We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Thursday, 12 November 15
FOREIGN COAL MINE ACQUISITION - STRATEGY VERSUS OPPORTUNITY FOR INDIAN UTILITIES - DIPESH DIPU
.jpg) The acquisition market for thermal coal assets abroad is dull. Sellers of all hues are in the market; some are actively scouting for buyers while others, hoping against hope that someone looking to buy might knock the door and hence, are their running operations even in cash losses. The coal assets were acquired by many Indian power utilities and commodity trading companies, and some were acquired even leading to unrelated diversification. Indonesia was the toast of coal mine acquisition investments from Indian companies, while there were big investments in Australia, South Africa and other countries too. Why now, when the quoted asset prices are all time low, most Indian investors are shying away when the contrarian strategy would typically require one to grab the opportunity?
The global prices of thermal coal are lower than the March 2009 levels, a lowest observed in a decade after the fall due to global financial crisis. Costs on the other hand have been rising, marginal costs of mining in Australia for a large percentile of coal mines is upward of US $ 60 per tonne, which is nearly the price they fetch for high grade coal. Percentiles for South African and Indonesian mines are better as these are the lowest cost producers in the world. It is common sense that when the commodity price is low, below the marginal cash cost of production, it is advisable to buy the lowest cost producer, which will survive and benefit once the commodity price recovers after the more expensive players are forced out of the market. Now, when the coal prices are lower than the marginal costs and there are several low cost producers willing to sell or have been forced to sell due to financial distress, the absence of buyers indicates only one thing – the concern about price recovery.
Global thermal coal prices had been stable in nominal terms through the mid-1970s till 2003, almost range-bound from US$ 25-35 per tonne. This essentially meant that in real terms prices fell through the three decades. However, since then demand led price hikes scaled new peaks every year and reached close to US$ 200 per tonne in July 2008. The global meltdown in the aftermath of financial crisis led to coal prices tumbling down to US$ 60-65 per tonne in March 2009 before heading back to US$ 135-140 per tonne by early 2011. And since then, there has been a constant downward trend that remains unabated till now.
China has been a prime mover of the global coal industry. The prices turned to its peaks when China became a net importer of coal in 2008-09. In 2014-15, domestic production of coal in China has seen a slowdown due to cost pressures, while its imports have fallen as well by nearly a third from last year. It is being considered that for cleaner environment, China is attempting to lower its dependence on coal-based power generation. While in India, domestic coal supply scenario has improved on two counts - Coal India and SCCL have improved production, and the demand for coal hasn’t picked up as expected. This has led to thermal coal imports falling albeit at a slow pace. Indian power generation capacity addition which was rapid in 2009-2012 has taken a hit, largely due to fuel crisis during that period, apart from challenges such as delays in approvals and clearances and resulting financing constraints. Coal India has also embarked upon a near-1 billion tonnes per annum production by 2020, which may improve domestic coal supplies, while capacity addition growth in power generation may take some time as investor confidence returns to the sector. China and India, thus, do not paint a picture of global coal price recovery soon.
US coal companies are faced with existential questions and have begun to look at the international markets for exports, given that local demand has suffered due to environmental protection laws. Australia also seems to have oversupply challenge. Several key projects that could have further enhanced coal production in Bowen and Galilee basins are now mothballed. Japan has plans to increase coal based generation that will positively impact the demand for coal, but that may not absorb the high oversupplies already in the market.
The other significant disruptor for coal sector has been the emergence of renewable energy, solar power in particular, with scalability and economics gradually tilting in their favour. On a total cost basis, including environmental costs, the inflexion point between coal based and solar power seems to have been reached. The pace of change in technology in these renewables is high, which has resulted in fall of solar power tariffs from Indian Rupees (INR) 12-15 per unit in 2009-10 to INR 4.63 in the recently concluded bids by NTPC. The trend of falling tariffs in solar power coupled with scalabilities that till recently were not considered achievable brought coal based power generation to the inflexion point. While concerns about quality of supplies may persist for some time, suffice it to say that the disruption in coal sector is imminent and inevitable, and that may have an impact on global coal prices.
Given these, it may be optimistic to evaluate coal assets on a price recovery outlook. It may make sense to invest in the assets that may sustain profitability at slightly lower than current prices, possibly in the marginal cost range of US$ 35-45 per tonne for coal of 5000-6000 kCal/kg gross calorific values on as received basis. Investors should prefer operating assets, which may not have construction and development risks as well as risks of permits. Essentially, with these, the investors also need to look at regulatory risks in the destination country.
Indonesian coal sector has been in a flux and has led to enhanced perception of regulatory risks even though from the logistics and mining costs points of view, it may appear the favourable place to buy coalmines. The divestment clause that restricts foreign ownership and eventually makes a foreign buyer a minority stakeholder has the potential to restrict investments only to smaller projects where reserves can be exhausted before a mine transfers ownership. South Africa and southern African countries like Mozambique, Malawi, Zimbabwe, Namibia and Botswana have challenges of logistics even though the regulatory regimes are favourable. Mozambique, for instance, has only one operating Sena rail link connecting the coalfields in Tete to Beira port, which is already running at capacity, and is about 900 kilometers. Infrastructure development plans are now doubtful given the concern of coal price recoveries. Australia has challenges of higher cost of production, compliance costs and higher logistics costs, particularly for coal assets in Galilee basin.
Given these, the attractiveness of coal mine acquisition is low even though the low asset prices provide opportunities. As reported in the national newspapers, Indian government owned companies seem to be scouting for assets, which is far more challenging for them given their approach and methodologies for acquisition. Tendering route may be considered the least efficient for such acquisition as the market size in such tenders gets limited to only those assets who choose to respond to the tenders. It is a passive approach which gets hampered by inefficiencies in information channels as well and may not reach the potential sellers with good assets. In my recently concluded assignments for a few of such government-owned companies, it was observed that most bidders turned out to be Indian companies that invested abroad and have not been able to develop the coal assets well for themselves. For success in the market, it is required that ground work is done privately to assess target zones and identify strategically fitting assets and then approach the owners to nudge them to sell. This, however, may be tough for the government-owned companies in light of their internal processes, which obviously have not been designed for such acquisitions.
For Indian companies to acquire foreign coal assets, it is critical that they identify their strategic objectives and not go by the opportunities the market seemingly provides in terms of large number of sellers in the market willing to sell at relatively low prices. Private sector companies have better procedural manoeuvrability while government-owned companies get tied up in their own processes to effectively acquire assets that fit them. In any case, the long term price outlook being uncertain, investors need to tread with caution and pick assets that may sustain profitability even with worse forecasts. Else, the winners curse follows.
By Dipesh Dipu
Energy, Natural Resources and Infrastructure Expert
India
Views and opinions / conclusion expressed herein are personal views of the author and not that of COALspot.com.
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Tuesday, 01 December 15
TANKERS VERSUS BULKERS - JUST PLAYING CATCH UP? - CLARKSONS
It’s now more than a year since the tanker market took off. In mid-2014 tanker earnings picked up and since then have been in the $30-$40,000 ...
Monday, 30 November 15
ASSOCARBONI LOOKS AT COAL FROM A DIFFERENT ANGLE
ASSOCARBONI is in favour of an international mechanism to provide financial support to countries building high efficiency low emission coal plants. ...
Monday, 30 November 15
CS 5000 GAR COAL INDEX FIRM D-O-D; WEAK W-O-W
COALspot.com: The 5000 GAR CS (i) coal index up slightly day over day.
According to the system generated index, the CS 50 (5000 GAR coal) was ...
Monday, 30 November 15
CFR SOUTH CHINA COAL SWAPS REMAINED UNCHANGED FROM LAST WEEK
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery declined US$ 4.50 (9.78%) per ton month over month.
A commodity swap ...
Sunday, 29 November 15
CAPE INDEX SURGES 383 POINTS WEEK OVER WEEK, BOOSTS BALTIC DRY INDEX
COALspot.com: The Baltic Dry Index, a measure of shipping rates, fell to 498 points on 20 November and touched a 30-year low, but on 27 November th ...
|
|
|
Showing 2681 to 2685 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- VISA Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- Minerals Council of Australia
- Ceylon Electricity Board - Sri Lanka
- Krishnapatnam Port Company Ltd. - India
- Intertek Mineral Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Makarim & Taira - Indonesia
- Larsen & Toubro Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tata Chemicals Ltd - India
- Formosa Plastics Group - Taiwan
- CNBM International Corporation - China
- Sree Jayajothi Cements Limited - India
- Romanian Commodities Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Singapore Mercantile Exchange
- Indian Oil Corporation Limited
- Orica Australia Pty. Ltd.
- Kumho Petrochemical, South Korea
- Dalmia Cement Bharat India
- Bukit Makmur.PT - Indonesia
- Altura Mining Limited, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- Sojitz Corporation - Japan
- Baramulti Group, Indonesia
- Timah Investasi Mineral - Indoneisa
- Economic Council, Georgia
- Indo Tambangraya Megah - Indonesia
- Anglo American - United Kingdom
- Bukit Baiduri Energy - Indonesia
- Bharathi Cement Corporation - India
- Mjunction Services Limited - India
- European Bulk Services B.V. - Netherlands
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement PLC, Thailand
- PetroVietnam Power Coal Import and Supply Company
- Vizag Seaport Private Limited - India
- Directorate Of Revenue Intelligence - India
- Salva Resources Pvt Ltd - India
- Thiess Contractors Indonesia
- LBH Netherlands Bv - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- Power Finance Corporation Ltd., India
- Holcim Trading Pte Ltd - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Metalloyd Limited - United Kingdom
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Iligan Light & Power Inc, Philippines
- Meenaskhi Energy Private Limited - India
- GMR Energy Limited - India
- Indogreen Group - Indonesia
- Commonwealth Bank - Australia
- Antam Resourcindo - Indonesia
- Standard Chartered Bank - UAE
- Energy Development Corp, Philippines
- Aditya Birla Group - India
- Banpu Public Company Limited - Thailand
- Toyota Tsusho Corporation, Japan
- GVK Power & Infra Limited - India
- Carbofer General Trading SA - India
- Kapuas Tunggal Persada - Indonesia
- IHS Mccloskey Coal Group - USA
- GN Power Mariveles Coal Plant, Philippines
- Binh Thuan Hamico - Vietnam
- Madhucon Powers Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Bhatia International Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Therma Luzon, Inc, Philippines
- Edison Trading Spa - Italy
- White Energy Company Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rio Tinto Coal - Australia
- Mercuria Energy - Indonesia
- Lanco Infratech Ltd - India
- GAC Shipping (India) Pvt Ltd
- San Jose City I Power Corp, Philippines
- Parliament of New Zealand
- Vedanta Resources Plc - India
- Bulk Trading Sa - Switzerland
- Petrochimia International Co. Ltd.- Taiwan
- Merrill Lynch Commodities Europe
- Kohat Cement Company Ltd. - Pakistan
- PowerSource Philippines DevCo
- Energy Link Ltd, New Zealand
- Trasteel International SA, Italy
- Essar Steel Hazira Ltd - India
- Sindya Power Generating Company Private Ltd
- MS Steel International - UAE
- Samtan Co., Ltd - South Korea
- Thai Mozambique Logistica
- Siam City Cement - Thailand
- Sinarmas Energy and Mining - Indonesia
- Kepco SPC Power Corporation, Philippines
- Georgia Ports Authority, United States
- Mercator Lines Limited - India
- Jaiprakash Power Ventures ltd
- PTC India Limited - India
- Indian Energy Exchange, India
- Cement Manufacturers Association - India
- New Zealand Coal & Carbon
- The University of Queensland
- Electricity Authority, New Zealand
- SN Aboitiz Power Inc, Philippines
- Independent Power Producers Association of India
- International Coal Ventures Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Jindal Steel & Power Ltd - India
- Posco Energy - South Korea
- Bukit Asam (Persero) Tbk - Indonesia
- Parry Sugars Refinery, India
- IEA Clean Coal Centre - UK
- Semirara Mining Corp, Philippines
- Barasentosa Lestari - Indonesia
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- Orica Mining Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Kaltim Prima Coal - Indonesia
- Karaikal Port Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Straits Asia Resources Limited - Singapore
- Interocean Group of Companies - India
- Global Green Power PLC Corporation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Videocon Industries ltd - India
- India Bulls Power Limited - India
- Medco Energi Mining Internasional
- Indonesian Coal Mining Association
- Simpson Spence & Young - Indonesia
- Gujarat Sidhee Cement - India
- Globalindo Alam Lestari - Indonesia
- Xindia Steels Limited - India
- Global Coal Blending Company Limited - Australia
- Central Java Power - Indonesia
- Renaissance Capital - South Africa
- Australian Coal Association
- Indika Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Ministry of Finance - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Latin American Coal - Colombia
- Uttam Galva Steels Limited - India
- Oldendorff Carriers - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Gujarat Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Heidelberg Cement - Germany
- South Luzon Thermal Energy Corporation
- Goldman Sachs - Singapore
- AsiaOL BioFuels Corp., Philippines
- Ambuja Cements Ltd - India
- Meralco Power Generation, Philippines
- Kideco Jaya Agung - Indonesia
- Eastern Energy - Thailand
- Wood Mackenzie - Singapore
- Sical Logistics Limited - India
- Marubeni Corporation - India
- Bangladesh Power Developement Board
- Borneo Indobara - Indonesia
- Electricity Generating Authority of Thailand
- SMG Consultants - Indonesia
- The Treasury - Australian Government
- Cigading International Bulk Terminal - Indonesia
- Coal and Oil Company - UAE
- Bayan Resources Tbk. - Indonesia
- PNOC Exploration Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- SMC Global Power, Philippines
- London Commodity Brokers - England
- Chamber of Mines of South Africa
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Miang Besar Coal Terminal - Indonesia
- ASAPP Information Group - India
- OPG Power Generation Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Riau Bara Harum - Indonesia
- Grasim Industreis Ltd - India
- TeaM Sual Corporation - Philippines
- Star Paper Mills Limited - India
- Kartika Selabumi Mining - Indonesia
- Manunggal Multi Energi - Indonesia
- Mintek Dendrill Indonesia
- Petron Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Australian Commodity Traders Exchange
- Leighton Contractors Pty Ltd - Australia
- Sarangani Energy Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Planning Commission, India
- Agrawal Coal Company - India
- CIMB Investment Bank - Malaysia
- Bhushan Steel Limited - India
- McConnell Dowell - Australia
- Wilmar Investment Holdings
- Maharashtra Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Africa Commodities Group - South Africa
- Deloitte Consulting - India
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- Attock Cement Pakistan Limited
- The State Trading Corporation of India Ltd
- Coalindo Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Ministry of Mines - Canada
- Central Electricity Authority - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Port Waratah Coal Services - Australia
- Kobexindo Tractors - Indoneisa
|
| |
| |
|
