New Delhi: After failing to win a 4,000MW ultra mega power project in Mundra, Gujarat, NTPC Ltd, India’s largest power generation company plans to set up imported coal-based power projects on the country’s coast.
These will be in addition to the imported coal-based mega projects already proposed by the government.
“We are actively looking out for acquiring coal mine stakes. This coal will be for our own imported coal-based projects. The size of the investment for these projects will depend on the size of the coal mines that we secure overseas,” said NTPC chairman and managing director T. Sankaralingam.
The company says it hopes to acquire overseas coal blocks with a mining capacity of around 20 million tonnes per annum (mtpa) and is exploring for opportunities in South Africa, Indonesia and Australia.
The company’s plans are consistent with its strategy of ensuring coal supplies, since more than 80% of its installed capacity of 27,404MW is coal-based.
NTPC also had to drop plans to bid for the Krishnapattnam power project in Andhra Pradesh, since it was unable to line up supplies of imported coal on time.
Imported coal typically has a higher calorific value, which reduces wastage and also improves the generation efficiency of these power projects. Analysts estimate that 1 tonne of imported coal is equivalent to 1.56 tonnes of domestic coal.
There has been a rush of Indian companies trying to acquire coal mines stakes overseas after Tata Power Ltd paid $1.1 billion (Rs4,334 crore) for a 30% stake in two coal mining units and a trading company, belonging to Indonesia’s PT Bumi Resources Tbk.
Reliance Power Ltd is set to make a $1 billion investment in overseas coal blocks and is hopeful of finalizing a deal shortly in Indonesia. Other companies with similar plans include Coal India Ltd, Lanco Infratech Ltd and Madhucon Projects Ltd.
Coal industry analysts believe that such a move makes business sense in light of the high coal prices in both contract and spot markets.
Coal mining costs are expected to rise, too, due to demand pressures on equipment and human resources in particular, but it will still have value for the investors who choose to mine rather than purchase at prevailing market rates.
However, they are quick to add that with a large number of players, from India and China in particular, looking for such acquisitions, NTPC may not find it easy.
“In a world where minerals are richly valued, NTPC would have to pay a hefty premium to acquire coal mines abroad,” said Abhishek Puri, an analyst with ASK Securities Ltd.
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. Prices of imported coal, including? freight,?average around $90 per tonne.
NTPC has a total coal requirement of 100mtpa, out of which around 4mtpa is imported. It already has a memorandum of understanding with Steel Authority of India Ltd, Coal India, Rashtriya Ispat Nigam Ltd and National Mineral Development Corp. Ltd for the formation of a special purpose vehicle for acquiring coal mines abroad.
Coal demand in India is expected to grow rapidly as the country seeks to add 78,000MW of generating capacity in the next five years. India currently has a generating capacity of 130,000MW, but needs more power to fuel an economy that grew by 9.4% last year and is expected to expand by more than 8% this year.