India’s biggest electricity generator outside state control, Tata Power Ltd, may invest in two coal mines overseas to supply as much as 4 million tonnes (mt) of the fuel as record prices curb expansion.
Mines in Australia, Indonesia or Mozambique would meet half the additional 8mt of coal that Tata Power needs by 2013 to fuel a fivefold increase in generating capacity, executive director S. Ramakrishnan said in his Mumbai office.
Tata Power invested $1.2 billion (Rs5,148 crore) in two Indonesian mines last year, joining JSW Energy Ltd and Adani Enterprises Ltd in securing overseas supplies as coal prices soared. India and China, the world’s two fastest growing major economies, need fuel to meet a doubling in energy consumption by 2030, according to the International Energy Agency.
“With coal prices flaring up, no trader, even we as owners of two coal mines, wants to make long-term commitments,” said Ramakrishnan. “If such a situation prevails, we may be forced to take equity positions to secure supplies.”
Coal prices will likely stay near record levels for the next three years, Ramakrishnan said. The imported coal will help Tata Power increase capacity more than fivefold to 12,861MW by March 2013, he said.
Thermal coal prices at Australia’s Newcastle port, a benchmark for Asia, have more than doubled this year on increased demand and supply curbs after railroad and port bottlenecks.
Mining companies, including Xstrata Plc., the world’s largest exporter, won a 125% increase in annual contract prices in the year that started on 1 April to $125 a tonne.
Contract prices for the fuel may rise to a record $150 a tonne next year because of continuing supply constraints and growing demand from Asian utilities, Goldman Sachs JBWere Pty Ltd said in a 11 July report.
The price may rise to $180 a tonne next year, Macquarie Group Ltd analysts said in a report. Bloomberg