MUMBAI: The power ministry’s guidelines for short-term procurement of electricity for less than or equal to one year is likely to bring cheer to cash-strapped distribution companies.
The new rules are expected to reduce power cost. The ministry had noted that the guidelines are aimed at promoting competitive procurement by problem-ridden distribution companies, by facilitating transparency and fairness.
Ajoy Mehta, managing director, Maharashtra State Electricity Distribution Company (MahaVitaran), welcomed the ministry’s guidelines and said it would bring in transparency in short-term power procurement. “Even before the issuance of these guidelines, MahaVitaran is procuring short-term power through e-tendering and this has been followed very unscrupulously. However, I strongly believe that financial freedom should not be taken away from distribution companies by regulatory commission during short-term power procurement.”
According to information gathered from distribution companies, the turnover in the short-term power sector works out to Rs 87,000 crore per annum.
The power ministry said in guidelines that there would be no escalation in tariff during the contract period. However, there would be a difference in pricing if bids were invited for different time slots. If power is supplied through alternative sources, the bidders would have to bear additional charges and losses due to cancellation of corridors and booking of new corridor.
Successful bidders would need to furnish contract performance guarantees (CPGs) in the form of bank guarantees within seven days for Rs 3 lakh per MW per month of contract period or part thereof. Non-performance would lead to forfeiture of CPG. The CPG needs to be released within 30 days of completion of the contract period.
On the role of regulatory commission, the ministry said if the quantum of power procured and tariff determined were within the blanket approval granted by the appropriate commission in the annual revenue requirement (ARR) of the respective year, the same would be considered to have been adopted by the appropriate commission.
Welcoming the move, power sector analyst D Radhakrishna said the distribution utilities were resorting to short-term power purchase in a big way during election and buying power no matter what the cost. “Now with guidelines in place, the Central Electricity Regulatory Commission needs to cap price so that undue profits are not taken by surplus states or generators. The tariff of independent power producers and ultra mega plants is around Rs 3- per unit and cost of supply of distribution companies are in range of Rs 3 to Rs 4 per unit. Thus capping of short-term price would restrict making unwarranted profits,” he added.
Last year, Tamil Nadu utility brought power for as high as Rs 15 per unit and its financial situation deteriorated.
The ministry has emphasised that the seller and the procurer would ensure that the scheduling does not deviate by more than 15 per cent of the contracted power, according to the approved open access on monthly basis.
If the deviation exceeds 15 per cent, the procurer would pay compensation at 20 per cent of tariff per unit for the shortfall in excess of the permitted deviation, while continuing to pay open access charges according to the contract.
Similarly, the seller would pay compensation at 20 per cent for the quantum of shortfall to procurer.
SPOT ELECTRICITY PRICES SOAR IN SECOND FORTNIGHT OF MAY
NEW DELHI: With temperatures soaring in the second fortnight of May, the spot electricity prices for South averaged around Rs 8.12 unit significantly higher than Rs 3.15 in the same month last year.
The price for the region hit a high of Rs 20 a unit during the month.
For North, the increase was about 14 per cent to Rs 3.29 a unit (Rs 2.89 a unit). But, in June, the spot prices are expected to soften.
Those tracking the sector said that in June the prices are expected to soften because power, which was bottled up in Karnataka, is now available and also more hydro and wind power are in the market.
Karnataka had stopped the developers from trading power outside State on the grounds that there was electricity shortage in the State. The developers there were barred till May 31.
In fact the first fortnight of May had seen the North spot prices averaging around Rs 3 a unit. For the South, though the prices saw a drastic upward movement averaging around Rs 10 a unit, the volumes were low (about 150 MW).
The reason for lower volumes was that the buyers from South were purchasing less because of low transmission capacity. The country is experiencing a power shortage of about 8-9 per cent, at present, down from 10-13 per cent at the start of the 11th Plan.
But that unmet demand is likely to further widen the shortage gap.
In the second fortnight of May, the peak demand met was 1,17,000 MW, the energy consumed was about 2,720 million units per day, sources said.
This was higher than last year’s 2,426 million units.
On May 30 it touched the highest peak demand of 1,19,000 MW.
Of this 2,719 million units, about 100 million units were coming from renewable sources, mostly from wind. The demand variation, particularly peaking, is met from hydro power.
Almost 17,000-18,000 MW comes from the hydro segment.
The total installed capacity of the country has crossed 2,00,000 MW, with a record capacity addition of 54,964 MW in the 11th Plan.
INDIA’S TOTAL POWER GENERATION CAPACITY CROSSES 200 GIGA WATT IN 11TH PLAN PERIOD
KOLKATA: The total installed capacity of the country has crossed two 200 giga watt, with a record capacity addition of 54,964 mw in the 11th plan — about two and half times the capacity added in the 10th plan. This was stated by power minister Sushil kumar Shinde while flagging off main plant civil works of NTPC’s Solapur Super thermal Power project (2x660MW) last evening.
NTPC, with a rich experience of engineering, construction and operation of around 38,000 mw of thermal generating capacity, is the largest and one of the most efficient power companies inIndia, having operations that match the global standards.
Towards this end, NTPC has adopted a multi-pronged strategy such asgreenfieldprojects, brownfield projects, joint venture and acquisition route. Apart from this, NTPC has also adopted the diversification strategy in related business areas, such as, services, coal mining, power trading, power exchange, manufacturing to ensure robustness and growth of the company.
To broad-base the business and also to ensure growth, diversification in the areas related to NTPC’s core business of power generation such as Hydro power, Distribution, Trading, Coal mining, LNG etc. have been identified as priority areas.
THERMAL PLANTS BATTLE COAL SHORTAGE AMID GROWING POWER DEMAND
NEW DELHI: Amid the country facing long power cuts due to lower production than demand, especially in peak summers, a CEA report has said that about 30 thermal power stations have less than a week’s coal to fuel plants.
On the first day of May, as many as 27 coal-based thermal power stations in the country had fuel stock that could not even last a week, according to the data by Central Electricity Authority (CEA). The power stations include 13 plants with less than four days of fuel stock on that day.
The number of power plants reeling under acute fuel shortage (of less than a week stock) increased to 30 by the end of the month and the number of plants with less than 4-day stock rose to 19, it said.
On an average over 28 power plants, every day, suffered fuel shortage with less than a week’s stock, last month.
The thermal power station (1,320 MW) at Jhajjar in Haryana remained shut almost the entire month due to shortage of fuel.
Major cities like Delhi, Bangalore, Chennai and rural areas are facing long power cuts as supply is insufficient to meet demand of power amid the peak summer season.
The eastern region was the worst affected, as 12 thermal power plants witnessed less than a week’s stock including 10 with less than four days of reserve.
The 3,000 MW Talcher power plant in Orissa, and three plants in West Bengal, with a collective capacity of over 1,600 MW received less coal from CoalIndiaand its subsidiaries, the data revealed. Whereas, coal supply is yet to start at three plants in the same region.
Seven power plants in the northern region -Delhi,Punjab, Haryana, Rajasthan, Uttar Pradesh – had less than 7 days of fuel stock on May 30.
Six power plants in the western region – Chhattisgarh, Gujarat, Madhya Pradesh,Maharashtra- had less than seven days stock on the same day.
And five power stations in the southern region – Andhra Pradesh, Karnataka, Tamil Nadu – had less than seven days of fuel stock on the same day.
The government has also proposed to add 1 lakh MW of electricity in the next five years, from all sources of energy.
According to Planning Commission estimates, the country’s energy supply needs to grow at 6.5 per cent annually if the nation has to achieve annual economic growth of 9 per cent during the current plan period (2012-17).
NATIONAL HYDRO-ELECTRIC POWER CORPORATION GETS CENTRAL ELECTRICITY AUTHORITY NOD FOR TAWANG PROJECTS
ITANAGAR: The National Hydro-electric Power Corporation (NHPC) has obtained concurrence of CEA (Central Electricity Authority) for 600 MW Tawang-I and 800 MW Tawang-II Projects in Arunachal Pradesh.
Environment clearances have also been accorded by the Union Environment and Forest Ministry for both these projects, an NHPC communique said here today.
NHPC has reported 27.93 per cent rise in net profit at Rs 2,771.77 crore during 2011-12 compared to year-ago period.
It registered sales turnover of Rs 5,509.65 crore against Rs 4,046.59 crore last year, it said.
The Centre has allowed NHPC to plan, promote and organise an integrated and efficient development of power through conventional and non-conventional sources inIndiaand abroad.
PTC INDIA VOLUMES TO IMPROVE, BUT INCREASING COMPETITION COULD SOFTEN MARGINS
Financial woes at the state electricity boards (SEBs) continue to take their toll on PTC India Ltd. In the March quarter, the company’s income from operations fell 28.3% as the beleaguered SEBs bought less electricity.
Compared with fourth quarter 2010-11, electricity sales fell 15.6% in January-March this year. On a sequential basis, volumes dropped 4%. This is the second consecutive quarter that the company has seen a contraction in volumes.
To match the lower offtake, the company has cut purchases. Expenses during the quarter fell 28.7% to Rs.1,412.5 crore. Expenditure as a percentage of operating income eased from 98.4% in fourth quarter of 2010-11 to 97.8% in January-March this year.
The 50 basis points contraction in operating costs, though, has done little help to the company. One basis point is one-hundredth of a percentage point. Net profits contracted 8.4% to Rs.30.1 crore as interest costs zoomed from a miniscule Rs.6.7 lakh in fourth quarter 2010-11 to Rs.6.4 crore in January-March this year.
Two variables will play a determining role on the company’s finances. First and foremost are the receivables. Payment delays from the cash-strapped SEBs have imposed severe financial stress on the company. Last fiscal cash assets fell 77% and trade receivables jumped 158% to Rs.2,588 crore. The delayed payments sent the interest costs higher and forced the company to reduce electricity sales to the defaulting SEBs.
The situation is improving, but at a slow pace. The Tamil Nadu SEB has begun payments and the company is expecting it to clear the dues in three months. The Uttar Pradesh SEB, meanwhile, is yet to chalk out a repayment plan. The Tamil Nadu and Uttar Pradesh SEBs together owe around Rs.1,200 crore to PTC India.
“Hopefully, the UP dues will also be cleared but UP is constrained to give timeline because right now the board is operating under deficit situation,” T.N. Thakur, chairman and managing director of PTC India said in an email.
Resumption of payments will help the company begin electricity sales to the defaulting states and arrest the fall in volumes. “Now they (Tamil Nadu) are asking us to supply power and we are working out an arrangement with them through which we will begin to supply them power,” says Thakur.
The other important variable is the margins. The company is facing increasing competition from the trading arms of the independent power producers like NTPC Ltd, Tata Power Co. Ltd and JSW Energy Ltd. Even though PTC India continues to have an edge in the long-term contracts, high competition in the short duration contracts could soften the margins.
“We expect competition to intensify in trading business, which would keep margins under pressure. Therefore, we reduce our trading margin estimate from 6 paise a unit to 5.1 paise per unit.” Rohit Singh of IDBI Capital Market Services Ltd said in a note.
After losing 69% in 2011, the stock rallied 42% since the beginning of this year. The stock rose on expectations that the recent tariff hikes by the SEBs will help them clear dues and step up the electricity purchases. But any further slippages on the repayment schedules could reverse the performance.
DISCOMS FIND IT TOUGH TO PROCURE EXTRA POWER
HYDERABAD: AP power distribution companies have managed to secure commitment for the supply of about 750 MW against the targeted 2,000 MW . This is in spite of higher purchase rates.
The short supply means consumers are in for tough times, as the demand is likely to be high and supply truncated.
Anticipating the power shortages, AP discoms had floated tender for 2,000 MW (48 million units) of power during June 2012 to May 2013. The total shortage is projected to hit 3,900 MW during the peak season.
According to the State Energy Co-ordination Cell, in the tender process, the power generators in AP quoted rates of up to Rs 6.79 a unit for a capacity of 350 MW (8.4 MU). And those outside the State quoted between Rs 5.75-7.39/ unit to supply 1,125 MW (27 MU). After several rounds of negotiations, including on May 29, the AP-based power generators agreed to supply at Rs 5/ unit for about 350 MW. Power producers outside AP expressed their inability to reduce their price below Rs 5.50/ unit, as they are using Indonesian coal whose price went up recently due to local changes.
Gas plants expressed their inability to reduce their price as they were operating at a low plant load capacity (at technical minimum of 34 per cent) due to gas shortage. The Central Electricity Authority (CEA) had indicated the unit rate at Rs 6 for gas stations operating at low load. Lanco and GMR plants are functioning at low capacity due to inadequate gas supply.
The State Regulatory Commission has continued the ceiling limit of Rs 5.50/ unit for this year as was the case last year.
VILLAGERS USE GOATS TO KEEP POWER, PETROCHEM FIRMS AWAY
MUMBAI: The Konkan region ofMaharashtrahas witnessed a number of protests by local villagers over land acquisition by large power and petrochemical companies.
This ecologically-fragile region is home to the numerous endangered plants and animals.
Villagers have now started seeking divine intervention and some novel protest methods to help them fight against these companies.
They are putting their faith on a newly found ally – the domestic goat. It is this humble animal that is now helping them ‘ward’ off companies.
Villagers have the practice of gifting goats to the temples of the local goddesses. While gifting, the villagers invoke an incantation – against the companies and the locals, who assist them in land acquisitions.
Once the goat is sanctified in this manner, it is allowed to roam freely in villages, where the project is proposed to be set up. The land, which has been traversed by the goats, cannot be sold to anybody. It evokes fear among the villagers and prevents them from selling their lands.
Unlike the usual custom of slaughtering such goats and eating its meat as ‘prasad’, these goats are protected by the villagers. They are seen as the messengers of the goddesses.
Due to this unusual protest method, the Rs 40,000 crore HPCL’s new refinery project at Tavsal village in Ratnagiri district has been stalled as the farmers are not even allowing land survey to be undertaken.
Same is the fate of the Dhopave thermal coal plant, which is coming up in the same district.
Using goats as means for organising the villagers and putting up a fight with the companies is the brainchild of Sadanand Pawar, former Economics professor and local resident.
He has been opposing mega projects in Konkan for the past ten years.
Pawar says that the protests are carried out peacefully for the conservation of land and protecting its biodiversity. The goat is the protest symbol of the villagers.
Pawar also claims some impressive scalps using this method.
“In 2002, we protested against Enron power project at Dabhol village in Ratnagiri. We sought help from our goddess and gifted a goat to the temple. We got the result in the form of Enron filing for bankruptcy,” he said.
Asked if this would not tantamount to spreading superstitions and rely on blind faith, he said, “People have criticised me for using the goat, they have accused me of spreading blind faith. But I believe that destroying environment by helping to set up environmentally harmful projects is a far more serious crime.”
Pawar said that Konkan requires projects, which does not hurt the local ecosystem.
“We never oppose any of the railway and port projects or any agro processing projects, which were set up in Konkan.
But thermal, coal and nuclear power projects, we will definitely oppose,” he said.
OPG POWER TO INVEST RS 3,000 CR BY 2014
NEW DELHI: London-based power company OPG Power has earmarked an investment of Rs 3,000 crore to increase over 6-fold its generation capacity by 2014.
It has an operating capacity of 112 MW, generated by three existing power plants.
” OPG Power Ventures PLC, a power generation company, listed on the London Stock Exchange, is all set to expand its presence inIndiawith an investment of Rs 3,000 crore,” the company said in a statement.
With this investment, OPG plans to increase the capacity to 750 MW by 2014, it said.
The company will set up three new power plants – one 80 MW Thermal Power plant and one 160 MW (80×2) plant in Chennai, and a 300 MW (150×2) plant in Kutch,Gujarat.
These projects are all coal-based and will start generating power by 2014, it added.
“In the recent years,India’s energy consumption has grown at the fastest rate in the world due to rising population and economic developments. This growth leads to huge demand and supply gap and gives us a huge opportunity to grow our business…,” OPG Power CEO Arvind Gupta said.
“…Indiais a resourceful country in terms of exhaustible and renewables,” he added.
All the new projects are being set up near ports which will give the company advantage and flexibility to use both domestic and imported coal.
In building and operating, OPG works with a team of industry-leading suppliers and contractors including BHEL and Ansaldo Boilers.
Each of OPG’s power projects are held through separate subsidiary companies inIndia.
SOLAR ENERGY PLAYER SUNEDISON OPEN FOR JOINT VENTURES IN INDIA
NEW DELHI: Looking to tap the “massive” opportunities inIndia, global solar energy firm SunEdison plans to strengthen its business activities in the country and is also open for joint venture partnerships.
SunEdison is mainly into setting up projects using photovoltaic technologies. The company is part of US-based MEMC.
“There are massive opportunities in the Indian solar space and the cost of solar power is also coming down,” MEMC President and Chief Executive Officer Ahmad Chatila told PTI.
According to him, the company would adopt a “multi-pronged” strategy to bolster its business in the country. “We are also open to joint ventures (in the country),” he noted.
However, he did not provide details about future plans. Against the backdrop of fuel supply issues impacting conventional thermal and gas-fired plants, solar energy offers a good alternative source for the power-starved nation.
Regarding the plans for Indian market, Chatila said the company would focus on three areas. “We will stress on having a good sales force, strong design and engineering organisation. We will also focus on having differentiated products (for our customers),” he added.
Last month, SunEdison had announced that it along with Azure Power would develop a 15 MW photovoltaic solar power plant inGujarat.
The government’s Jawaharlal Nehru National Solar Mission aims to have 20,000 MW of grid-connected solar power by 2022.
CIL IN DILEMMA OVER ITS DUTY TO SHAREHOLDERS
NEW DELHI: The issue of fuel supply agreements (FSAs) between Coal India (CIL) and newly commissioned power projects has again come to a head.At a recent board meeting, the CIL top brass decided that given the company’s obligations to shareholders as a listed entity, coal supply under the FSA cannot be allowed come in the way of company selling coal through e-auction, its most profitable venture. CIL has been selling about 10% of its output through e-auction with price realisation nearly twice its notified price.
With CIL unable to find ways to implement the decree directing to sign FSAs with power companies without compromising its commercial interests, the matter could again come up for discussion at the highest level, sources in the know said. The legal implications of the situation are also being studied.
The CIL board also agreed that the company will have sole discretion to import coal for meeting the committed demand. It has also sought clarification from the government on whether the presidential decree also stipulates 80% trigger level for invocation of penal provisions in case of supply shortfall for power plants commissioned during April 2012- March 2015.
According to observers, while CIL is keen to comply with the directive, it does not want to risk profitability. This dilemma was evident at the board meeting. What aggravates the problem is the company remains uncertain about growth in its future production. CIL remains a cash-rich company as methods like e-auction have helped it boost margins. Profits have risen in recent years despite stagnating production.
“CIL has to protect the interest of shareholders and also follow a pricing which does not affect the interest of interest users, including power generation companies. Since penal provisions of FSA would come into play only if quantum of supply reduces below the 80% of annual contracted quantity and CIL may have difficulties in short term to meet the commitment levels, CIL may fix a penalty percentage which protects its interest and at the same time acceptable to end consumers,” said Dilipkumar Jena, senior consultant and knowledge manager, mining, PwC. “CIL needs to overcome production constraints in order to meet the ever increasing coal demand,” said Charudatta Palekar, another energy expert from the same consultancy firm.
POLICY WATCH: LOOKING BEYOND COAL INDIA
Inefficiencies of Coal India Ltd (CIL) have ensured thatIndia, despite geological reserves of 286 billion tonnes, produces only 550 million tonnes per annum (mtpa) of coal. To meet the shortfall, the country has to import about 100 million tonnes of coal each year.
In the 1980s, the telecom sector was not very different from today’s coal sector. The state’s monopoly in telecom was exercised through Mahanagar Telephone Nigam Ltd, Videsh Sanchar Nigam Ltd and department of telecom.
Not surprisingly, it was the consumer who bore the brunt of high call charges, poor service quality, wrong billing and frequent dead connections. A new telephone connection often took over few years to acquire, until reforms happened.
The coal sector can also be revolutionised through reforms, if there is a political will.
Old mining equipment and technology employed by state-run organisations allow mining only up to depths of 200-300 metres in open cast mines. This leaves 60% reserves untouched. When benchmarked against global standards, the size of operations is also small. To make matters worse, about 10% of CIL’s annual production is earmarked for e-auction sales, while it remains unable to meet its contractual coal sale obligations.
This builds pressure on the large users of coal, primarily power plants, to ramp up their coal imports. Imports are subject to price fluctuations and policy changes in the exporting country. Increasing imports will push up the tariff for the consumer. If a coal-based power plant that imports 30% of its requirements, with fuel price being a complete pass-through, the consumer pays about 75 paise to R1 extra for each unit of power. On 800 billion units of coal-based power consumed inIndiaeach year, unwarranted import of coal would impose around R50,000 crore of additional expenditure on the power consumers.
A pioneering step toward introducing transparency and competition in the sector was the allocation of coal blocks under the Union government’s ultra-mega power projects (UMPP), awarded on transparent international competitive bidding. The power tariffs discovered in this bid process established the efficacy of competition in the power sector.
Another outcome of these massive coal blocks being handed over to the private sector is the availability of surplus coal. With such low tariffs, the developer is encouraged to deploy modern technology and equipment in the mines to ensure increased fuel production much in excess of the requirements of the power plant.
To appreciate the impact of advanced technologies, consider this–the annual capacity of the Pakri-Barwadih coal block, which has reserves of 1.4 billion tonnes, is 15 million tonnes per annum while a nearby block allotted to a UMPP, by a private developer, with lower reserves of 1.2 billion tonnes, has an annual production capacity of 40 million tonnes per annum.
This translates to an increased potential of producing around 6,000 MW per annum which would cater to the annual electricity needs of 6.5 crore Indians. This higher coal production is a boon for the country’s dwindling balance of payments, power deficit and inadequate coal import infrastructure.
There are three clear options before the government on this surplus coal. First, it could advise the developer to limit the mined quantities to match the requirements of the allotted captive plant, which would mean coal reserves remaining unutilised for the entire plant life. This option does not benefit anybody.
The second option is to force the developers to hand over surplus coal at pre-determined prices to CIL, which would in turn allocate them to others. Here the issue is at what price coal would be passed on to CIL: if passed on cost of production, the developer has no incentive to produce additional coal. Further, the original end-use plant always has over-riding priority on the coal produced from allotted mines, and the developer would be unduly handicapped by being asked to give this coal to a third party. Therefore, the only option for the government is to permit the usage of this coal in the developer’s own plants, supplying power either through regulated tariff or discovered through competitive bidding. This would ensure the surplus coal is converted to power rather than lying buried.
This would encourage usage of cutting edge technology in coal mining and reduce the country’s power deficit.
Therefore, this decision, taken by the empowered group of ministers recently on the case of Sasan UMPP, is a well-considered practical solution.
The government’s decision would now be whether to take this forward-looking policy applicable to all coal blocks, or let the coal be buried underground and lose it forever, and stay clear of controversies.
The writer is a former member of UPERC and was director (commercial), NTPC
NMDC TO START COAL PRODUCTION BY 2014
NEW DELHI: State-owned iron ore miner NMDC, which is setting up a 3 MTPA steel plant in Chhattisgarh, hopes to start producing coal from its captive mine by 2014, coinciding with the commissioning of facility for the alloy.
In a recent presentation to the steel ministry, NMDC has said it is taking “all necessary steps” to start production from the Shahpur West block in Madhya Pradesh in 2014. Coal Ministry has already given approval to mine closure plan for the block.
The coal ministry had allotted two blocks – Shahpur East and Shahpur West in Shahdol district of Madhya Prdesh to NMDC in 2009. Following this, a Memorandum of Understanding (MoU) was signed between NMDC and Mineral Exploration Corporation (MECL) to carry out exploration in both the blocks.
“We have applied for environment and forest clearance and as per the approved mine plan, coal production is expected to start from 2014,” a source in the company said.
Having a captive source of coal for its steel plant would help NMDC to hedge itself against price fluctuations, which is almost a certainty even in 2014 as the raw material is getting scarcer and costlier by day.
Domestic steel manufacturers, including Steel Authority of India, is continuously facing the heat of scorching coal prices in international market as its captive source can meet only a small part of the total requirement.
NMDC is setting up a three million tonnes per annum steel plant at Nagarnar in Chhattisgarh with Rs 15,525 crore outlay. It has placed all major orders including sinter plant, blast furnace, raw material handling systems, steel melting shop and oxygen plant among others.
Being a major iron ore producer itself, adequate supply to feed the steel plant is not a matter of concern for NMDC. The company aims to produce over 30 million tonnes iron ore in current fiscal, almost 20 per cent more than in 2011-12 by enhancing production form the existing mines. It has plans to produce 40 million tonnes iron ore by 2014-15.
NMDC has also inked a MoU withRussia’s Severstal to set up a three mtpa steel plant In Karnataka. However, this entity has plans to acquire a coal mine inRussiawhich would meet the fuel requirement for the steel plant.
LANCO TO RAMP UP OUTPUT FROM AUSTRALIA MINES
NEW DELHI: Lanco Infratech Ltd is working out a strategic plan to ramp up production from Griffin Coal mines inAustraliato 18 million tonnes a year by 2017-18. The programme would cost the company up to $ 1 billion.
“The capital expenditure (capex) would be finalised by September 2012. It would be up to $ 1 billion. The output would be increased in phases from four million tonnes at present to 18 million tonnes by 2018,” said an official privy to the development.
Lanco acquiredAustralia’s The Griffin Coal Mining Company Pty Ltd in 2011 for $ 750 million. It has already paid $ 500 million and rest of the funds would be paid in two tranches in one year and three years.
The capital expenditure for increasing output would be funded by both equity and debt. “The exact ratio of equity and debt funding is being worked out,” the official added. Lanco would borrow debt from overseas market in either US or Australian dollar.
When asked if there was any chance of Lanco raising debt from the Indian market, the official said, “This is not viable as expenses are to be made in Australian dollar.”
Griffin Coal is currently operating Ewington 1& 2 and Muja Mines situated inWestern Australia, according to the company’s Web site. The miner has more than 1.2 billion tonnes of coal resources.
Griffin Coal also exports nearly 0.75 million tonnes of coal every year through Kwinana port. Lanco is also planning to develop the railway and port infrastructure that would help export coal from these mines through Bunbury port.