freight costs.
The company has set itself a target of bringing 15 million tonnes per annum (mtpa) of coal to India for a minimum period of 30 years. This will enable it to supply the fuel to power projects with an aggregate generating capacity of 5,000MW. “While 80% of this capacity (15mtpa) will be through acquiring stakes in coal mines, the balance will be bought through coal trading,” the PTC executive added.
PTC will buy power from these projects to which it supplies power. This will help power companies that are finding it difficult to find coal to run their plants as was reported by Mint on 18 April.
“PTC’s move should be seen as its strategy to be a de-facto owner of the power generation assets as it would be securing power supplies for itself by supplying coal to the projects. While power trading is not an attractive option today, due to the 4 paise cap per unit profit on power traded, there is a huge margin (in coal) between the actual mining costs and coal prices,” said a coal industry analyst who did not wish to be identified. Prices of imported coal, including freight, are around $90 (Rs3,546) a tonne.
Indian power generation companies such as NTPC Ltd, Coal India Ltd, Reliance Power Ltd, Lanco Infratech Ltd, Madhucon Projects Ltd, GVK Power and Infrastructure Ltd have acquired or plan to acquire stakes in mines in Indonesia. The first such acquisition was made by Tata Power Co. Ltd, when it bought a 30% stake in two mines and a coal marketer from PT Bumi Resources Tbk for $1.1 billion in an effort to line up supplies for its 4,000MW ultra mega power project at Mundra in Gujarat.
Apart from its proximity to India, Indonesia has become a preferred destination for Indian companies because of the availability of the fuel there and the local government’s willingness to invite foreign firms to invest in the country.
“Our team is already in Indonesia and we have signed around five memorandums of understanding (MoUs) for taking stakes in coal mines,” the PTC executive said.
Coal imports are likely to see a rise of 100% to 40mtpa by 2012 due to an increase in demand. Total coal requirement is expected to go up to 544mtpa by 2012, of which only 482mtpa is available domestically.
PTC is looking to dovetail its imports to meet the shortfall.