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.
|
|
Friday, 27 November 15
INDONESIA COAL SWAPS: WEEK ENDING 20 NOVEMBER CLOSED HIGHER COMPARED TO THE PREVIOUS WEEK
COALspot.com: Indonesian coal swaps for delivery Q1 2016 declined month on month and up on week over week. Coal prices seen slight improvements thi ...
Friday, 27 November 15
FOB RICHARDS BAY COAL SWAPS UP FROM LAST WEEK
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q1’ 2016 up week over week and month over month.
The Q1’ 2016 swa ...
Thursday, 26 November 15
ITALY'S STEAM COAL IMPORTS EXPECTED TO REACH 16 MILLION TONS AND COKING COAL IMPORTS TO AMOUNT TO 4 MILLION TONS - ASSOCARBONI
ASSOCARBONI LOOKS AT COAL FROM A DIFFERENT ANGLE
- “Coal has made huge steps towards environmental sustainability, making itself t ...
Thursday, 26 November 15
DRY BULK MARKET WILL REBOUND EVENTUALLY, BUT THINGS WILL BECOME EVEN WORSE BEFORE THEY IMPROVE SAYS SHIPBROKER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As the dry bulk market’s benchmark, the Baltic Dry Index (BDI) reached an all-time late last week and has failed to rebound significantly eve ...
Thursday, 26 November 15
Q3'16 FOB NEWCASTLE COAL SWAP FALLS 27.5% SINCE 20 FEB 2015
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery slid $5 per ton (12.05%) month over month to US$ 36.50 per ton. The s ...
|
|
|
Showing 2686 to 2690 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Banpu Public Company Limited - Thailand
- White Energy Company Limited
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- Ceylon Electricity Board - Sri Lanka
- India Bulls Power Limited - India
- Anglo American - United Kingdom
- Standard Chartered Bank - UAE
- Electricity Authority, New Zealand
- Parliament of New Zealand
- Xindia Steels Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Goldman Sachs - Singapore
- Australian Commodity Traders Exchange
- CIMB Investment Bank - Malaysia
- OPG Power Generation Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Indogreen Group - Indonesia
- Power Finance Corporation Ltd., India
- Sindya Power Generating Company Private Ltd
- Malabar Cements Ltd - India
- Dalmia Cement Bharat India
- Energy Link Ltd, New Zealand
- New Zealand Coal & Carbon
- TeaM Sual Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Karaikal Port Pvt Ltd - India
- SMC Global Power, Philippines
- Indonesian Coal Mining Association
- Antam Resourcindo - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Electricity Generating Authority of Thailand
- Indian Oil Corporation Limited
- Bhushan Steel Limited - India
- Eastern Coal Council - USA
- Coal and Oil Company - UAE
- Bhatia International Limited - India
- GVK Power & Infra Limited - India
- Planning Commission, India
- Bukit Baiduri Energy - Indonesia
- Sree Jayajothi Cements Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Barasentosa Lestari - Indonesia
- Carbofer General Trading SA - India
- Semirara Mining and Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Alfred C Toepfer International GmbH - Germany
- Tamil Nadu electricity Board
- Bayan Resources Tbk. - Indonesia
- Madhucon Powers Ltd - India
- Uttam Galva Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- Kartika Selabumi Mining - Indonesia
- Oldendorff Carriers - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Global Business Power Corporation, Philippines
- Indian Energy Exchange, India
- Kaltim Prima Coal - Indonesia
- Larsen & Toubro Limited - India
- International Coal Ventures Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Deloitte Consulting - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Intertek Mineral Services - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Thiess Contractors Indonesia
- South Luzon Thermal Energy Corporation
- Commonwealth Bank - Australia
- Marubeni Corporation - India
- Karbindo Abesyapradhi - Indoneisa
- Lanco Infratech Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kepco SPC Power Corporation, Philippines
- Videocon Industries ltd - India
- The University of Queensland
- Tata Chemicals Ltd - India
- Australian Coal Association
- Miang Besar Coal Terminal - Indonesia
- Indo Tambangraya Megah - Indonesia
- Mercator Lines Limited - India
- Toyota Tsusho Corporation, Japan
- Manunggal Multi Energi - Indonesia
- Essar Steel Hazira Ltd - India
- Mintek Dendrill Indonesia
- Meralco Power Generation, Philippines
- Thai Mozambique Logistica
- Energy Development Corp, Philippines
- Jindal Steel & Power Ltd - India
- Bharathi Cement Corporation - India
- Port Waratah Coal Services - Australia
- Parry Sugars Refinery, India
- Kideco Jaya Agung - Indonesia
- Vedanta Resources Plc - India
- Kobexindo Tractors - Indoneisa
- Global Coal Blending Company Limited - Australia
- Semirara Mining Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- PTC India Limited - India
- Aboitiz Power Corporation - Philippines
- GMR Energy Limited - India
- Eastern Energy - Thailand
- Heidelberg Cement - Germany
- Sakthi Sugars Limited - India
- Sojitz Corporation - Japan
- Savvy Resources Ltd - HongKong
- LBH Netherlands Bv - Netherlands
- Mjunction Services Limited - India
- Siam City Cement - Thailand
- Ministry of Mines - Canada
- Simpson Spence & Young - Indonesia
- Pendopo Energi Batubara - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Binh Thuan Hamico - Vietnam
- Pipit Mutiara Jaya. PT, Indonesia
- PowerSource Philippines DevCo
- Altura Mining Limited, Indonesia
- GAC Shipping (India) Pvt Ltd
- VISA Power Limited - India
- Independent Power Producers Association of India
- Interocean Group of Companies - India
- Meenaskhi Energy Private Limited - India
- Bangladesh Power Developement Board
- CNBM International Corporation - China
- Chettinad Cement Corporation Ltd - India
- Central Electricity Authority - India
- Salva Resources Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Orica Australia Pty. Ltd.
- Vijayanagar Sugar Pvt Ltd - India
- Sical Logistics Limited - India
- Rio Tinto Coal - Australia
- Chamber of Mines of South Africa
- Global Green Power PLC Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Aditya Birla Group - India
- London Commodity Brokers - England
- Maharashtra Electricity Regulatory Commission - India
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Transport, Egypt
- Siam City Cement PLC, Thailand
- The Treasury - Australian Government
- Neyveli Lignite Corporation Ltd, - India
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- PNOC Exploration Corporation - Philippines
- Cement Manufacturers Association - India
- Formosa Plastics Group - Taiwan
- IHS Mccloskey Coal Group - USA
- Wilmar Investment Holdings
- Trasteel International SA, Italy
- Latin American Coal - Colombia
- Borneo Indobara - Indonesia
- Minerals Council of Australia
- Georgia Ports Authority, United States
- Romanian Commodities Exchange
- Holcim Trading Pte Ltd - Singapore
- Kumho Petrochemical, South Korea
- European Bulk Services B.V. - Netherlands
- Attock Cement Pakistan Limited
- Sarangani Energy Corporation, Philippines
- Medco Energi Mining Internasional
- MS Steel International - UAE
- Africa Commodities Group - South Africa
- Merrill Lynch Commodities Europe
- Directorate Of Revenue Intelligence - India
- Petron Corporation, Philippines
- Ambuja Cements Ltd - India
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- ICICI Bank Limited - India
- Maheswari Brothers Coal Limited - India
- Mercuria Energy - Indonesia
- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- Bulk Trading Sa - Switzerland
- Bukit Asam (Persero) Tbk - Indonesia
- Agrawal Coal Company - India
- Jaiprakash Power Ventures ltd
- Gujarat Sidhee Cement - India
- Economic Council, Georgia
- McConnell Dowell - Australia
- Posco Energy - South Korea
- Metalloyd Limited - United Kingdom
- Kapuas Tunggal Persada - Indonesia
- SMG Consultants - Indonesia
- ASAPP Information Group - India
- Ministry of Finance - Indonesia
- Edison Trading Spa - Italy
- Riau Bara Harum - Indonesia
- Coastal Gujarat Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Timah Investasi Mineral - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- Renaissance Capital - South Africa
- Wood Mackenzie - Singapore
- Makarim & Taira - Indonesia
- Central Java Power - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bukit Makmur.PT - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Grasim Industreis Ltd - India
- Indika Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Samtan Co., Ltd - South Korea
- The State Trading Corporation of India Ltd
- Cigading International Bulk Terminal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Orica Mining Services - Indonesia
- Therma Luzon, Inc, Philippines
|
| |
| |
|
