New Delhi: Combining its success in acquiring overseas coal blocks with plans to enter the shipping business, Reliance Power Ltd (RPL), part of the Reliance-Anil Dhirubhai Ambani Group, is exploring getting into the business of selling coal to other big consumers in India.
“We have already secured stakes in the coal blocks in Indonesia, having estimated reserves of 2 billion tonnes. We are also in active negotiations for a couple of more coal properties there. We are also scouting for stakes in Mozambique, South Africa and Australia. Since we will also be entering the shipping business, we may leverage all this to help us enter the coal trading business,” said a Reliance executive, who didn’t want to be named.
In a related development, since it has secured abundant coal blocks, Reliance is also proposing another 4,000MW imported coal-based power project in India, apart from the proposed ultra mega power project (UMPP) at Krishnapatnam that may involve an investment of Rs16,000 crore.
“Our stakes in the Indonesian coal blocks can support one more 4,000MW imported coal-based power project in India, apart from servicing the needs of our 4,000MW UMPP and the 1,200MW project at Shahpur. We are scouting for sites in Gujarat and Tamil Nadu,” the RPL executive said.
The size of the market for imported coal that goes into power generation in India is around 20 million tonnes (mt) per annum and is expected to double by 2012 as more thermal power projects go onstream. If it starts to sell coal, Reliance will have to compete with, among others, Dubai’s Coal and Oil Group Llc., PTC India Ltd and MMTC Ltd in the coal trading business.
The big buyers of imported coal for the power sector include NTPC Ltd, India’s largest power generation company, as well as several other independent power producers.
Reliance will be investing around $1 billion, or nearly Rs4,000 crore, to acquire stakes in the Indonesian coal mines, as reported by Mint on 27 November. It also plans to invest around $1 billion for the purchase of capesize vessels, large cargo ships, for transporting coal from overseas for its power projects in India.
“Getting into coal trading is a very viable proposition, especially when a firm has its own coal properties and is not exposed to the market volatility,” said Anish De, chief executive officer at Mercados Asia, an energy consulting firm.
Dipesh Dipu, a manager with audit and consulting firm PricewaterhouseCoopers, says that an “integrated approach to sourcing coal from abroad and supplying to the power projects and other consumers may have significant business potential.”
Even though 78% of India’s coal production is dedicated to power generation, the sector is expected to need 545mt of coal by 2012, not counting the new needs of so-called UMPPs. Domestic coal supplies are expected to provide only around 482mt.