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, 12 May 15
FOB INDONESIA COAL SWAP; DECLINED M-O-M AND W-O-W
COALspot.com: Indonesian coal swap for delivery Q3 2015 lost week over week and month on month, this past week.
The Q3 swap was declined US$ 0 ...
Tuesday, 12 May 15
FOB RICHARDS BAY COAL SWAPS: LOST W-O-W; GAIN M-O-M
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q3' 2015 increased month over month and decreased week over week.
The Q3 swap h ...
Monday, 11 May 15
DRY BULK CARRIER ORDERS CRASH TO A TWENTY YEAR LOW - CLARKSONS
In the last four months dry bulk orders have fallen to 0.4m dwt per month, the lowest level since the 1990s. This is a massive 98% reduction from t ...
Monday, 11 May 15
HBA PRICE DIPS FURTHER; LOWEST RECORDED SINCE JANUARY 2009
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia revised down Indonesian coal benchmark prices to US$ 61.08 per MT in May ...
Monday, 11 May 15
API 5 FOB NEWCASTLE COAL SWAP; INCREASED M-O-M; DECLINED W-O-W
COALspot.com: API 5 FOB Newcastle Coal swap for Q3’ 2015 delivery gained US$ 0.62 per MT (1.41%) month over month and lost US$ 0.88 week on w ...
|
|
|
Showing 3026 to 3030 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Kaltim Prima Coal - Indonesia
- Bukit Makmur.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Indian Energy Exchange, India
- Uttam Galva Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Posco Energy - South Korea
- Mercator Lines Limited - India
- CIMB Investment Bank - Malaysia
- Standard Chartered Bank - UAE
- Aditya Birla Group - India
- Port Waratah Coal Services - Australia
- Australian Coal Association
- New Zealand Coal & Carbon
- Ceylon Electricity Board - Sri Lanka
- IEA Clean Coal Centre - UK
- IHS Mccloskey Coal Group - USA
- Oldendorff Carriers - Singapore
- Meralco Power Generation, Philippines
- Thiess Contractors Indonesia
- ICICI Bank Limited - India
- Global Business Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Ministry of Mines - Canada
- Billiton Holdings Pty Ltd - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Kumho Petrochemical, South Korea
- Siam City Cement PLC, Thailand
- Gujarat Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Ambuja Cements Ltd - India
- Mercuria Energy - Indonesia
- Parry Sugars Refinery, India
- Wilmar Investment Holdings
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Agrawal Coal Company - India
- San Jose City I Power Corp, Philippines
- Larsen & Toubro Limited - India
- Trasteel International SA, Italy
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The University of Queensland
- The State Trading Corporation of India Ltd
- Power Finance Corporation Ltd., India
- CNBM International Corporation - China
- Ministry of Transport, Egypt
- Neyveli Lignite Corporation Ltd, - India
- GAC Shipping (India) Pvt Ltd
- Metalloyd Limited - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- VISA Power Limited - India
- Kobexindo Tractors - Indoneisa
- Mjunction Services Limited - India
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Generating Authority of Thailand
- Alfred C Toepfer International GmbH - Germany
- Indonesian Coal Mining Association
- Straits Asia Resources Limited - Singapore
- PowerSource Philippines DevCo
- Bayan Resources Tbk. - Indonesia
- Banpu Public Company Limited - Thailand
- Global Green Power PLC Corporation, Philippines
- Vedanta Resources Plc - India
- Gujarat Mineral Development Corp Ltd - India
- Savvy Resources Ltd - HongKong
- Formosa Plastics Group - Taiwan
- TeaM Sual Corporation - Philippines
- Medco Energi Mining Internasional
- PTC India Limited - India
- Attock Cement Pakistan Limited
- Interocean Group of Companies - India
- Madhucon Powers Ltd - India
- Antam Resourcindo - Indonesia
- SMC Global Power, Philippines
- Orica Australia Pty. Ltd.
- India Bulls Power Limited - India
- Georgia Ports Authority, United States
- Cement Manufacturers Association - India
- AsiaOL BioFuels Corp., Philippines
- Altura Mining Limited, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Carbofer General Trading SA - India
- Videocon Industries ltd - India
- Cigading International Bulk Terminal - Indonesia
- Meenaskhi Energy Private Limited - India
- Miang Besar Coal Terminal - Indonesia
- Malabar Cements Ltd - India
- Independent Power Producers Association of India
- Indian Oil Corporation Limited
- Global Coal Blending Company Limited - Australia
- Sree Jayajothi Cements Limited - India
- Kideco Jaya Agung - Indonesia
- Toyota Tsusho Corporation, Japan
- GVK Power & Infra Limited - India
- Coalindo Energy - Indonesia
- Indogreen Group - Indonesia
- Iligan Light & Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Star Paper Mills Limited - India
- Sakthi Sugars Limited - India
- Central Java Power - Indonesia
- Coal and Oil Company - UAE
- Globalindo Alam Lestari - Indonesia
- Deloitte Consulting - India
- Dalmia Cement Bharat India
- Intertek Mineral Services - Indonesia
- Chamber of Mines of South Africa
- Sical Logistics Limited - India
- Ministry of Finance - Indonesia
- Riau Bara Harum - Indonesia
- European Bulk Services B.V. - Netherlands
- Eastern Energy - Thailand
- OPG Power Generation Pvt Ltd - India
- Bhushan Steel Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- Tamil Nadu electricity Board
- Parliament of New Zealand
- Manunggal Multi Energi - Indonesia
- International Coal Ventures Pvt Ltd - India
- Commonwealth Bank - Australia
- Xindia Steels Limited - India
- Sojitz Corporation - Japan
- Coastal Gujarat Power Limited - India
- Tata Chemicals Ltd - India
- Grasim Industreis Ltd - India
- Singapore Mercantile Exchange
- Sinarmas Energy and Mining - Indonesia
- Bangladesh Power Developement Board
- Energy Link Ltd, New Zealand
- Kapuas Tunggal Persada - Indonesia
- Essar Steel Hazira Ltd - India
- Latin American Coal - Colombia
- Bahari Cakrawala Sebuku - Indonesia
- Rio Tinto Coal - Australia
- Barasentosa Lestari - Indonesia
- Petron Corporation, Philippines
- Mintek Dendrill Indonesia
- Semirara Mining and Power Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- McConnell Dowell - Australia
- PetroVietnam Power Coal Import and Supply Company
- Renaissance Capital - South Africa
- Leighton Contractors Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- Salva Resources Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Wood Mackenzie - Singapore
- Simpson Spence & Young - Indonesia
- Chettinad Cement Corporation Ltd - India
- Indika Energy - Indonesia
- Bhatia International Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Bulk Trading Sa - Switzerland
- Lanco Infratech Ltd - India
- Bukit Baiduri Energy - Indonesia
- Gujarat Sidhee Cement - India
- Borneo Indobara - Indonesia
- Kepco SPC Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Edison Trading Spa - Italy
- Economic Council, Georgia
- Orica Mining Services - Indonesia
- MS Steel International - UAE
- London Commodity Brokers - England
- Central Electricity Authority - India
- GMR Energy Limited - India
- PNOC Exploration Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The Treasury - Australian Government
- Romanian Commodities Exchange
- Merrill Lynch Commodities Europe
- GN Power Mariveles Coal Plant, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Makarim & Taira - Indonesia
- Planning Commission, India
- White Energy Company Limited
- Directorate Of Revenue Intelligence - India
- Samtan Co., Ltd - South Korea
- Semirara Mining Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Jaiprakash Power Ventures ltd
- Therma Luzon, Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Maheswari Brothers Coal Limited - India
- Krishnapatnam Port Company Ltd. - India
- Heidelberg Cement - Germany
- Bharathi Cement Corporation - India
- Energy Development Corp, Philippines
- Thai Mozambique Logistica
- Timah Investasi Mineral - Indoneisa
- Marubeni Corporation - India
- Price Waterhouse Coopers - Russia
- Pipit Mutiara Jaya. PT, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Vizag Seaport Private Limited - India
- Ind-Barath Power Infra Limited - India
- Australian Commodity Traders Exchange
- ASAPP Information Group - India
- SMG Consultants - Indonesia
- Bhoruka Overseas - Indonesia
- Aboitiz Power Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Eastern Coal Council - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- Minerals Council of Australia
- Karaikal Port Pvt Ltd - India
- Anglo American - United Kingdom
|
| |
| |
|
