Electricity to cost 60 paise per unit more on new coal price formula

Thursday, 12 Jan 2012

Electricity bill could go up by 50 to 60 paise a unit as early as February, triggered by the recent increase in coal prices. Currently, the average cost of power is INR 3 to INR 4 a unit. The average realisation for NTPC in the September quarter was INR 3.3 a unit, up from INR 2.66 last year.

Effective January 1, Coal India switched from the useful heat value based coal grading system to gross calorific value system for pricing coal. This move has not gone down well with power producers, as this will push up the fuel cost. The producers have been raising the issue with the fuel suppliers. Though suppliers claim that migration from the UHV to GCV based system will be revenue neutral, those tracking the sector said that in reality there will be a big increase in pricing without any value addition.

Power generating companies typically use grade E and F coal. The basic price of grade E coal will be INR 880 to INR 1,781 a tonne against INR 730 to INR 1,090 under the old pricing system (data based on ‘Final offer document' of Coal India). For grade F coal, the price will be INR 630 to INR 933 against INR 570 to INR 870 earlier.

Sources privy to the developments told Business Line that utilities have raised the issue with Coal India, which has assured them that if the consumer price gets affected beyond a point, say, higher than 10%, then the mechanism can always be reviewed.

(Sourced from BL)

Australian coking coal mines facing above average cyclone season

Tue,Oct18, 2011

Reuters quoted meteorologists said Australia faces an above average number of cyclones over the coming storm season, threatening new devastation after massive floods swamped homes as well as destroying crops and crippling mining earlier this year.

Australia's Bureau of Meteorology said in its 2011-12 tropical cyclone season forecast that the northwest offshore oil and gas field and coastal iron ore operations face a 65% chance of being hit by more than seven cyclones.

BOM said Northeast Australia where coal mining was crippled last year due to heavy flooding partly generated by cyclones, also faces a 65% chance of more than the average of three to four cyclones this season.

BOM said "Historically, these conditions have favored an above average number of cyclones in the Australian region."

Australia's cyclone season is between November and April.

Treasurer Mr Wayne Swan said natural disasters including floods and cyclones cut economic activity by 0.75 percentage points in 2010-11, wiping AUD 1.75 billion from revenue across 2010-11 and 2011-12.

Australia's third-largest city Brisbane was inundated with floodwaters and flooding across an area as big as France and Germany forced major miners to declare force majeure and damaged large swaths of croplands, including the key sugar crop.

One of the most powerful La Nina's in recent years fuelled the devastating 2010-11 cyclones and floods and the bureau of meteorology said another less powerful, La Nina would likely develop in 2011-12.

The bureau said "Before a tropical cyclone forms it is difficult to predict its exact strength and path, including whether it will make landfall."

It said "Along the east and west coasts fewer than half of the cyclones affect the coast, with most staying out to sea. Along the north coast more than half of the cyclones impact the coast. Tropical cyclones which remain out to sea can still cause storm surges, gales and areas of intense rain over land."

(Sourced from Reuters)

Australia Newcastle thermal coal falls to USD 120.79 per tonne

Mon,17 Oct,2011

Bloomberg reported that power station coal prices at Australia Newcastle port an Asian benchmark dropped 0.3% in the week ended today.

According to the globalCOAL NEWC Index coal prices at the New South Wales port declined to USD 120.79 per ton from USD 121.14 the previous week.

(Sourced from Bloomberg)

Legacy Iron Ore in trading halt pending share subscription agreement with NMDC

Monday, 17 Oct 2011

It is reported that Legacy Iron Ore has been granted a trading halt by the ASX pending the release of an announcement about the execution of a share subscription agreement with National Mineral Corporation Limited of India.

The company expects to make an announcement on or before the commencement of trading on Tuesday 18th October 2011.

Legacy secured NMDC as a cornerstone investor in a complex transaction on September 22 and a new company will be the developer of the Mt Bevan JV Iron Ore project, if shareholder and regulatory approval is obtained. The acquisition and deal would represent the first overseas acquisition by India NMDC which is the country largest iron ore producer. NMDC has a USD 4 billion war chest for acquisitions in bulk commodities.

For its part NMDC would undertake an investment in Legacy and receive 50% of the equity in Legacy in return for a USD 19 million investment. Legacy Iron Ore would become NMDC exclusive investment vehicle in Australia.

On September 30 Legacy said NMDC was committed to using Legacy for further acquisitions in bulk commodities. Several projects have already been reviewed by NMDC and Legacy including an established JORC coal project.

(sourced Proactiveinvestors)

Coal crisis deepens, power units may shut down

Sun,October 16, 2011
By Sudheer Pal Singh & Mansi Taneja

The government might have announced diversion of spot market coal to bridge the supply shortages for long-term consumers in the power sector, but experts see the move as “grossly inadequate”. As coal shortage has touched unprecedented levels, coal stock position at power stations has gone from bad to worse forcing the power industry to brace itself for a possible closure of some units.

A host of issues including heavy rains disrupting coal supply, workers’ strike at largest producer Coal India and Telangana agitation in the South have snapped fuel supply at power stations over the past month. More than half of the country’s 86 thermal power stations are currently running at “critical” stocks of less than seven days, while more than a third of the plants have become “super critical”, according to Central Electricity Authority (CEA), the apex power sector planning body.

The crisis has even made short-term power prices and volumes at the exchanges go haywire. “The average power tariff has increased to around Rs 7-7.50 per unit, from Rs 2.5-3.5 about 20 days back, due to mismatch in demand and supply. The traded volume in the exchange has come down to 35,000MW/hr from 1 lakh MW/hr on a daily basis,” India Energy Exchange senior vice president for business development Rajesh Mediretta said.

The crisis has even made short-term power prices and volumes at the exchanges go haywire. “The average power tariff has increased to around Rs 7-7.50 per unit, from Rs 2.5-3.5 about 20 days back, due to mismatch in demand and supply. The traded volume in the exchange has come down to 35,000MW/hr from 1 lakh MW/hr on a daily basis,” India Energy Exchange senior vice president for business development Rajesh Mediretta said.

The situation is unprecedented. “This is surely one of the most critical situations that we have faced ever,” power secretary Anil Razdan told Business Standard. “The lesson to learn is that we cannot leave the coal production programme entirely in the hands of a monopoly,” he added, referring to dismal performance of Coal India that supplies over 80 per cent of India’s coal.

Other experts were equally depressed. “The current crisis is probably the most unprecedented scenario ever. I have not seen supply for power plants being hurt to such an extent in the past many years,” said a senior power sector analyst from an accounting and consultancy firm.

The ongoing crisis had forced the coal ministry to announce earmarking a part of the 4 MT coal sold through e-auction to meet shortages in Fuel Supply Agreements (FSAs) yesterday. Experts were not too optimistic over the move and called it “a temporary relief measure” at best.

“The quantity to be diverted from e-auction would be a major issue. Making available only a part of 4 MT quantity from the spot market would not make a huge difference. It cannot be a sustainable long-term strategy,” said Shubhranshu Patnaik, Senior Director, Deloitte Touche Tohmatsu.

He also added that another issue with the coal ministry’s formula of diverting e-auction coal was logistics. “Coal sold through auction is not spread across the country. It is not made available (CIL) subsidiary-wise. Transporting this coal from one region where the mine is located to another region where a plant is situated would become a problem,” Patnaik said.

Demand for coal in India has grown at an annual rate, exceeding 8.4 per cent over the past five years. Supply has, however, fallen grossly short, registering a dismal annual growth rate of 5.4 per cent during the same period. For 2011-12, while India’s coal demand is estimated at 696 MT, 554 MT is likely to be available, leaving a gap of 142 MT to be met through imports.

Coal Minister Sri Prakash Jaiswal, who has chaired multiple urgent meetings with coal ministry officials and chairmen of Coal India subsidiary companies in the past one week assured of making supplies available. “Production and offtake has been less than target in the past two months. Mahanadi Coalfields and Northern Coalfields are among the major defaulters. But I have been assured the situation is only temporary and will improve soon,” he said.

Acting to avert the crisis, the coal ministry has promised smooth coal availability for plants facing the heat, particularly in the northern region. The ministry has also increased daily supply of rakes to 169, including 148 rakes for the power sector. “Total despatches are likely to further increase to 180 in the next few days, of which 145 rakes will be supplied to power plants,” a release issued by the ministry read.

However, the domestic power industry has sounded the alarm bells saying closure of some extremely critical units could be imminent. “If there is not enough coal to tide over the lead time (during which the fuel is transported from mine head to the station) as the crisis continues, closure of at least some units is obvious,” Ashok Khurana, Director General of Association of Power Producers (APP), told Business Standard.

The crisis is impacting even merchant power generation.

Out of the 4,000 MW demand for traded power, only 1,500 MW is met as there are not enough sellers on the exchanges, said Mediretta. Jindal Steel and Power, Lanco Infratech and JSW Enregy are currently among the highest traders in merchant power.

According to another power industry expert, this trend will continue for some time as the distribution companies are going out of the way to tie-up the power because of the low supply scenario. He said the merchant power rates will remain on the higher side, till the issues is addressed.

(sourced Business Standard)

Pvt power firms for level-playing field in coal allocation

Sun,October 16,2011

New Delhi:Private power companies in a letter to the Coal Ministry has asked for a level-playing field in allocation of the natural resource and printed out that imports is not the solution to country's fuel problem.

"Supply of low and varied quantities of indigenous coal may lead to serious functional ramifications for the power plants," Ashok Khurana, Director General, Association of Power Producers said in a letter to Coal Secretary Alok Perti.

"The boilers here can accept only a blend of not more than 15-20% of the imported with domestic coal," he said, adding that this technical constraint makes it difficult for the existing thermal plants to provide undertaking for accepting unspecified quantity of imported coal.

Khurana also said that coal is a scarce natural resource and it must be distributed on the basis of its efficient use and in a manner to maximise benefit to the end consumers of power.

Coal should be allocated, based on the merits of projects and not on the basis of ownership, he said.

The Fuel Supply Agreements (FSAs) are granted for a period of five years, whereas the commitment of supply of energy under the power purchase agreement is between 25-30 years...

....For a developer to meet it's obligations to the procurer, there cannot be any disconnect between PPA and FSA, he added.

The lenders would also be extremely reluctant to finance a project which has no sustained and assured supply of fuel, he said.

(sourced BS)

Coal shortage hits NTPC’s output

Wed, Oct12,2011
By Sanjay DuttaSanjay Dutta, TNN

NEW DELHI: The power situation has worsened as generation at state-run utility NTPC's several plants across the country has been hit because of recent heavy rains in coal producing areas in eastern and central parts of the country and disruption of coal supplies due to continuing blockade in Andhra Pradesh's Telengana region.

NTPC is the biggest power generator in the country and accounts for 34,000mw. It has been recognized as the number one utility in the world in terms of utilizing capacity but is now producing some 4,000 mw less due to fuel shortage. The company's power stations at Dadri in the National Capital Region, Singrauli and Unchahar in the northern region, Vindhyachal in Madhya Pradesh, Farakka and Kahalgaon in the eastern region and Ramagundam and Simhadari in the south have been affected due to shortage of coal.

The Badarpur plant in Delhi is generating less because of shortage of water due to temporary closure of the Agra canal. Water is used in cooling towers of power plants. Together, these plants account for nearly 14,000 mw. Frequent bandhs in the Central Coalfields' area, a two-day strike by Coal India employees and continued strike at Singareni Coalfields as part of the Telangana agitation from September 13-20 have aggravated the situation. During the last one month, supply from the Singareni Coalfields was less than 34%.

Besides, mining and loading of coal have been affected at Coal India subsidiaries - Northern Coalfields, Central Coalfields, Eastern Coalfields and Mahanadi Coalfielfds. These mines account for almost 70% of NTPC's coal supply contracts.

Before the onset of monsoon, NTPC had a coal stock of 5.3 million tonnes, good enough for 13 days. This has depleted to critical levels - an average of 3-4 days - in the absence of normal replenishment, forcing NTPC to switch off some units at each affected plant to avoid running them dry and damage to equipment.

Coal supply and transportation of the fuel have been identified as the bugbear of the country's power sector at every meeting on energy and industry held over the last 2-3 years in various levels of the government. (sourced TOI)

Vietnam forced to import coal

Thursday, 21 Jul 2011 | By VNS

Vietnam is becoming a coal importer due to high demand and dwindling domestic supplies. Last month, the state owned mining giant Vinacomin Group accepted the country's first ever batch of imported coal for domestic use.

The shipment of 9,570 tonnes imported from Indonesia arrived at Cat Lai Port in the southern province of Dong Nai and would be used as fuel for thermal power plants in the central and southern regions.

According to Vinacomin, Viet Nam has been a coal exporter for decades, relying on its large coal deposits, but the imports have become necessary as buying imported coal has become cheaper than extracting domestic coal.

Importing lowenergy bituminous coal for use in power generators became preferable to using domestic coal, a high energy anthracite mainly used in chemicals and metallurgy, Vinacomin's acting deputy director Vu Manh Hung said that "We should sell our high-quality coal and import cheaper coal. Power plants have been advised not to waste anthracite to generate electricity."

Mr Le Minh Chuan general director of Vinacomin said that earlier projections had said coal imports would become necessary in 2015, but heavy exports of domestic coal and inadequate policies for stockpiling supplies have pushed that date forward.

Coal price rises partially aligns to import rates

March 4, 2011, 1:10 IST
By Sudheer Pal Singh

New Delhi : Coal India’s price revision, that would help it partially offset the impact of the wage revision due in July, is an attempt to align domestic coal to import parity prices.

CIL yesterday announced an increase in prices for cement and steel sectors, but spared power, fertiliser and defence. The monopoly coal producer has adopted differential pricing this time. “After the hike, only the price of A and B grade coal, which has high calorific value as compared to other grades, would see any significant increase,” said a senior CIL executive.

Coal of A and B grades has gone up by 150 per cent, and the rise for the other varieties is about 30 per cent. The Integrated Energy Policy of 2006 had recommended import parity pricing for coal. After the increase, coal would be priced at a discount of about 15 per cent to the imported parity prices.

CIL produces 430 million tonnes annually, 77 per cent going to the power sector. Domestic fertiliser consumes the bulk of the rest.

“We sell between 10 and 12 per cent of our production through e-auction. A miniscule part of the production goes to the cement and sponge iron sectors. The current increase (for grades other than A and B) is at par with the floor price at e-auction, which is typically 30 per cent over the notified price,” the Coal India executive said.

As a result of the current rise, cement prices are likely to go up by Rs 5 per bag. This, in addition to the impact of the Budget announcement of a rise in excise duty for cement companies, is likely to lead to an overall increase of up to Rs 10 per bag.

“The increase by Coal India Ltd will result in (cement) industry profitability declining by around 500 basis points, to 18 per cent in 2011-12,” rating agency Crisil said in its latest report. This is despite the expected three-four per cent increase in cement prices in 2011-12 on the back of expected recovery of the operating environment, it added.

Steel companies which use sponge iron as raw material are also likely to be impacted. “The 30 per cent increase in non-coking coal prices will adversely affect profitability of sponge iron players,” the Crisil report said.

Meanwhile, CIL is hopeful the price rise would translate into additional revenue of Rs 650 crore in the current financial year and Rs 6,200 crore during the next one, ending March 2012. The company’s previous increase in prices, by 11 per cent in October 2009, had resulted in an average increase of Rs 77 per tonne in the pit-head price of coal delivered to power utilities.

International spot prices of coking coal have recently gone up by $40-50 per tonne to $290 per tonne, as production suffered due to floods in Australia’s Queensland province, that alone supplies around 40 per cent of the world’s coking coal exports. (Business Standard)

Sri Lanka coal power plant on full load

Feb 19, 2011 (LBO) -

Sri Lanka has run a Chinese built 300 MegaWatt power plant fully on coal with a full load connected to the national power supply on Friday night for the first time as part of its testing regime officials said.

The power plant started tests in September initially using diesel and then gradually moved to coal.

"Today we ran the plant fully on coal," power minister Patali Ranawaka told reporters Friday.

On Friday night the plant had also been successfully connected to the grid at full load for the first time, officials said.

The plant can generate up to 315 MegaWatts of power but can export between 285MW to 300MW the grid after using part of the energy for its own operations such as running a coal crushing plant and its cooling systems.

Ranawaka said coal prices were also rising and at current prices the cost of generating a unit of power from coal was 6.40 rupees.

But diesel prices are also rising and the cost of liquid thermal generation was also rising.

Minister Ranawaka said coal spot prices were spiking faster than normal as many countries had built new coal plants in recent years.

Coal is mostly sold on long term contracts and utilities in many countries usually manage cost rises better than liquid fuels.

Sri Lanka India coal project hit by legal queries: report

Feb 18, 2011 (LBO) - A state joint venture coal power plant between India and Sri Lanka which has been negotiated for several years has been hit by further delays following legal queries from the island nation, a media report said.
India's National Thermal Power Corporation and Sri Lanka's Ceylon Electricity Board has been talking on a 500 MegaWatt 50:50 joint venture coal plant in the Eastern coastal town on Trincomalee from 2006.

The Times of India newspaper quoting an unnamed source said Sri Lanka's attorney general had raised 70 queries "on basic issues at the nick of time" delaying the signing of the deal.

India's foreign ministry had "advised NTPC against responding to the queries for the time being," the report said.

Sri Lanka is building a 900 MegaWatt fully CEB-owned coal plant with Chinese finance in the West coast reducing the urgency for a additional capacity. The first 300 MW stage is almost complete and is being tested now.

The Times of India report said queries on 'basic issues' included Sri Lanka's government budgetary support for CEB's part of the investment, government guarantees, laws governing the joint venture and place of arbitration.

But analysts say power purchase agreements, a key component of power deals in particular are complex documents running into several hundred pages and Sri Lanka's power officials have earlier expressed unhappiness at some of the clauses in earlier deals.

The CEB is running massive losses partly due to its inability to pass on the costs paid to independent power producers.

Sri Lanka's attorney general is also battling two cases of arbitration and court proceedings in three countries relating to a disputed energy deal relating to the island's state run petroleum utility.

(sourced:lbo.lk)