Star Emmsons Resource has acquired Indonesia’s Bara Energy Makmur (BEM), a company with two coal blocks, in an attempt to line up supplies for a plant its parent is setting up in Tamil Nadu and to trade in coal, demand for which is on the increase here.
Star Emmsons is a 70:30 joint venture between Dubai’s ETA Star Group and India’s Emmsons International Ltd. Confirming the acquisition, ETA Star director Hameed Syed Salahuddin said the company would look to acquiring more coal mines in Indonesia. He declined to comment on the cost of acquiring BEM, which has between 150 million tonnes and 250 million tonnes of coal reserves.
ETA Star is setting up a 1,200MW coal-based power project in Tamil Nadu at a cost of Rs6,000 crore. Star Emmsons was created to acquire coal assets as reported by Mint on 28 September.
Beyond borders: Coal being transported by rail. Power firms that need coal to run their plants are increasingly looking overseas, to countries such as Indonesia, for the resources. (Photo: Ramesh Pathania/ Mint)
Indian power companies needing coal to run their plants are increasingly looking to Indonesia. Last year, Tata Power Co. Ltd acquired a 30% stake in two coal mining units and a trading company from Indonesia’s PT Bumi Resources for $1.1 billion (Rs4,334 crore at current rates).
Other Indian companies such as NTPC Ltd, Coal India Ltd, Reliance Power Ltd, Lanco Infratech Ltd, Madhucon Projects Ltd and GVK Power and Infrastructure Ltd are also looking for coal assets in the same region.
Star Emmsons’ newly acquired mines in Indonesia will have a production of 12 million tonnes a year—half of this will go into feeding the Tamil Nadu power project and the rest will be traded. The $4 billion revenue ETA Star Group also plans to build a ship terminal as part of the project to receive the imported coal. “Not much has been heard on the Indonesian coal mines front from India’s perspective, though a lot of companies have shown interest (in the country). This is an interesting development because they (Star Emmsons Resources) are looking to supply coal not only to their own project but also to the Indian power sector. Going forward, there will be a lot of action happening in South Africa as well,” said Arvind Mahajan, executive director at audit and consulting firm KPMG.
ETA Star and Emmsons already trade in and source coal from Indonesia, South Africa and other African countries as well as China.
“The acquisition is in line with our company’s strategy to become an integrated power generation company, and enter the coal import business in India. We will enter the coal import business in India on the back of our coal blocks. The coal block has coal seams of 15m size with ash content in the coal around 2-4%,” said M. Tariq Raza, resident director of ETA Star India Projects Pvt. Ltd, the group’s Indian subsidiary.
The size of the market for imported coal that goes into power generation in India is around 20 million tonnes per annum (mtpa). Coal imports are projected to more than double to 40mtpa by 2012 due to an increase in demand from power projects. ETA will have to compete, among others, with Coal and Oil Group Llc. Dubai, PTC India Ltd and MMTC Ltd in the coal trading business.
Prices of imported coal, including freight, are around $90 (Rs3,546) a tonne.
“Indian companies should acquire coal mines overseas. This is also in line with our long-term energy policy which says that even though India has huge coal reserves, it will be better if a part of our needs are met from coal from outside so that the reserves here are consumed over a longer time frame,” said R.V. Shahi, the country’s former power secretary .