India searches for more coal

AS THE coal asset mismanagement scandal known as Coalgate continues to swirl around top governmental officials on the Indian subcontinent, state-run miner Coal India is increasing its overseas efforts to relieve a crippling domestic supply deficit.
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Justin Niessner

In a push to alleviate coal shortfalls plaguing Indian utilities, Coal India has hired consultants to strengthen its presence in the US, Australia, South Africa and Mozambique.

Government pressure to increase imports and domestic coal production was made all the more urgent by a huge blackout that left 600 million people in the dark earlier this month.

India produced 540 million tonnes of coal in the 12 months ending in March, while the country’s demand remained at almost 700Mt. This year, domestic demand is expected to exceed that amount.

Last week, New Jersey-based collaborative FJS Energy signed a 25-year, $US7 billion contract with India’s Abhijeet Group to buy thermal coal from Appalachia.

To ensure timely export of coal from its proposed Carmichael complex in Australia’s coal-rich state of Queensland, Indian giant Adani clinched an agreement with Australian shipper QR National last month to link with the rail company’s port-bound corridor.

In the emerging coal export centers of Africa, Coal India has reportedly been pursuing acquisition of coalfields through subsidiaries, joint ventures and government-to-government deals.

Coal India chairman S Narsing Rao told Indian business newspaper Mint that selecting South African consultants to set up a subsidiaries might be the best strategy to establishing an Indian presence in the country by the end of the year.

“My focus on overseas acquisitions is on government-to-government deals and the developing and emerging market routes,” he said.

“Acquisitions of assets of big companies could be highly overvalued, though at the same time I don’t want to say no to them.”

However, in reference to failed deals in the US with Massey Energy and Peabody Energy, Mint noted that Coal India’s past experience with overseas acquisitions had been “dismal” and that sector experts expected the company’s focus to remain on the existing mines back home.

“In spite of whatever time Coal India may have spent (overseas), I would still call it early stage,” Edelweiss Securities analyst Prasad Baji was quoted as saying.

“The company has to look for acquiring new mines to use its huge cash pile as well as get some return on it,” he said.

“There are no opportunities to acquire anything in India, so effectively it has to scout overseas.”

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