Friday, February 12, 2010

WSJ: World's Largest Coal Producer, Coal India, has $6 Billion in the Bank, and is on the Prowl for Assets

It looks like China is not the only one scanning the globe for natural resources to secure... Coal India has a $6B war chest it is looking to deploy.  Considering the size of some of the larger US coal companies (Massey Energy - $3.5B, Walter Energy - $4.0B), perhaps they are too big but there are perennial candidates like James River Coal (JRCC) [$0.5B] and Patriot Coal (PCX) [$1.4B] who finally could be in play??  We had high hopes - as did Wilbur Ross - a few years ago that this would happen; but that small thing called a global credit crisis hampered this from developing.. [Jul 18, 2008: Wilbur Ross Believes M&A Activity in Coal Will be Unprecedented in Next 12 Months]  If not total outright purchase, Coal India could still do join ventures of some sort with the bigger US names.  I assume resource rich Australia will also be a target due to distance.

  • Coal India Ltd., the world's largest coal producer, may invest about $2 billion over the next four years to buy stakes in overseas coal assets, as it wants to boost local availability of the fuel to meet rapidly rising demand, its chairman said Thursday.
  • Coal India, which floated a tender in July seeking joint business initiatives in coal mining in Australia, the U.S., South Africa and Indonesia, has received about 17 proposals to buy stakes in coal producing areas or to form joint ventures for greenfield projects, Partha S. Bhattacharyya told Dow Jones Newswires in an interview.   "We want to enhance the availability of coal in this country by getting coal from overseas, but on terms that are distinctly better than term imports," Mr. Bhattacharyya said.
  • Coal India, which contributes more than 80% of India's total coal production, is doing due diligence on ten proposals from companies including Peabody Energy Corp.(BTU) and Massey Energy Co., (MEE) Mr. Bhattacharyya said.
  • Coal India will generate the funds for purchases of stakes in assets abroad from its internal accruals. "We have $6 billion in banks and that is something we don't like," Mr. Bhattacharyya said.
  • Mr. Bhattacharyya said India stands a better chance than China in securing overseas assets as it is a republic and offers a more transparent system than its neighbor.
An astounding statistic below; especially for those who think solar or wind is going to make coal go splat in the next few years.  As I opined in 2007, coal - traditionally a domestic commodity like natural gas - is slowly making a turn into a global one.   [Sep 18, 2007: Another Look at Coal]
  • India, which imported 59 million tons of coal in the fiscal year ended March 2009, could import as much as 150 million tons by 2016-17 as increases in local supplies are lagging demand growth.
  • Coal demand is being fueled by rapid development in power generation capacity. The South Asian country aims to increase annual additions to capacity fourfold over the next few years to 13,000 megawatts each year from around 3,500 MW a year recently, to provide electricity to millions of rural households and eliminate frequent blackouts.

Interesting blurb at the end of the story - sounds very familiar to issues in the US when trying to secure a refiner, nuclear reactor, heck - just about anything nowadays.
  • Coal India, which had planned to produce 435 million tons of coal in the current financial year, will miss its target of starting production at some of projects due to a lack of necessary government approvals.
  • The company previously identified 134 coal projects adding 308.94 million tons of capacity each year during the five-year plan period that ends March 2012. Seventeen of these projects, with a total production of 101 million tons, are stuck in the approval process due to issues related to forest clearances.
  • Although the government is expected to give forest clearance for mining in 300 days, it usually takes five to six years. The clearances need the signatures of more than 30 people.
Ah the sweet nectar of government bureaucracy. 

[Jan 14, 2008: New Coal ETF (KOL) Introduced from Van Eck Global]

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012