New Delhi: Monnet Ispat and Energy (MIEL) is set to make a killing following completion of its deal to acquire PT Sarwa Sembada Karya Bumi’s thermal coal mine in Sumatra, Indonesia, for just $24 million.
Spread over 25,000 hectares in the East Asian nation’s Jambi province, the mine provides MIEL access to one of the largest thermal coal deposits in the world and gives it a captive source to fire its upcoming power projects, Monnet Group executive vice-chairman and managing director Sandeep Jajodia told the news agency.
It would also help MIEL cash in on the boiling coal market by selling the excess production in open markets, as output would far outstrip its captive demand.
“The worldwide coal markets are expected to do very well in the coming years and especially India and China would remain strong buyers,” he added.
According to coal ministry estimates, the coal deficit being faced by Indian power utilities is expected to double to 104 MT in the next fiscal.
At present, the deficit is being met through imports. Of the total installed power capacity of 159,398 MW in India, almost 50% is based on coal.
Coal prices are already ruling high following flash floods in Australia’s Queensland province, a major producing region.
MIEL has so far explored only about 1,500 hectares of the total lease area and was able to establish 65 million tonnes of coal reserves in that area itself.
“We expect these reserves to go up substantially after completing exploration of the total area,” Jajodia said, adding that coal from the mine would help MIEL access low-cost fuel for its planned coast-based power projects.
MIEL is currently working on a 1,700 MW thermal power plant in Orissa and plans to put up one more plant of 1,300 MW capacity somewhere in Gujarat or Tamil Nadu to meet the growing need of the country. The location for the second plant has not yet been firmed up.
While the plant in Orissa would take another 3-3.5 years to go on stream, MIEL would meanwhile sell the fossil fuel in open markets, ensuring a long-term source of revenue for the company, Jajodia added.
The acquisition, made by MIEL’s wholly-owned subsidiary Monnet Global (MGL), is also value-accretive as the logistics cost would be comparatively lower in view of the excellent coastal location of the mine in Sumatra.
“Keeping in mind the high coal prices... We have been able to close the deal at a very low value as the agreement with PT Sarwa was initially executed in 2008. However, the process and regulatory procedures for actual transfer took a long time to finally close the deal,” Jajodia said.