Bangalore: GMR Infrastructure Ltd is among at least two other Indian firms that have been shortlisted to submit bids for Australian coal miner Bandanna Energy Ltd as local companies seek to secure overseas coal assets to fuel power plants in the world’s second fastest growing major economy.
“We have progressed into the second stage of the transaction process for Bandanna Energy,” said Raaj Kumar, chief executive officer of GMR Energy Ltd, the holding firm for GMR Group’s energy business. “The due diligence has started,” Kumar said in an interview in Bangalore.
Indian companies are buying coal mines in Australia, South Africa and Indonesia to meet growing demand for the commodity from power and steel plants. India holds 10% of the world’s coal reserves, but local supplies aren’t enough to meet demand as the nation builds more power plants.
Besides, high ash content inflates production costs for Indian utilities using local coal. Coal imports may rise to 200 million tonnes (mt) by 2016 from 80 mt now.
Local firms are buying coal assets overseas for their potential dual use, said Kuljit Singh, partner, infrastructure practice, at Ernst & Young Pvt. Ltd.
“They can use the coal for their own power plants in India and also use it to become major suppliers of coal in the international market,” he said.
Other Indian companies that have been shortlisted for the second round of bidding for Bandanna Energy include the Aditya Birla Group and JSW Steel Ltd and JSW Steel & Power Ltd, according to a 23 May report by Reuters.
A JSW Steel spokesman declined to comment. An Aditya Birla group spokesperson wasn’t immediately available for comment.
Bandanna holds 16 exploration permits in the Bowen and Galilee basins of coal-rich Queensland state apart from licences to explore for minerals and oil shale in the state, according to the company’s website.
It has a resource of more than 1.4 billion tonnes, representing the largest thermal coal inventory for any exploration company in Australia, the website said. The transaction could involve partial or total sale of Bandanna’s assets.
More than half of India’s current capacity of 169,749 megawatts is generated through coal-based thermal power plants, forcing companies such as GMR to secure raw material supplies from outside the nation.
“Coal market is hot now,” said Kumar. The mine GMR acquired in Indonesia in 2009 will start production this year, he said.
In August, Adani Enterprises Ltd acquired Australia’s Linc Energy for $2.7 billion. Lanco Infratech Ltd bought Griffin Coal for A$800 million last year.
Bangalore-based GMR Infrastructure, which builds highways and power plants and also runs airports, said it posted a loss of Rs 1,006.7 crore in the quarter ended March from a profit of Rs 73.1 crore a year earlier.
The loss was because of a one-time loss of Rs 939 crore from the sale of its 50% stake in power generation company Intergen NV in April to China’s Huaneng Group, said Subbarao Amarthaluru, group chief financial officer of GMR.
The company purchased the stake in Intergen for $1.1 billion in 2008.
The company’s fourth quarter revenue rose 74% to Rs 1,962 crore from a year earlier.