Mr Raaj Kumar CEO of GMR Energy, the holding firm for GMR Group's energy business, said that "We have progressed into the second stage of the transaction process for Bandanna Energy. The due diligence has started."
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.
Mr Kuljit Singh, partner, infrastructure practice at Ernst & Young Pvt Limited, said that besides, high ash content inflates production costs for Indian utilities using local coal. Coal imports are expected to rise to 200 million tonnes by 2016 from 80 million tonnes now. Local firms are buying coal assets overseas for their potential dual use.
He added that "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."
Bandanna holds 16 exploration permits in the Bowen and Galilee basins of coal rich Queensland apart from licenses to explore for minerals and oil shale in the state. More than half of India's current capacity of 169,749 MW is generated through coal based thermal power plants, forcing companies such as GMR to secure raw material supplies from outside the nation.
Mr Kumar said that "Coal market is hot now." He added that GMR also acquired a mine in Indonesia in 2009, and this is expected to start production this year.
Such purchases of overseas coal mines have become common to Indian companies. Last August, Adani Enterprises acquired Australia's Linc Energy for USD 2.7 billion. Lanco Infratech bought Griffin Coal. (sourced from Livemint)