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, 01 April 15
SUPRAMAX & HANDY: RATES HELD STEADY TOWARDS THE WEEKEND
“Despite the fact that the Dry Bulk market closed off on the green last week, sentiment didn't improve by any means, not only because of ...
Wednesday, 01 April 15
WEEKLY SHIPPING MARKET UPDATE - INTERMODAL
There is no doubt that we are still witnessing a very challenging and at the same time very uncertain market, both with respect to dry chartering a ...
Wednesday, 01 April 15
Q4' 15 INDONESIA COAL SWAP CLOSED AT $45.15 W/E 27 MARCH 2015
COALspot.com: Indonesian coal swap for delivery Q2' 2015 drops month on month and week over week.
The Q2 swap declined US$ 1.54 (3.24%) mo ...
Tuesday, 31 March 15
RICHARDS BAY COAL SWAPS GAIN WEEK OVER WEEK
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 declined month over month but increased week on week.
The Q2 swap has ...
Monday, 30 March 15
WORST IS OVER FOR THE DRY BULK MARKET, BUT THE PAIN WILL REMAIN FOR YEARS TO COME, SAYS BIMCO CHIEF ANALYST - HELLENIC SHIPPING
The current demise of the dry bulk market isn’t one to go away anytime soon. That doesn’t mean that it can’t improve, with all sh ...
|
|
|
Showing 3096 to 3100 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Bukit Baiduri Energy - Indonesia
- Makarim & Taira - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Asmin Koalindo Tuhup - Indonesia
- European Bulk Services B.V. - Netherlands
- Port Waratah Coal Services - Australia
- Jindal Steel & Power Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Madhucon Powers Ltd - India
- SN Aboitiz Power Inc, Philippines
- Indogreen Group - Indonesia
- Thiess Contractors Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Altura Mining Limited, Indonesia
- Orica Australia Pty. Ltd.
- Billiton Holdings Pty Ltd - Australia
- Australian Coal Association
- Sojitz Corporation - Japan
- Sakthi Sugars Limited - India
- Coal and Oil Company - UAE
- SMC Global Power, Philippines
- Mintek Dendrill Indonesia
- The Treasury - Australian Government
- Georgia Ports Authority, United States
- Siam City Cement - Thailand
- Indonesian Coal Mining Association
- LBH Netherlands Bv - Netherlands
- Xindia Steels Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GVK Power & Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Maheswari Brothers Coal Limited - India
- ICICI Bank Limited - India
- VISA Power Limited - India
- SMG Consultants - Indonesia
- IEA Clean Coal Centre - UK
- Lanco Infratech Ltd - India
- Formosa Plastics Group - Taiwan
- Meralco Power Generation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Indika Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Attock Cement Pakistan Limited
- Coalindo Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Electricity Generating Authority of Thailand
- McConnell Dowell - Australia
- The State Trading Corporation of India Ltd
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- Renaissance Capital - South Africa
- PNOC Exploration Corporation - Philippines
- Simpson Spence & Young - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Cement Manufacturers Association - India
- India Bulls Power Limited - India
- South Luzon Thermal Energy Corporation
- MS Steel International - UAE
- Binh Thuan Hamico - Vietnam
- Agrawal Coal Company - India
- Mercuria Energy - Indonesia
- Africa Commodities Group - South Africa
- Straits Asia Resources Limited - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indo Tambangraya Megah - Indonesia
- CIMB Investment Bank - Malaysia
- Savvy Resources Ltd - HongKong
- Gujarat Sidhee Cement - India
- Pendopo Energi Batubara - Indonesia
- Latin American Coal - Colombia
- Interocean Group of Companies - India
- Power Finance Corporation Ltd., India
- Marubeni Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- Krishnapatnam Port Company Ltd. - India
- Sical Logistics Limited - India
- Larsen & Toubro Limited - India
- Videocon Industries ltd - India
- Energy Link Ltd, New Zealand
- Medco Energi Mining Internasional
- Riau Bara Harum - Indonesia
- Salva Resources Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Wilmar Investment Holdings
- Indian Energy Exchange, India
- AsiaOL BioFuels Corp., Philippines
- PTC India Limited - India
- Orica Mining Services - Indonesia
- Commonwealth Bank - Australia
- Wood Mackenzie - Singapore
- Meenaskhi Energy Private Limited - India
- Globalindo Alam Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Romanian Commodities Exchange
- Bayan Resources Tbk. - Indonesia
- Bangladesh Power Developement Board
- Energy Development Corp, Philippines
- Samtan Co., Ltd - South Korea
- Barasentosa Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Mercator Lines Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CNBM International Corporation - China
- Petron Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Minerals Council of Australia
- Metalloyd Limited - United Kingdom
- Mjunction Services Limited - India
- Intertek Mineral Services - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Ministry of Finance - Indonesia
- Ambuja Cements Ltd - India
- Antam Resourcindo - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Eastern Energy - Thailand
- Dalmia Cement Bharat India
- Price Waterhouse Coopers - Russia
- Siam City Cement PLC, Thailand
- Sree Jayajothi Cements Limited - India
- Chettinad Cement Corporation Ltd - India
- Ministry of Transport, Egypt
- Planning Commission, India
- Baramulti Group, Indonesia
- Borneo Indobara - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Essar Steel Hazira Ltd - India
- IHS Mccloskey Coal Group - USA
- Chamber of Mines of South Africa
- Kideco Jaya Agung - Indonesia
- Eastern Coal Council - USA
- Kaltim Prima Coal - Indonesia
- Tata Chemicals Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Banpu Public Company Limited - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Timah Investasi Mineral - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
- Directorate Of Revenue Intelligence - India
- Star Paper Mills Limited - India
- Iligan Light & Power Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Parliament of New Zealand
- Ceylon Electricity Board - Sri Lanka
- Edison Trading Spa - Italy
- TeaM Sual Corporation - Philippines
- Anglo American - United Kingdom
- Jaiprakash Power Ventures ltd
- Independent Power Producers Association of India
- ASAPP Information Group - India
- Kohat Cement Company Ltd. - Pakistan
- Oldendorff Carriers - Singapore
- Posco Energy - South Korea
- Trasteel International SA, Italy
- Heidelberg Cement - Germany
- Singapore Mercantile Exchange
- Jorong Barutama Greston.PT - Indonesia
- London Commodity Brokers - England
- Vizag Seaport Private Limited - India
- Toyota Tsusho Corporation, Japan
- Cigading International Bulk Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Ind-Barath Power Infra Limited - India
- New Zealand Coal & Carbon
- GMR Energy Limited - India
- GAC Shipping (India) Pvt Ltd
- Coastal Gujarat Power Limited - India
- Electricity Authority, New Zealand
- Carbofer General Trading SA - India
- Kumho Petrochemical, South Korea
- Vedanta Resources Plc - India
- Kobexindo Tractors - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Holcim Trading Pte Ltd - Singapore
- White Energy Company Limited
- Central Electricity Authority - India
- International Coal Ventures Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Bhushan Steel Limited - India
- Merrill Lynch Commodities Europe
- Ministry of Mines - Canada
- The University of Queensland
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Deloitte Consulting - India
- Goldman Sachs - Singapore
- Uttam Galva Steels Limited - India
- Tamil Nadu electricity Board
- TNB Fuel Sdn Bhd - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- Central Java Power - Indonesia
- Economic Council, Georgia
- Manunggal Multi Energi - Indonesia
- Thai Mozambique Logistica
- Aboitiz Power Corporation - Philippines
- Semirara Mining Corp, Philippines
- Bhoruka Overseas - Indonesia
- Global Business Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Bukit Makmur.PT - Indonesia
- Bharathi Cement Corporation - India
- Maharashtra Electricity Regulatory Commission - India
- Bhatia International Limited - India
- Standard Chartered Bank - UAE
- Aditya Birla Group - India
- PowerSource Philippines DevCo
- Kepco SPC Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Parry Sugars Refinery, India
- San Jose City I Power Corp, Philippines
- Grasim Industreis Ltd - India
|
| |
| |
|
