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, 26 May 15
FOB INDONESIA COAL SWAP; UP WEEK OVER WEEK
COALspot.com: Indonesian coal swap for delivery Q3 2015 gains week over week and lost month on month, this past week.
The Q3 swap was declined ...
Monday, 25 May 15
FOB NEWCASTLE COAL SWAP Q1'16 CLOSED LOWER THAN Q3'15 CLOSING
COALspot.com: API 5 FOB Newcastle Coal swap for Q3’ 2015 delivery gained US$ 0.92 per MT (2.07%) month over month and US$ 0.70 week on week. ...
Monday, 25 May 15
CFR SOUTH CHINA COAL SWAP : Q3, Q4'15 & Q1'16 INCREASED M-O-M AND W-O-W
COALspot.com: API 8 CFR South China Coal swap for Q3’ 2015 delivery up US$ 1.55 (3.09%) per MT month over month and US$ 0.72 (1.41%) pe ...
Sunday, 24 May 15
INDONESIA TO INDIA PANAMAX CHARTER RATES WERE RATING AT AROUND US$ 5500
COALspot.com: The freight market softened in all segments this past week.
The BDI was dropped 7.57 percent week over week and closed at 586 po ...
Friday, 22 May 15
FOB INDONESIA COAL Q3'15 SWAP FINISHED THE WEEK UP 38 CENTS TO $43.65 PER MT
COALspot.com: Indonesian coal swap for delivery Q3 2015 gains week over week and lost month on month, past week.
The Q3 swap was declined US$ ...
|
|
|
Showing 3006 to 3010 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Straits Asia Resources Limited - Singapore
- Romanian Commodities Exchange
- Malabar Cements Ltd - India
- PTC India Limited - India
- Sical Logistics Limited - India
- Therma Luzon, Inc, Philippines
- San Jose City I Power Corp, Philippines
- Bulk Trading Sa - Switzerland
- McConnell Dowell - Australia
- Samtan Co., Ltd - South Korea
- Kalimantan Lumbung Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Savvy Resources Ltd - HongKong
- Bukit Baiduri Energy - Indonesia
- Mercator Lines Limited - India
- Commonwealth Bank - Australia
- Antam Resourcindo - Indonesia
- Tamil Nadu electricity Board
- Bhoruka Overseas - Indonesia
- White Energy Company Limited
- Grasim Industreis Ltd - India
- Attock Cement Pakistan Limited
- Simpson Spence & Young - Indonesia
- OPG Power Generation Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Marubeni Corporation - India
- Global Coal Blending Company Limited - Australia
- Medco Energi Mining Internasional
- Economic Council, Georgia
- London Commodity Brokers - England
- Singapore Mercantile Exchange
- International Coal Ventures Pvt Ltd - India
- Energy Development Corp, Philippines
- Barasentosa Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Ministry of Transport, Egypt
- Minerals Council of Australia
- GMR Energy Limited - India
- CNBM International Corporation - China
- Kobexindo Tractors - Indoneisa
- Meralco Power Generation, Philippines
- Iligan Light & Power Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Vedanta Resources Plc - India
- Indo Tambangraya Megah - Indonesia
- Global Business Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- GVK Power & Infra Limited - India
- Ind-Barath Power Infra Limited - India
- Krishnapatnam Port Company Ltd. - India
- Gujarat Sidhee Cement - India
- Kartika Selabumi Mining - Indonesia
- Central Java Power - Indonesia
- Standard Chartered Bank - UAE
- Renaissance Capital - South Africa
- ICICI Bank Limited - India
- Salva Resources Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sojitz Corporation - Japan
- Planning Commission, India
- Pendopo Energi Batubara - Indonesia
- GAC Shipping (India) Pvt Ltd
- Edison Trading Spa - Italy
- South Luzon Thermal Energy Corporation
- Rashtriya Ispat Nigam Limited - India
- Timah Investasi Mineral - Indoneisa
- Power Finance Corporation Ltd., India
- Port Waratah Coal Services - Australia
- Bukit Makmur.PT - Indonesia
- Ministry of Finance - Indonesia
- Electricity Authority, New Zealand
- Latin American Coal - Colombia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Maharashtra Electricity Regulatory Commission - India
- MS Steel International - UAE
- Thiess Contractors Indonesia
- SMC Global Power, Philippines
- ASAPP Information Group - India
- Holcim Trading Pte Ltd - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- Australian Coal Association
- Sinarmas Energy and Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Bhatia International Limited - India
- Intertek Mineral Services - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Georgia Ports Authority, United States
- Mjunction Services Limited - India
- Bhushan Steel Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- PNOC Exploration Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Larsen & Toubro Limited - India
- Coastal Gujarat Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Trasteel International SA, Italy
- European Bulk Services B.V. - Netherlands
- Orica Australia Pty. Ltd.
- Wilmar Investment Holdings
- IHS Mccloskey Coal Group - USA
- Indogreen Group - Indonesia
- Eastern Energy - Thailand
- Binh Thuan Hamico - Vietnam
- Thai Mozambique Logistica
- Mintek Dendrill Indonesia
- Tata Chemicals Ltd - India
- Central Electricity Authority - India
- Chamber of Mines of South Africa
- Aditya Birla Group - India
- The State Trading Corporation of India Ltd
- Sindya Power Generating Company Private Ltd
- Kepco SPC Power Corporation, Philippines
- Agrawal Coal Company - India
- CIMB Investment Bank - Malaysia
- Posco Energy - South Korea
- Jaiprakash Power Ventures ltd
- Essar Steel Hazira Ltd - India
- LBH Netherlands Bv - Netherlands
- Formosa Plastics Group - Taiwan
- Anglo American - United Kingdom
- Makarim & Taira - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Star Paper Mills Limited - India
- Semirara Mining and Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Parry Sugars Refinery, India
- Meenaskhi Energy Private Limited - India
- The University of Queensland
- Indika Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- New Zealand Coal & Carbon
- Energy Link Ltd, New Zealand
- Merrill Lynch Commodities Europe
- Africa Commodities Group - South Africa
- Independent Power Producers Association of India
- IEA Clean Coal Centre - UK
- Deloitte Consulting - India
- Parliament of New Zealand
- Siam City Cement - Thailand
- Bharathi Cement Corporation - India
- Bangladesh Power Developement Board
- Directorate Of Revenue Intelligence - India
- Rio Tinto Coal - Australia
- Interocean Group of Companies - India
- Cement Manufacturers Association - India
- Sarangani Energy Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Videocon Industries ltd - India
- Indian Energy Exchange, India
- Bayan Resources Tbk. - Indonesia
- Borneo Indobara - Indonesia
- Toyota Tsusho Corporation, Japan
- Karaikal Port Pvt Ltd - India
- Heidelberg Cement - Germany
- Sakthi Sugars Limited - India
- Billiton Holdings Pty Ltd - Australia
- Eastern Coal Council - USA
- Gujarat Electricity Regulatory Commission - India
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- Baramulti Group, Indonesia
- SMG Consultants - Indonesia
- VISA Power Limited - India
- Altura Mining Limited, Indonesia
- Coalindo Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Madhucon Powers Ltd - India
- Xindia Steels Limited - India
- Oldendorff Carriers - Singapore
- PetroVietnam Power Coal Import and Supply Company
- Chettinad Cement Corporation Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kaltim Prima Coal - Indonesia
- Dalmia Cement Bharat India
- The Treasury - Australian Government
- Global Green Power PLC Corporation, Philippines
- Indonesian Coal Mining Association
- Orica Mining Services - Indonesia
- India Bulls Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- Uttam Galva Steels Limited - India
- Wood Mackenzie - Singapore
- Ambuja Cements Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Globalindo Alam Lestari - Indonesia
- Jindal Steel & Power Ltd - India
- Indian Oil Corporation Limited
- Australian Commodity Traders Exchange
- Metalloyd Limited - United Kingdom
- Ceylon Electricity Board - Sri Lanka
- Bahari Cakrawala Sebuku - Indonesia
- Electricity Generating Authority of Thailand
- Ministry of Mines - Canada
- Alfred C Toepfer International GmbH - Germany
- GN Power Mariveles Coal Plant, Philippines
- Kumho Petrochemical, South Korea
- Petron Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Semirara Mining Corp, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Riau Bara Harum - Indonesia
- Goldman Sachs - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Lanco Infratech Ltd - India
- Coal and Oil Company - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Asmin Koalindo Tuhup - Indonesia
- Siam City Cement PLC, Thailand
- Mercuria Energy - Indonesia
- Carbofer General Trading SA - India
- PowerSource Philippines DevCo
|
| |
| |
|
