PTC India, the country’s leading power trading company, has kicked off a diversification strategy, signing three memoranda of understanding with coal mining companies in Indonesia and Australia for coal imports to India and is also evaluating opportunities of acquiring stakes in these ventures.
PTC is looking at long-term coal supply agreements of minimum duration of 25 years. The idea is to help power project developers who are not able to secure coal supplies, and PTC believes that imported coal will be increasingly used in future power plants.
This comes close on the lines of Tata Power Co buying a 30% stake in two mines and a coal marketer from PT Bumi Resources Tbk for $1.1 billion (Rs4,840 crore). Even NTPC Ltd is planning to acquire stakes in coal blocks in Indonesia—a preferred destination due to the availability of coal reserves and the local government’s focus on building power generating capacity.
PTC has been trying for a while now to secure coal tie-ups in Australia, South Africa and Indonesia in an internationally competitive market. The coal will not be for trading but for PTC’s own projects in which it will be taking stakes through its subsidiary PTC India Financial Services.
“As of now the requirements are in the range of five million tonne per annum (mtpa) but requests from power project developers are still coming in,” said a senior PTC executive who did not wish to be identified. He declined to name the companies or investments planned, citing the confidentiality clause in the MoU and the commercial sensitivity of the deal.
The coal import is also expected to see an increase of 100% to 40 mtpa by 2012 due to a increase in demand of coal requirement for power projects. The overall coal requirement in the country is expected to go up to 544 mtpa by 2012. Of this, only 482 mtpa is expected to be available domestically. PTC is looking to dovetail its imports to meet the supply shortfall.
Said Shubhranshu Patnaik at accounting firm PricewaterhouseCoopers: “There are already entrenched and active players in the coal trading business. PTC will have to compete with them. Diversification is a noble idea as power trading as a business is actually stagnant due to the four paise cap per unit profit on the power traded.”
The size of the market for imported coal for power generation in India is around 20 mtpa. When the PTC enters the business, it will have to compete with coal and oil group LLC Dubai, Adanis, Minerals and Metals Trading Corporation and Swiss Singapore among others.
“We are considering acquiring stakes through another company as we do not have the required balance sheet to fund these acquisitions. We are also discussing ways and means to raise resources,” the executive added.