Mumbai: India’s largest private sector power utility Tata Power Co. Ltd proposes to increase its coal mining capacity in Indonesia by a fourth starting in the latter half of fiscal 2011, excutive director S. Ramakrishnan said on Tuesday.
Capacity will be increased to 75 mt a year from the current 60 mt, he said.
The company is unperturbed by an 82% drop in net profit to Rs92.5 crore in the three months ended 31 December, from Rs505 crore a year earlier, caused by a Rs350.89 crore charge due to increased mining costs.
A revision of the mine stripping ratio, a measure of the waste material that has to be removed in a coal mining operation and reflects the cost of coal extraction, forced the firm to write down past mining expenses in the December quarter.
“These charges had to be written off after the review of stripping ratio after a study conducted in November,” Ramakrishnan said.
“We had to go deeper and spend more to get more coal in 2009, which resulted in the higher ratio. The ratio is reviewed periodically and the mines had to be realigned to current assets,” he said, adding that 80% of the cost increase was carried forward from 2009.
The company owns 30% stakes in two Indonesian coal mines belonging to PT Bumi Resources, purchased in June 2007. Tata Power imports 3 mt of coal for its plant in Trombay, Mumbai, 1 mt of which comes from the Bumi coal fields, Ramakrishnan said.
Analysts said the increase in mining capacity could mean higher volumes and sales because of demand from markets such as India.
“Right now, the company mostly ships this coal to Japan. But going forward, they will supply to countries where the demand is higher—like India. Tata’s Mundra project, for example, will get coal from there,” said Madan Gopal, an analyst at Centrum Broking Pvt. Ltd.
Tata Power also plans to increase power generation from an annual 3,000MW currently to 4,242MW in 2011 and further to 5,842MW in 2012, Ramakrishnan said.
The Mundra project is a coal-based power plant with 4,000MW of capacity. The first unit generating 800MW will be completed in September 2011.
“The projects are going on as per schedule but the main take away from this call was the increase in stripping ratio,” said an analyst from a private brokerage, who did not want to be identified.