The Indian arm of Dubai’s ETA Star group, ETA Star India Projects Pvt. Ltd, might buy coal mines abroad jointly with power trading firm PTC India Ltd and Infrastructure Leasing and Financial Services Ltd (IL&FS).
“Companies such as PTC and IL&FS are interested in partnering with us for coal block acquisition abroad and they have approached us,” ETA Star director Hameed Syed Salahuddin said.
Executives at PTC and IL&FS confirmed the development.
Analysts say that for these companies, partnering ETA—which has bought coal mines in Indonesia and Mozambique—would help in spreading wings in the increasingly competitive global coal market.
While such a venture may help PTC raise resources, it will guarantee ETA assured sales as PTC has already agreed to supply coal to power project developers for a total generation capacity of 5,000MW, they say.
IL&FS, too, will benefit as it is scouting for coal for its 1,600MW imported coal-fired power project at Krishnapattnam, in which it has 50% stake, with Andhra Pradesh Power Generation Corp. Ltd holding the rest.
ETA Star group recently acquired a coal property in Mozambique and will mine it through a venture with the Mozambique government, as reported by Mint on 11 July 2007.
Its Star Emmsons Resource unit also bought Indonesia’s Bara Energy Makmur, a company that owns two coal blocks, as reported by Mint on 30 January.
PTC wants to speed up its coal business. It aims to supply the fuel to firms from which it will buy power. It has targeted importing 15 million tonnes per annum (mtpa) of coal into India for some 30 years.
Dipesh Dipu, a manager at audit and consulting firm PricewaterhouseCoopers, said, “The alliances for coal mine acquisitions can be a strategic tool to leverage the strengths of various partners. Financial strength, relationships and contracts with power generation companies, and technical expertise in coal mining may be pooled in for the purpose of striking good deal for acquisition and also to mitigate demand risk in the consumer market.”
“The motivation for such alliances may also be varied—from investing in a profitable venture, diversification of risks through syndication, utilization of existing expertise and resources, and to procurement of coal for consumption—each quite justifiable for forging strategic partnerships,” he added.
The market for imported coal to produce electricity in India is estimated to be around 20mtpa. Coal imports are likely to double by 2012 due to an increase in demand. India’s need for coal to generate power is expected to go up to 544mtpa by 2012, of which only 482mtpa is available in the country.
Indian power generation companies such as NTPC Ltd, Coal India Ltd, Reliance Power Ltd, Tata Power Co. Ltd, Lanco Infratech Ltd, Madhucon Projects Ltd and GVK Power and Infrastructure Ltd have either bought overseas coal mines or plan to do so soon.