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.
|
|
Wednesday, 11 November 15
VESSEL VALUES ARE DOWN BY AT LEAST 20% SINCE MID-AUGUST - INTERMODAL
I had promised not to spend another broker’s insight focusing on the dry bulk side. However, the sale of the M/V Churchill Bulker (179,362 dw ...
Tuesday, 10 November 15
SELF-HEATING OF COAL HAS EMPHASISED THE IMPORTANCE OF CHECKING THE ACCURACY OF SHIPPER'S DECLARATIONS - GARD
Recent incidents involving self-heating of coal has emphasised the importance of checking the accuracy of shipper’s declarations for all type ...
Tuesday, 10 November 15
API 5 FOB NEWCASTLE COAL SWAP SLIDES CONTINUE
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery slid $3.55 per ton (8.50%) month over month to US$ 38.20 per ton. The swap ...
Monday, 09 November 15
BUNKER PRICES TO KEEP SLIDING THIS WEEK, EXPERT SAYS - MARINE BUNKER EXCHANGE
The oil price volatility has continued this week. Two dollars up one day and the next day two dollars down. The oil market has been trading on the ...
Monday, 09 November 15
CFR SOUTH CHINA THERMAL COAL SWAP FOR Q3' 16 CONTRACT DECLINED US$ 4 PER TON
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery declined US$ 4.35 (9.03 %) per ton month over month.
A commodity swa ...
|
|
|
Showing 2721 to 2725 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Directorate General of MIneral and Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Toyota Tsusho Corporation, Japan
- Anglo American - United Kingdom
- Timah Investasi Mineral - Indoneisa
- Independent Power Producers Association of India
- Ceylon Electricity Board - Sri Lanka
- Petrochimia International Co. Ltd.- Taiwan
- Metalloyd Limited - United Kingdom
- Makarim & Taira - Indonesia
- Madhucon Powers Ltd - India
- Latin American Coal - Colombia
- Indogreen Group - Indonesia
- ICICI Bank Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Standard Chartered Bank - UAE
- Vizag Seaport Private Limited - India
- ASAPP Information Group - India
- CNBM International Corporation - China
- Maheswari Brothers Coal Limited - India
- Riau Bara Harum - Indonesia
- Ministry of Transport, Egypt
- Petron Corporation, Philippines
- Aditya Birla Group - India
- Global Green Power PLC Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Electricity Generating Authority of Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mintek Dendrill Indonesia
- Global Business Power Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- SMG Consultants - Indonesia
- SN Aboitiz Power Inc, Philippines
- Carbofer General Trading SA - India
- Australian Commodity Traders Exchange
- Mjunction Services Limited - India
- VISA Power Limited - India
- Global Coal Blending Company Limited - Australia
- Asmin Koalindo Tuhup - Indonesia
- Mercator Lines Limited - India
- Indian Energy Exchange, India
- Maharashtra Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Bahari Cakrawala Sebuku - Indonesia
- Port Waratah Coal Services - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coalindo Energy - Indonesia
- GMR Energy Limited - India
- Directorate Of Revenue Intelligence - India
- Economic Council, Georgia
- Kepco SPC Power Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- India Bulls Power Limited - India
- Samtan Co., Ltd - South Korea
- Sinarmas Energy and Mining - Indonesia
- Indo Tambangraya Megah - Indonesia
- Energy Development Corp, Philippines
- Parry Sugars Refinery, India
- Ind-Barath Power Infra Limited - India
- Orica Australia Pty. Ltd.
- Ministry of Mines - Canada
- Tata Chemicals Ltd - India
- Globalindo Alam Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Semirara Mining and Power Corporation, Philippines
- New Zealand Coal & Carbon
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Karbindo Abesyapradhi - Indoneisa
- Grasim Industreis Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Sindya Power Generating Company Private Ltd
- LBH Netherlands Bv - Netherlands
- Siam City Cement - Thailand
- White Energy Company Limited
- MS Steel International - UAE
- Eastern Energy - Thailand
- Bhushan Steel Limited - India
- OPG Power Generation Pvt Ltd - India
- Chettinad Cement Corporation Ltd - India
- Coastal Gujarat Power Limited - India
- Trasteel International SA, Italy
- Goldman Sachs - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Salva Resources Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- SMC Global Power, Philippines
- Agrawal Coal Company - India
- Orica Mining Services - Indonesia
- Electricity Authority, New Zealand
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- CIMB Investment Bank - Malaysia
- Bayan Resources Tbk. - Indonesia
- Planning Commission, India
- PNOC Exploration Corporation - Philippines
- The State Trading Corporation of India Ltd
- Kohat Cement Company Ltd. - Pakistan
- Bukit Baiduri Energy - Indonesia
- Siam City Cement PLC, Thailand
- Energy Link Ltd, New Zealand
- TeaM Sual Corporation - Philippines
- Posco Energy - South Korea
- Semirara Mining Corp, Philippines
- Intertek Mineral Services - Indonesia
- Banpu Public Company Limited - Thailand
- Kumho Petrochemical, South Korea
- Commonwealth Bank - Australia
- Essar Steel Hazira Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Attock Cement Pakistan Limited
- Gujarat Mineral Development Corp Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Meenaskhi Energy Private Limited - India
- Bangladesh Power Developement Board
- Simpson Spence & Young - Indonesia
- Heidelberg Cement - Germany
- Star Paper Mills Limited - India
- Merrill Lynch Commodities Europe
- Larsen & Toubro Limited - India
- Rio Tinto Coal - Australia
- Dalmia Cement Bharat India
- Gujarat Electricity Regulatory Commission - India
- Baramulti Group, Indonesia
- PTC India Limited - India
- Pendopo Energi Batubara - Indonesia
- Mercuria Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Georgia Ports Authority, United States
- Coal and Oil Company - UAE
- Price Waterhouse Coopers - Russia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Chamber of Mines of South Africa
- Romanian Commodities Exchange
- AsiaOL BioFuels Corp., Philippines
- GN Power Mariveles Coal Plant, Philippines
- Wilmar Investment Holdings
- Edison Trading Spa - Italy
- Ministry of Finance - Indonesia
- Indika Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Central Electricity Authority - India
- IHS Mccloskey Coal Group - USA
- European Bulk Services B.V. - Netherlands
- PowerSource Philippines DevCo
- Krishnapatnam Port Company Ltd. - India
- Eastern Coal Council - USA
- Africa Commodities Group - South Africa
- Gujarat Sidhee Cement - India
- Jindal Steel & Power Ltd - India
- Sree Jayajothi Cements Limited - India
- IEA Clean Coal Centre - UK
- Kobexindo Tractors - Indoneisa
- Formosa Plastics Group - Taiwan
- Kartika Selabumi Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Altura Mining Limited, Indonesia
- International Coal Ventures Pvt Ltd - India
- Medco Energi Mining Internasional
- Central Java Power - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- GVK Power & Infra Limited - India
- Deloitte Consulting - India
- London Commodity Brokers - England
- Uttam Galva Steels Limited - India
- Parliament of New Zealand
- Minerals Council of Australia
- Manunggal Multi Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- The Treasury - Australian Government
- Sarangani Energy Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Bhoruka Overseas - Indonesia
- Singapore Mercantile Exchange
- Thai Mozambique Logistica
- Indonesian Coal Mining Association
- South Luzon Thermal Energy Corporation
- Bukit Makmur.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- Power Finance Corporation Ltd., India
- Vedanta Resources Plc - India
- The University of Queensland
- Sakthi Sugars Limited - India
- Tamil Nadu electricity Board
- Oldendorff Carriers - Singapore
- Sojitz Corporation - Japan
- Thiess Contractors Indonesia
- Lanco Infratech Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- Wood Mackenzie - Singapore
- McConnell Dowell - Australia
- Renaissance Capital - South Africa
- Australian Coal Association
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sical Logistics Limited - India
- Bhatia International Limited - India
- Borneo Indobara - Indonesia
- Interocean Group of Companies - India
- Bharathi Cement Corporation - India
- GAC Shipping (India) Pvt Ltd
- Videocon Industries ltd - India
- Indian Oil Corporation Limited
- Malabar Cements Ltd - India
- San Jose City I Power Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- Cement Manufacturers Association - India
- Meralco Power Generation, Philippines
- Ambuja Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Holcim Trading Pte Ltd - Singapore
- Therma Luzon, Inc, Philippines
- Karaikal Port Pvt Ltd - India
|
| |
| |
|
