CIL mega IPO steals the show in 2010

CIL mega IPO steals the show in 2010

New Delhi: “Perhaps time’s definition of coal is diamond," said the famed Lebanese-American author Kahlil Gibran and true to that remark Coal India proved a virtual gold mine for the government in the year gone by.

The spectacular share sale of the world’s largest coal miner ahead of Diwali added glitter and spark to the government’s fund-raising plans through divestment in key PSUs.

While the country’s largest ever IPO mopping up Rs15,200 crore hogged the limelight, a terse battle between coal and environment ministries after the latter declared 206 coal blocks in 9 coalfields as “no-go areas" for mining, and the government’s talk of action against coal mafias numbering roughly 10,000 also gave much fodder to green activists and the media.

Mergers and acquisitions of coal assets too made headlines throughout the year as firms remained in a frenzy to acquire assets in view of ever-widening demand supply gap of the dry fuel.

As far as Coal India IPO was concerned a total of 484 Foreign Institutional Investors were allotted its shares through the IPO which was oversubscribed 15.14 times.

FIIs submitted bids worth Rs1.20 lakh crore for the mega IPO which led to over subscription of shares in that category by 24.70 times. Overall, the IPO, in which the government sold its 10% stake in it, generated bids worth Rs2.35 lakh crore.

Coal minister Sriprakash Jaiswal termed Coal India as “Gold India." But even enhanced production of coal, with CIL that meets over 85% of domestic requirement likely to mine about 460 MT against last year’s 431.5 MT, will not be able to meet demand for the black diamond, which prompted users to look for assets across the globe.

In one of the largest coal mine deals by an Indian group,the country’s largest coal importer Adani Enterprises had in August bought the Australia-based Linc Energy’s Galilee coal tenement in the Queensland for about Rs12,600 crore.

It had also been awarded preferred proponent status for developing the Dudgeon point terminal in Macay, Queensland, which gives the Adani Group the right to develop a coal terminal with an annual capacity of 30-60 million tonnes (MT).

Adani Enterprises also entered into a $1.65 billion deal with the Indonesian government and its mining company PT Bukit Asam for setting up rail and port infrastructure in the island nation and get rights to source coal to India.

Besides, Anil Ambani Group firm Reliance Power has bought three coal mines in Indonesia. Another group, Essar had earlier this year bought Trinity Coal Corp in the US and is aggressive for a similar acquisition in Australia.

Jindal Steel & Power earlier this year vied with China’s Meijin Energy Group to buy Rocklands Richfield, while Lanco Ifratech in December signed a pact with an Australian company to acquire Griffin coal.

Other power companies-- Adani, Reliance Power, Tatas and Essar-- are likely to remain aggressive on buying coal reserves overseas even as Chinese entities will continue to pose a “threat" to such deals, energy information provider Platts forecast.

CIL did not lag behind in scouting for assets abroad either. It is in advanced talks to buy 10 per cent stake in the US-based Peabody Energy Corp’s asset in Australia. The company is also negotiating with US firm Massey Energy and Indonesian Novem/Sinarma for a possible partnership for their respective mines in the US and Indonesia.

The Navratna company has earmarked Rs6,000 crore for this purpose in the current fiscal.

“We are making efforts to increase our global footprint and are in advanced stage of talks with three firms for assets abroad," CIL chairman Partha S. Bhattacharyya told the news agency.

Joining the race is the International Coal Ventures Ltd (ICVL), an SPV comprising CIL, NTPC, NMDC, SAIL and RINL. ICVL is scouting properties abroad and may bid for Australia’s Riversdale in which Tata Steel has 24%. Global miner Rio Tinto has already evinced interest in it while Tata Steel may counter Rio Tinto’s bid.

Public and privately-run steel and power firms, aluminium producers like Nalco, which faced coal shortage last year are also actively scouting for coal properties abroad.

“We have shortlisted two firms for supply of 10 million tonnes of coal, half of which would go to our Rs18,000 crore Indonesian venture while remaining will be used elsewhere," Nalco director finance B. L. Bagra said.

In the wake of the demand-supply gap, India’s coal imports are expected to touch 164 million tonnes by 2015 as against the current 73 million tonnes (Platts estimate). Coal minister Jaiswal said the deficit was being met through coal imports, which are rising fast and already accounts for over 10% of the consumption.

Of the total installed power capacity of 159,398 MW in India, almost 50% is based on coal. Industries such as steel, cement, fertilisers and chemicals are major sectors of coal consumption.

Globally, the Indian coal industry is the fourth largest in terms of reserves at 267 billion tonnes, and third largest in terms of overall production of around 550 MT per annum.

The CIL meanwhile is in the process of restructuring its internal and external operations and also hopes to secure 138 coal blocks soon to meet its XIth Five-Year Plan (2007-11) target of 520MT.