Mining taxes impede Indian firms foray into Australia

Monday, 19 Dec 2011

Even as it proposes a Free Trade Agreement with the Indian government, Australia is keen to lay out a red carpet for Indian companies looking to mine coal or iron ore in Australia. However, new taxes on mining could also mean that Indian companies will have to buy assets in Australia as well.

GVK recently paid a little over USD 1 billion for 3 coal mines in Australia and it is not alone. Indian power and infra companies are making a beeline for Australia. But two new taxes, carbon and mining tax could act as a spoiler. The Australian government however is at pains to explain that the incidence of these two taxes will be minimal.

Mr Bill Shorten minister for financial services of Australia said "It’s better to tax profits rather than an umbrella royalty. Australia can definitely offer large natural resources to Indian companies looking for mining opportunities."

He said that "We have long term pension funds which are really keen to be part of the Indian growth story and infrastructure is an attractive investment area.”

Meanwhile, the Australian government is also looking to invest in India. Australian pension funds, some with assets over USD 15 billion are keen to pump in long term funds in the infrastructure sector.

Even as Australia and India increase their engagement, the Australian government is ultimately looking at a FTA with India to boost economic co-operation between the two countries.

(Sourced from profit.ndtv.com)

MMTC to buy 3.73 Million tons of Coal for 2011- 2013

Wednesday, 02 November 11

India’s state-owned coal and mineral trader MMTC looking for 3.73 million tons of power plant coal for the period 2011 - 2012/ 2012- 2013. According to MMTC tender document, the coal that MMTC to buy 5800-6500 kcal/kg gad coal for its client’s power plants.

1.50 Mmt for Thermal power station Koderma Thermal Power Station (KTPP), 1.5 Mmt for Durgapur Steel Thermal Power Station (DSTPS) and 730,000 Mt for Mejia Thermal Power Station (MTPS).

MMTC is willing to accept any coal withthin the following range of quality.

Total Moisture (ARB) 10-20% Max, Ash (ADB) 8-20%, Fixed Carbon (ADB) 30-50% Typical, Volatile Matter (ADB) 25-45%, Sulphur (ADB) 0.70-0.90% Maximum, HGI 45-60 and IDT under reducing atom Deg.Centigrade 1100-1250.

However the price basis for paymnet settlement will be based on the following terms:

Total Moisture (ARB) : 16%, Ash(ADB) : 10%, Sulphur (ADB) : 0.80% and Gross Calorific Value (ADB) : 6300 Kcal/Kg

Bids close on November 16.

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(sourced coalspot.com)

India's NTPC mulling 25-yr coal import deal-chairman

Fri Aug 5, 2011

* Plans to secure more coal mines in India
* Aims to add 25,000-30,000 MW generation capcity in Apr 2012-March 2017
* To invite price bids for 4 mln T coal imports in next few days

NEW DELHI, Aug 5 (Reuters) - India's NTPC Ltd is looking for 25-year coal import deals to secure supplies and hedge against sharp fluctuations in prices, its chairman said on Friday, days after it abandoned a bid for Australian coal miner Bandanna Energy's assets.

"Our first priority is not to acquire coal mines and make money, our first priority is to secure fuel," Arup Roy Choudhury told a news conference.

NTPC last week did not submit a bid for Bandanna as the price was too high.

Choudhury said tax changes caused uncertainty in international prices and were a deterrent to his firm's overseas coal mine acquisition plans. Australia last month announced it would levy a carbon emission tax that is seen denting miners.

NTPC, which is India's biggest power producer, consumes 164 million tonnes of coal a year to fire over two-thirds of its about 35,000 megawatts (MW) installed capacity. In the five years to March 2017 it aims to add 25,000-30,000 MW capacity.

It plans to import four million tonnes on its own for the first time in the current fiscal year, besides buying 12 million tonnes through state-run trading agencies.

Choudhury said in the next few days, NTPC would invite price bids from six to seven companies that have been qualified to supply imported coal.

It is also in talks for 25-year coal import deals.

"Return on capital and investment, appreciation in coal mine is very difficult to know in advance. We don't know how it will behave. It is very speculative. Long-term deals provide you an assured amount of coal at a predetermined prices," he said.

The company aims to secure more coal mines in India, he said. NTPC aims to meet about 20 percent of its coal needs through captive mines by 2017, according to the company website.

The federal government has allotted seven mines to NTPC, including two blocks to be developed through joint ventures.

GVK set to buy Hancock Coal

April 5, 2011, 0:58 IST
ByArijit Barman & Katya Naidu

Mumbai: Signs exclusivity pact; deal size likely at $8 billion.

The great Indian coal rush Down Under continues. After months of intense negotiations and competitive bidding, Hyderabad-based GVK group has been shortlisted to acquire Hancock Coal.

GVK and Hancock had entered into an “exclusive arrangement” for negotiations that would continue till the middle of next month, said three independent sources aware of the developments.

GVK will have to make an initial payment of $1.3 billion (Rs 5,798 crore) or show its capability to do so within the exclusivity period. It would have to follow it up with similar payments of $1.3 billion each over the next three to four years towards equity, said these sources.

Over and above the $4 billion equity, GVK will have to pay another $4 billion as debt and mining development costs over the next six years, taking the total deal size to around $8 billion.

To organise the initial funds, GVK has approached some foreign and Indian banks such as Standard Chartered and ICICI. Three banks are likely to take an exposure of around $420 million each.

E&Y is said to have done the due diligence for GVK.

GVK Chief Financial Officer Issac George refused to comment on the development.

However, sources, on condition of anonymity, said procedural issues apart, it was almost a done deal. Hancock’s brass even visited Hyderabad last month to attend a private function of the Reddy family, the promoter of GVK.

It is not yet clear which vehicle GVK will use for the acquisition. GVK Power and Infrastructure is the group’s listed entity for energy and infrastructure. Its market capitalisation is Rs 4,461 crore. Typically, companies float special purpose vehicles abroad for acquisitions to get financial flexibility. Interestingly, GVK will pay more than the market cap of its key corporate entity for Hancock.

Hancock is owned and managed by Gina Reinhart, the richest woman in Australia. It has two mines — Alpha Coal Project and Kevin’s Corner — in the coal-rich Galilee Basin in Queensland, Australia.

These assets were put on the block early this year. Their combined reserves are estimated to be eight billion tonnes. The life of these mines is estimated to be as much as 30 years.

Alpha Coal, the bigger of the two, is an open-cut mine. It has 3.6 billion tonnes of measured, indicated and inferred compliant coal.

Kevin’s Corner, which is right now under development, can produce 30 million tonnes per year. Analysts say it is a tough block to mine. The construction is expected to start this year and production is expected from the later part of 2013.

The two require huge investments in infrastructure, the cost of which will have to be borne by GVK once the deal goes through. They require a dedicated multi-user rail system, along with the existing rail infrastructure. They also need a port facility.

The GVK group, which is into power generation, airports and roads, has launched a division called GVK Natural Resources in its quest for natural resources. Hancock’s acquisition will get it coal for its power plants. It will also mark its entry into commodities.

GVK Energy, the power subsidiary, has only one coal-based power project, in Goindwal Sahib in Punjab, that is under development. It depends on domestic coal. The project’s capacity was increased to 1,860 megawatt (Mw) recently.

The company is expanding its 464-Mw Gautami and 216-Mw Jegurupadu gas-fired projects by 800 Mw each. It has three hydel power projects under development in Rishikesh, Gauriganja and Ratle with a combined capacity of 1,390 Mw. As a group, it aims to reach 10,000 Mw in the next three-five years.

Last year, Lanco Infratech, paid A$750 million (Rs 3,375 crore) to acquire Griffin Coal in Australia, outbidding GVK. This time, too, GVK had competitors such as JSW Energy and Essar, which showed initial interest in Hancock’s assets.

GVK was also a serious bidder for Griffin Coal, which is in Collie in Western Australia and has reserves of 1.1 billion tonnes.

In comparison, Hancock’s assets are much more expensive, but it has seven times the reserves. However, these assets are not producing immediately. At present, GVK is not developing any power project based on imported coal.

The year 2010 saw another high-profile coal asset purchase when Adani Enterprises paid $2.7 billion (Rs 12,300 crore) in cash and royalty to acquire Linc Energy, which has reserves of 7.8 billion tonnes. (sourced Business Standard)

South Africa coal price fall draws out Indian buying

Thu Feb 10, 2011 2:41pm GMT
LONDON (Reuters) - A fall in South African thermal coal prices to $113 a tonne this week has started to draw out Indian buyers who have been sidelined since November, Indian traders said on Thursday.
Spot coal prices topped $120 a tonne in December from $90 in October on strong Chinese spot imports and spiked again in January after disastrous Australian floods.
During this period, Indian end-users stayed firmly out of the market and relied on stockpiles, deliveries of term contract coal and cheaper coal from Indonesia instead.
India's share of South Africa's coal exports has risen from almost nothing five years ago to an average of 30 percent a month.

The participation of these buyers and the Indian traders who supply them is also a crucial element of the global spot market - their withdrawal usually triggers a fall in prices but panic-buying and bullish sentiment was overwhelming last month.
"At these prices of around $113, $114 a tonne FOB Richards Bay some more people are looking to buy South African coal now, it's not a bad price," one of India's biggest trader importers said.
"Between December and February there were no physical demand reasons for prices to up $24 and then down $20, it was all artificial," he said.
India's Binani Cement Ltd this week bought a March loading South African cargo at $114 a tonne FOB, traders said.
A few of the smaller to medium-sized cement makers are likely to issue tenders now to take advantage of falling coal prices and extremely weak freight, traders said.
Indian end-users tend to focus on the delivered cost of coal and their trader suppliers are constantly comparing the cost plus freight of South African versus Indonesian coal.
There had been some fairly active re-selling of South African cargoes back to the original suppliers in January by Indian traders who replaced these cargoes with Indonesian material but this has dried up now, Indian traders said.

"We did see some of that last month but nothing much now," one South African producer said.
"It did make sense to take cheaper Indonesian. The freight was also more stable but current South African prices are not bad and the market looks like it's going to fall further anyway," another Indian trader said.

South African coal is preferred by many Indian end-users in the sponge iron and cement sectors for its consistent quality but because the market is so price-driven, consumers will switch quickly if delivered costs rise to unacceptable levels.
Prices are expected to come under further downward pressure as Indonesian exports start to flow again following confusion over export licences.
Around 3.5 million tonnes of mostly low-grade coal was held up but this is starting to move again.(sourced:Thomson Reuters)