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.
|
|
Monday, 09 November 15
INDIAN THERMAL COAL IMPORTS SURGED 18%; COKING COAL 6.31% DURING APRIL-OCTOBER: BUSINESS-STANDARD
Indian thermal coal imports surged 18% at the country's top 12 major ports to 55.90 million tonnes (MT) in the first seven months of the curren ...
Sunday, 08 November 15
THE FREIGHT MARKET KEEP DROPPING THIS WEEK - VISTAAR
COALspot.com: The freight market keep dropping this week.
The BDI down 12.48 percent week on week and closed at 631 points on 6 November 2015. ...
Sunday, 08 November 15
CAPESIZE FREIGHT RATES IN AUSTRALIA-CHINA ROUTES OVER 50% CHEAPER THAN BRAZIL-CHINA ROUTE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
China’s mining and steel industries are facing tectonic shifts over the past couple of years, with the country’s limiting of coal use, ...
Friday, 06 November 15
COAL PRODUCTION IN THE U.S. FELL SHARPLY FOR THE WEEK ENDING OCTOBER 31
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 16.6 million shor ...
Thursday, 05 November 15
Q2'16 INDO THERMAL COAL SWAP CONTRACT FOB INDONESIA FALLS TO $39.90/T
COALspot.com: Indonesian coal swap for delivery Q4 2015 declined month on month and week over week. Price of coal seen no improvements this past we ...
|
|
|
Showing 2726 to 2730 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- TeaM Sual Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kapuas Tunggal Persada - Indonesia
- Power Finance Corporation Ltd., India
- Sakthi Sugars Limited - India
- Kideco Jaya Agung - Indonesia
- GAC Shipping (India) Pvt Ltd
- Medco Energi Mining Internasional
- Malabar Cements Ltd - India
- Coastal Gujarat Power Limited - India
- Dalmia Cement Bharat India
- Bhoruka Overseas - Indonesia
- Wilmar Investment Holdings
- Africa Commodities Group - South Africa
- Madhucon Powers Ltd - India
- Minerals Council of Australia
- Ambuja Cements Ltd - India
- Energy Link Ltd, New Zealand
- The State Trading Corporation of India Ltd
- Anglo American - United Kingdom
- Bhatia International Limited - India
- Chamber of Mines of South Africa
- Coalindo Energy - Indonesia
- Straits Asia Resources Limited - Singapore
- Latin American Coal - Colombia
- Indian Energy Exchange, India
- Formosa Plastics Group - Taiwan
- Indika Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Mintek Dendrill Indonesia
- Bukit Makmur.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- Kaltim Prima Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- Semirara Mining Corp, Philippines
- Siam City Cement - Thailand
- Energy Development Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement PLC, Thailand
- AsiaOL BioFuels Corp., Philippines
- Goldman Sachs - Singapore
- SMC Global Power, Philippines
- Independent Power Producers Association of India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Iligan Light & Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining and Power Corporation, Philippines
- PowerSource Philippines DevCo
- Petrochimia International Co. Ltd.- Taiwan
- Maheswari Brothers Coal Limited - India
- Mjunction Services Limited - India
- Therma Luzon, Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Interocean Group of Companies - India
- Ministry of Finance - Indonesia
- Salva Resources Pvt Ltd - India
- Georgia Ports Authority, United States
- Meralco Power Generation, Philippines
- Merrill Lynch Commodities Europe
- European Bulk Services B.V. - Netherlands
- MS Steel International - UAE
- Neyveli Lignite Corporation Ltd, - India
- Standard Chartered Bank - UAE
- Ceylon Electricity Board - Sri Lanka
- Global Business Power Corporation, Philippines
- Wood Mackenzie - Singapore
- International Coal Ventures Pvt Ltd - India
- Heidelberg Cement - Germany
- Planning Commission, India
- Central Java Power - Indonesia
- Eastern Energy - Thailand
- IEA Clean Coal Centre - UK
- Sarangani Energy Corporation, Philippines
- Parry Sugars Refinery, India
- Jindal Steel & Power Ltd - India
- Indian Oil Corporation Limited
- Thiess Contractors Indonesia
- Port Waratah Coal Services - Australia
- Holcim Trading Pte Ltd - Singapore
- Timah Investasi Mineral - Indoneisa
- Attock Cement Pakistan Limited
- Bulk Trading Sa - Switzerland
- Essar Steel Hazira Ltd - India
- Mercuria Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Kumho Petrochemical, South Korea
- Petron Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Star Paper Mills Limited - India
- Riau Bara Harum - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Uttam Galva Steels Limited - India
- Borneo Indobara - Indonesia
- GMR Energy Limited - India
- Sinarmas Energy and Mining - Indonesia
- Singapore Mercantile Exchange
- Directorate Of Revenue Intelligence - India
- Kepco SPC Power Corporation, Philippines
- The University of Queensland
- Coal and Oil Company - UAE
- Gujarat Mineral Development Corp Ltd - India
- Samtan Co., Ltd - South Korea
- Ind-Barath Power Infra Limited - India
- Globalindo Alam Lestari - Indonesia
- South Luzon Thermal Energy Corporation
- Bharathi Cement Corporation - India
- The Treasury - Australian Government
- Antam Resourcindo - Indonesia
- Agrawal Coal Company - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ICICI Bank Limited - India
- Toyota Tsusho Corporation, Japan
- Bayan Resources Tbk. - Indonesia
- Simpson Spence & Young - Indonesia
- Economic Council, Georgia
- SN Aboitiz Power Inc, Philippines
- Vizag Seaport Private Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Deloitte Consulting - India
- Mercator Lines Limited - India
- Indogreen Group - Indonesia
- Electricity Generating Authority of Thailand
- Indo Tambangraya Megah - Indonesia
- Baramulti Group, Indonesia
- IHS Mccloskey Coal Group - USA
- LBH Netherlands Bv - Netherlands
- Central Electricity Authority - India
- Billiton Holdings Pty Ltd - Australia
- OPG Power Generation Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Posco Energy - South Korea
- CIMB Investment Bank - Malaysia
- Jorong Barutama Greston.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Price Waterhouse Coopers - Russia
- Intertek Mineral Services - Indonesia
- Sical Logistics Limited - India
- White Energy Company Limited
- Vedanta Resources Plc - India
- McConnell Dowell - Australia
- India Bulls Power Limited - India
- New Zealand Coal & Carbon
- Banpu Public Company Limited - Thailand
- SMG Consultants - Indonesia
- ASAPP Information Group - India
- Global Green Power PLC Corporation, Philippines
- Sojitz Corporation - Japan
- Gujarat Electricity Regulatory Commission - India
- Parliament of New Zealand
- Indonesian Coal Mining Association
- Altura Mining Limited, Indonesia
- Sindya Power Generating Company Private Ltd
- Barasentosa Lestari - Indonesia
- Renaissance Capital - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Xindia Steels Limited - India
- Karaikal Port Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Lanco Infratech Ltd - India
- Marubeni Corporation - India
- Jaiprakash Power Ventures ltd
- TNB Fuel Sdn Bhd - Malaysia
- Orica Mining Services - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Rashtriya Ispat Nigam Limited - India
- Makarim & Taira - Indonesia
- London Commodity Brokers - England
- Gujarat Sidhee Cement - India
- Orica Australia Pty. Ltd.
- Videocon Industries ltd - India
- Ministry of Transport, Egypt
- Australian Commodity Traders Exchange
- Kohat Cement Company Ltd. - Pakistan
- Bahari Cakrawala Sebuku - Indonesia
- Grasim Industreis Ltd - India
- Edison Trading Spa - Italy
- Commonwealth Bank - Australia
- Binh Thuan Hamico - Vietnam
- Rio Tinto Coal - Australia
- Cigading International Bulk Terminal - Indonesia
- Pendopo Energi Batubara - Indonesia
- Tata Chemicals Ltd - India
- Australian Coal Association
- Metalloyd Limited - United Kingdom
- Global Coal Blending Company Limited - Australia
- Chettinad Cement Corporation Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Eastern Coal Council - USA
- Leighton Contractors Pty Ltd - Australia
- CNBM International Corporation - China
- PTC India Limited - India
- Tamil Nadu electricity Board
- Bukit Baiduri Energy - Indonesia
- Electricity Authority, New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Romanian Commodities Exchange
- Ministry of Mines - Canada
- Larsen & Toubro Limited - India
- Sree Jayajothi Cements Limited - India
- GVK Power & Infra Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Thai Mozambique Logistica
- Aditya Birla Group - India
- VISA Power Limited - India
- Bangladesh Power Developement Board
- Asmin Koalindo Tuhup - Indonesia
- Trasteel International SA, Italy
- Savvy Resources Ltd - HongKong
- Oldendorff Carriers - Singapore
- Cement Manufacturers Association - India
- PNOC Exploration Corporation - Philippines
- Bhushan Steel Limited - India
- Carbofer General Trading SA - India
|
| |
| |
|
