India’s largest power generation company, NTPC Ltd, plans to set up power projects in Mozambique and, in return, acquire rights to mine coal in the country, in an effort to ensure a steady source of the fuel to power its plants.
The overseas coal block acquisition is similar to the model NTPC has adopted in Nigeria and Yemen, where the company is setting up power plants and, in return, getting gas blocks.
“We have had preliminary discussions in this regard with the Mozambique government. We hope to use our expertise in setting up power projects as leverage for securing coal blocks there,” said a senior NTPC executive, who did not wish to be identified.
Coal is critical for NTPC, as more than 80% of its installed power generation capacity of 27,404MW is coal-based. The company proposes to add another 15,180MW of coal-based power generation capacity by 2012, out of a total of 50,000MW that it plans to add in this period.
NTPC has an overall demand of 115 million tonnes per annum (mtpa) of coal, and imports 4mtpa of coal to meet its overall requirement. Its coal consumption is expected to surge to between 185mt and 200mt a year by 2017 on the back of expansion plans.
Imported coal typically has a higher calorific value, which reduces wastage and also improves the generation efficiency of power plants. Analysts estimate that one tonne of imported coal is equivalent to 1.56 tonnes of domestic coal. Tata Power Co. Ltd have already acquired stakes in coal blocks in Indonesia.
NTPC plans to arrange for its coal itself and not depend on fellow state-owned firm Coal India Ltd, its primary coal supplier as reported by Mint on 11 October. Delays in finalizing coal supplies have upset the company’s plans in the past.
According to Dipesh Dipu, a manager with audit and consulting firm PricewaterhouseCoopers, Mozambique may not be the best country to source coal from because it “has significant political risks”. “The coal resources in Mozambique have to be proved with investments in exploration and geotechnical investigations, which enhance the gestation period of the venture as well. However, the country has been invested in by global and Indian majors; and given NTPC’s financial and technical prowess and government’s blessings, the proposition may be worth investing,” Dipu said.
Even though 78% of India’s coal production is dedicated to power generation, projected supply of the fuel falls short of demand. The sector, excluding the planned ultra mega power projects, is expected to need 545mt of coal by 2012, compared with domestic coal supplies of around 482mt. The shortfall will have to be made up through imports.
India’s coal imports, currently estimated at 20mt, are expected to double in the next five years as more thermal power projects become operational.