Essar Energy hit by project delays

Aug22,2011
* Still awaiting forest clearance for some coal blocks
* Says minor delays to three power projects
* Analysts say company faces a trust deficit after project hold-ups
* H1 EBITDA $477.9 million vs $467 mln consensus
* Shares fall 4.4 pct

LONDON (Reuters) - India-focused refiner and power generator Essar Energy said three projects would be delayed as it continues to battle hold-ups from regulators, hurting its shares.

The company said on Monday there would be "minor delays" to its Salaya I, Mahan I and Vladinar phase 2 power projects and that it is still awaiting forest clearance from the Indian government for its Mahan, Chakla and Ashok Karkata coal blocks which will provide fuel for the Mahan I and Tori power stations.

Shares in Essar traded down 4.4 percent to 246.3 pence, paring earlier losses of as much as 6 percent, and making the company the biggest loser on Britain's bluechip index .

"We believe that Essar Energy now faces a trust deficit and therefore there will be an even greater investor focus on project delivery times," said analysts at JP Morgan in a note.

Essar Energy said in its statement: "Delays to regulatory approvals and delays to the access of fuel supplies are a cause for concern."

"Not only do these delays impact the economic returns on projects, but they are acting to discourage investment in the sector from project sponsors, debt providers and equity investors."

For the six months ended June 30, the company posted earnings before interest, tax, depreciation and amortisation (EBITDA) of $477.9 million, up from $320.2 million last year, boosted by higher refinery margins.

This compared with a company-supplied anlayst consensus figure of $467 million.

JP Morgan said in a note that when measured on a current price basis, earnings missed consensus, having been negatively impacted by a foreign exchange loss in the company's oil and gas unit.

The FTSE 100 company was positive on the future of its refining business, saying it expected margins to stay at their current high levels to the end of 2011.

"Strong global demand, the earthquake in Japan and events in the Middle East and north Africa pushed up refining margins in the first half of 2011," the company said.

The company, which agreed to buy Royal Dutch Shell's (RDSa.L) Stanlow refinery in northwest England for $350 million in February, said its focus was on its Indian power projects and integrating Stanlow into its business.

"We do not have any plans for any further acquisitions of refineries in Europe or elsewhere," chief executive Naresh Nayyar said in a conference call with reporters.

Essar Energy, the majority shareholder in India-listed Essar Oil , is itself 77 percent-owned by privately-held Indian conglomerate Essar Group.

Flooding hits New Hope coal shipments

March23,2011 12:00AM
By Sarah-Jane Tasker,The Australian

QUEENSLAND coalminer New Hope has reported a jump in its first-half profit to $407.4 million, but widespread flooding is still affecting its shipments.

According to the company, the healthy profit was driven by the sale to Royal Dutch Shell and PetroChina of its 16.7 per cent stake in Arrow Energy, which added a one-off $326m to net profit.

Excluding this benefit, net profit in the six months to the end of January fell 27 per cent to $81.1m, on the back of increased costs, Queensland flooding and a strong Australian dollar.

The miner, which operates three mines in Queensland, said although the heavy rainfall in December and January had only a limited effect on mining operations, damage to the Western Rail Line servicing flagship project New Acland had prevented shipment of coal from that mine.

It said rail transport from New Acland had been curtailed for about 2 1/2 months but was expected to resume later this month.

New Hope has ramped up production at its West Moreton operations and increased truck haulage levels from New Acland.

According to the company, this year's second-half result will be harmed by the unavailability of the Western Rail Line and the flow-on effect to exports from New Acland. It added that revised full-year sales forecasts were expected to be in the range of 4.8-5.2 million tonnes.

Clean-coal production for the half year, fell 2 per cent to 2.8 million tonnes.

The Bureau of Meteorology warned yesterday that the area in southeast Queensland where New Hope has its operations had a 70 per cent chance of higher than median rainfall in the three months to the end of June.

Despite the weather, New Hope managing director Rob Neale said the miner had increased export sales during the first half by 23 per cent to 2.7 million tonnes.

"As a result, we are in a good position to take advantage of firming coal prices once transport infrastructure in the region has been repaired," he said.

"Recent acquisitions in both the coal and energy sector complement a very strong balance sheet and provide New Hope with a solid platform for growth in the short to medium term."

The company was positive on the outlook for the price of thermal coal, with contract negotiations between Swiss giant Xstrata and Japanese power generators to start in the next few weeks.

It is understood Xstrata representatives were in Japan ready to start talks just after the Japanese earthquake and tsunami, which have stalled discussions.(sourced Theaustralian)