The great coal hunt continues as firms tap global markets
December 21, 2009
another example of how getting coal thousands of miles away from another continent is much easier than getting it from a few hundred kilometres within the country, Nava Bharat (Singapore) Private Limited (NBS) a subsidiary of Nava Bharat Ventures Limited (NBVL), has signed a share sale and purchase agreement (SPA) for acquiring 65% equity stake in Maamba Collieries Limited (MCL), with the Government of the Republic of Zambia holding the Golden Share.
This news pushed the stock to a high of Rs405, and it ended the day at Rs399, up 6% from the previous day’s close of Rs378.
As per reports, MCL, which is estimated to have a capacity of two million tonnes of washed coal per annum, is expected to start operating on 1 March 2010 after the new investor, Nava Bharat, completes the financial closure.
As per the filing to the Bombay Stock Exchange (BSE), the company said that a group of individuals (Zambian Consortium) had joined NBS to form Nava Bharat Consortium (Nava Bharat). According to the company announcement, the acquisition was made pursuant to the selection of Nava Bharat against a global tender issued by ZCCM in late 2008 for inducting a private majority partner.
Nava Bharat’s move underlines once again how there is now a beeline to acquire coal sources abroad. In early December, Moneylife Digital had reported that JSW Energy’s fuel requirement would be met by a mix of domestic coal sources and imported coal, since uninterrupted coal supply from domestic sources was not easy.
“Domestic coal has its own challenge. If we want to ramp up capacity, there are issues. We have tried to enter this space very differently with a mix of domestic coal and imported coal. We have around three to five years to explore various sources for coal allocation. A lot of capacity is coming in, but we have to keep an eye on the challenges which we will face in procuring domestic coal. The reason for this is that we are not seeing a huge amount of coal capacity actually coming on stream,” said Pramod Menon, chief financial officer, JSW Energy Ltd.
“We believe it is ideal to have a (supply) mix of domestic and imported coal. We have most of our projects dependent on imported coal located near ports, so we have the infrastructure in place,” Mr Menon had told us.
JSW Energy imports coal from Indonesia and Mozambique. It owns two coal blocks in Mozambique. Coal sourced from this country will fuel JSW’s power plants dependent on this source in about three to four years. Mr Menon added that, “We need to de-risk the dependence on a single source by working out arrangements with multiple parties. Over time, you will find us addressing these risks.”
Meanwhile, P Trivikrama Prasad, managing director of Nava Bharat, said that the company has successfully demonstrated its strengths in executing small-scale, coal-based power projects in the past. He said that this new venture will benefit from the same experience, and the company expects to be able to complete this project through a prudent financial structure that will optimise the opportunity for all stakeholders involved.
Nava Bharat and ZCCM are committed to optimise the mine operations to obtain positive cash flows soon and to establish a 2x150MW power plant by utilising low-grade coal from the coal mine which has reserves of about 65 million tonnes of washed high-grade coal and an equivalent quantum of low-grade coal for use as feedstock for the proposed 300-MW power plant.
The overall integrated project entails capital outlay of about $550 million which will be funded by non-recourse project debt and equity. The filing also said that Nava Bharat’s share of equity for this integrated project is about $108 million and that of ZCCM is about $57 million and the actual commitment would vary upon finalisation of the project cost and financing structure. Currently, the company is in talks with some leading banks for the proposed financing of the MCL project.