Indian company investments in overseas coal mines

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Indian company investments in overseas coal mines include investments in Australia, Mozambique, and Indonesia.

Investments in Australian coal mines and export infrastructure

  • In August 2010 Adani Mining, a subsidiary of Adani Group, bought Linc Energy's Galilee coal tenement for $A500 million in cash plus a $2 per tonne royalty (indexed to the Consumer Price Index) for the first twenty years of coal production. According to Linc the Galilee tenement represents an indicated resource of 500 million tonnes plus a further 7.3 billion tonnes in inferred resources. The company claims that the "tenement is capable of producing up to 60 million tonnes of coal per year once fully operational."[1] In May 2011 another Adani Group subsidiary, Mundra Port Pty Ltd, paid $1.829 billion for the 99-year lease of the Abbot Point Coal Terminal in North Queensland, winning the tender bid for the lease over the X50 terminal - which has the capacity for 50 million tons of coal a year.[2] As of January 2015, the Adani Mining website states that "The Galilee Basin is potentially the last undeveloped coal resource within Queensland and has the potential to become the largest coal producing region in the State. Adani is proposing to develop the North Galilee Basin Rail Project (NGBR Project) to transport coal from the Galilee Basin to the Port of Abbot Point via a multi-user, greenfield, standard gauge rail line."[3] The 310km NGBR railway won approval from the Australian government in October 2014; however, environmentalists have expressed strong opposition to Galilee Basin coal mining and development of a major coal port so close to the Great Barrier Reef and have launched petitions and legal proceedings to block Adani's plans.[4][5] In October 2014, Adani reiterated its commitment to the Abbot Point terminal project, despite the decision of major banks including Goldman Sachs, Citigroup and JPMorgan Chase not to finance the project due to environmental concerns.[6] In November 2014, responding to falling coal prices and diminishing interest among other potential developers, Queensland's state government offered to contribute an unspecified amount ("hundreds of millions, but not billions" of dollars) in incentives towards construction of the proposed $2.2 billion rail line between Galilee and Abbot Point.[7] In November 2014, Adani signed a memorandum of understanding with the State Bank of India for a loan of up to $1 billion to help finance the project.[8] In January 2015, Australia Mining reported that Adani had awarded a $2 billion contract to the Australian engineering company Downer EDI for development of Adani's Galilee Basin mines, with mine construction slated to start in 2015 and coal production expected to begin in 2017.[9] However, the newly elected Labor Party in 2015 stated that taxpayer funds should not go toward the project, and that “The stewardship of the Great Barrier Reef necessitates that we have a comprehensive climate change policy.”[10]
  • In March 2011 Lanco Infratech Ltd bought the Griffin Coal Mining Co. Pty Ltd’s coal mines in Western Australia for A$750 million. The report stated that "Lanco plans to boost almost four-fold to over 15 million tonnes per annum, in addition to adding rail linkages, and expanding facilities at Bunbury port." The coal, aside from that produced domestically, would be exported to feed Lanco's proposed major increase in coal-fired power plants it owns and operates in India.[11] In July 2013, Western Australia's Environmental Protection Authority gave provisional approval to Lanco's plans for an export facility at Bunbury port capable of handling 15 million tons of coal annually[12], and Environment Minister Albert Jacob granted final approval for the $500 million project in June 2014. Responding to approval of the port facility, Lanco Australia's project development manager David Trench confirmed Lanco's intention to quadruple production at its Western Australia mines and transport coal from the mines to the port via an existing 74km railway line, to be upgraded by Lanco.[13] However, as of October 2014, financial problems at Lanco - whose debts were estimated at US$5.9 billion - had prompted the company to seek outside investors to purchase a stake in its Australian mining and port ventures.[14][15] Lanco's insolvency, coupled with a November 2014 statement from India's Energy Minister Piyush Goyal that India would seek to stop coal imports "possibly within the next two or three years," have cast doubt over long-term prospects for Lanco's Australian mining ventures.[16]
  • In September 2011 GVK Power and Infrastructure announced it had purchased coal projects in Australia from Hancock Coal for US$1.26 billion. The purchase consisted of 79% interest in the Alpha ("Tad's Corner") and Alpha West ("Paul's Corner") coal mines; a 100% shareholding interest in the adjacent Kevin's Corner coal mine; and a 100% shareholding interest in the rail and port project connecting the coal mines to the port of Abbot Point.[17] GVK plans to export coal from the mines via a 500km railway (to be constructed by GVK itself) and a new port facility at Abbot Point capable of handling 80 million tons of coal per year (to be constructed in conjunction with Samsung C&T of Korea and Smithbridge of Australia).[18] Queensland's state government granted approval for the the Alpha mine and rail project in 2012, and approved the Kevin's Corner mine in May 2013. Australia's federal government added its own stamp of approval for both projects in August 2012 and November 2013, respectively.[19][20] However, despite governmental support, both projects' viability has been called into question by declining coal prices and opposition from Australian environmentalists, and in December 2014 Societe Generale, one of GVK's lenders, withdrew its support for the Alpha coal project.[21][22]

Investments in Mozambique coal mines and export infrastructure

  • In August 2009, Coal India Africana Limitada (CIAL), a wholly owned subsidiary of Coal India Limited, obtained a 5-year license for exploration and development of mines in two coal blocks - A1 and A2 - spread over 200 sq km near Motaize in Mozambique's northwestern Tete Province. Preliminary exploration began in 2011, after India's Coal Minister Sriprakash Jaiswal visited Mozambique to secure commitments for a rail link and other infrastructure necessary to export coal from the blocks to India.[23] In August 2013 the Indian government announced that geological mapping and survey work on both blocks had been completed, along with the first stage of drilling.[24] Additional drilling, geophysical logging and analysis of coal samples were undertaken in 2014, and Coal India's 2014 annual report stated that a geological report was being prepared based on exploration to date.[25] In December 2014, a senior Coal India official stated that the company expected to begin mining in 2015.[26] However, in February 2015 it was reported that CIAL had abandoned the coal mining project, citing poor quality of coal on the site. A senior official with CIL group said samples sent to India for laboratory analysis revealed that the coal was of very poor quality, and contained insufficient carbon to be called coal. CIL had already spent US$80 million in coal exploration at the A1 and A2 blocks in Tete Province.[27]
  • As of 2012 Essar Energy's website stated that it planned for coal from the company's "captive coal mines in Indonesia and Mozambique" to be used for stages 1 & 2 of its own 3,000MW Salaya power plant in Gujarat, India.[28] Essar's only announced coal project in Mozambique at the time was the Cambulatsitsi mine, mentioned in a 2010 annual report.[29] In subsequent years Essar has not publicly mentioned Cambulatsitsi as a supplier for the Salaya power station; however, the company has continued moving forward with plans for coal exports from Mozambique. In April 2014, Essar announced that it was seeking shareholder approval for a new $25 million coal terminal at Beira port in northern Mozambique, with an annual capacity of 10 million tons.[30] The new terminal, officially known as NCTB (New Coal Terminal Beira), would be a joint venture between Essar Ports (70% stake) and CFM, Mozambique's port and rail authority (30% stake). In August 2014, the Mozambican government officially laid out the terms of its concession for the new terminal, which would be issued on a DBOOT (design, build, own, operate and transfer) basis. Under the terms of the agreement, Essar would have the right to design, build, and operate the terminal for a 30-year period before handing over management to the Mozambican government.[31]
  • Mumbai-based Tata Steel was a 35% joint venture partner with Rio Tinto Coal Mozambique in the development of the Benga coal mine, initially expected to produce 5 million tons of coal annually for export via the Sena railway to Beira port. In mid-June 2013 Rio Tinto announced that - after writing off almost $3 billion on its Mozambique coal assets - it would sell its stake in projects held by Rio Tinto Coal Mozambique.[32] In July 2014, Rio Tinto announced sale of its 65% share in the Benga mine to the Indian joint venture International Coal Ventures Limited (ICVL) for US$50 million[33], and ICVL promptly announced plans to spend $300 million to expand production at the mine.[34]. Upon completion of the sale in October 2014, ICVL chairman CS Verma specified that his company planned to triple coal production at the mine, from the current level of 5 million tons annually to 16 million tons within the next four to five years.[35]. In November 2014, the first shipment of coking coal from the Benga mine reached Vizag port in India, destined for the Steel Authority of India Limited (SAIL).[36]
  • In February 2011, Mozambique awarded the Indian company Jindal Steel & Power a 25-year licence to explore and mine for coal in the northwest Tete province. Jindal was to invest $180 million in a project covering 21,540 hectares, with the Mozambican government owning a 10 percent stake.[37] In 2012, Jindal began operations at Chirodzi, an open-pit mine with a proven reserve of 700 million tons and an expected life of 25 years. Total output in 2012 was 3 million tons, according to Jindal's company website.[38] Jindal made its first export shipment of 36,000 tons of Chirozi-mined coal in May 2013. Coal for this shipment was transported by truck 600km from Chirodzi to northern Mozambique's Beira port.[39] Jindal's long-term plans call for an annual production of 10 to 20 million tons of coal from the Chirodzi mine, with exports to be transported to Beira by rail or via a $900 million, 490-kilometer coal slurry pipeline that would be the first of its kind in Africa.[40][41]

Investments in Indonesian coal mines and export infrastructure

  • In March 2007 Tata Power purchased a 30% stake in two coal mines owned by Bumi Resources --PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia (Arutmin). The deal was for approximately US$1.3 billion of which $1.1 billion was the base price. Announcing the deal, Bumi stated that Tata Power had entered into a "long term" coal off-take agreement with KPC "for the supply of approximately 10 million tonnes per annum at index linked prices for its power plant at Trombay in India as well as for future power projects, including the recently won Ultra Mega Power Project of 4,000MW at Mundra in India."[42] In January 2014, citing a need to "get additional cash flow and to reduce its consolidated debt," Tata Power sold its entire 30% stake in PT Arutmin for $500 million.[43] In July 2014, the company also sold 5% of its stake in PT Kaltim along with its entire stake in that mine's associated infrastructure for $250 million. Both the PT Arutmin and PT Kaltim sales were to the Indonesia-based Bakrie Group.[44] As of September 2014, Tata was reportedly considering selling its remaining 25% stake in the PT Kaltim mine, citing unprofitable conditions due to a decline in global coal prices.[45]
  • In November 2012 Tata Power announced that it had bought a 26% stake in PT Baramulti Suksessarana Tbk ("BSSR") in Indonesia. In a media release Tata stated that "PT Antang Gunung Meratus ("AGM"), a 100% subsidiary of the BSSR, and BSSR together own approximately 1 billion tonnes of coal resources in South and East Kalimantan." The company stated that "we recognize fuel security is key to support Tata Power's growth agenda. ... This acquisition would aim to support our power generation projects in select geographies, to be developed over next few years." The company stated that as part of the purchase the company can "purchase about 10 million tonnes of coal per annum."[46] As of January 2015 Tata Power continues to list PT Baramulti Sukessarana Tbk as an active joint venture on its website.[47]
  • In 2007 the Indian-based Adani Group acquired a license from the Indonesian government to mine coal at Bunyu, East Kalimantan. Total estimated coal resources at the mine are 269 million metric tons, with a peak annual capacity of 10 million tons. Mining operations started in April 2008, yielding 1.08 metric tons in the first year and reaching 2.3 million tons in 2011-12.[48] A July 2012 article in Business Standard estimated that Adani Power obtained roughly a third of its coal from the Bunyu mines.[49] A January 2014 moneycontrol.com article noted that production at the Bunyu mine was picking up, even as Adani continued to rack up losses on its bottom line.[50]

Articles and Resources

Sources

  1. Linc Energy, "Linc Sella Galilee Coal Tenement for $3.0 billion", Media Release, August 3, 2010.
  2. Anna Bligh (Premier and Minister for Reconstruction) and Rachel Nolan (Minister for Finance and Arts), "Premium price for Abbot Point Coal Terminal boosts disaster recovery", Media Release, May 3, 2011.
  3. "North Galilee Basin Rail Project", Adani website, accessed January 2015.
  4. "Environmental group takes Adani’s Carmichael mine to court", Mining Australia, October 9, 2014.
  5. "Activists Gun For Indian Billionaire's Great Barrier Reef Project", Forbes, December 2, 2014.
  6. "Abbot Point coal development progresses, but banks back away from the project amid environmental concerns", ABC Bush Telegraph, October 31, 2014.
  7. "Newman government courts Adani on Galilee Basin coal deal", The Saturday Paper, November 22, 2014.
  8. "Adani lines up $1 billion SBI loan for Australian coal venture", Reuters, November 17, 2014.
  9. "Adani awards Downer EDI $2 billion coal contract", Mining Australia, January 5, 2015.
  10. "Adani’s Carmichael Coal Proposal Will Now Have to Rely on Commercial Viability," IEEFA, Jan 31, 2015
  11. "Lanco Infratech seals $760 mn Griffin buy", The Financial Express, March 4, 2011.
  12. "Lanco unit Griffin gets nod for Australian coal facility", The Economic Times, July 17, 2013.
  13. "$500 million WA coal export facility approved", ABC, June 26, 2014.
  14. "India's Lanco in talks to sell stake in Griffin coal mine", Reuters, October 10, 2014.
  15. "Trouble for Griffin Coal Mine as Lanco plans sale", Australian Mining, October 14, 2014.
  16. "The imminent failure of Lanco Infratech’s investment in Griffin Coal", Reneweconomy, December 3, 2014.
  17. "GVK acquires Hancock Coal and Infrastructure Projects in Australia," GVK press release, Sep 16, 2011
  18. "Rail & Port", GVK website, accessed January 2015.
  19. "$7bn Alpha coal mine gets approval", ABC, August 23, 2012.
  20. "Kevin’s Corner secures federal approval", Australian Mining, November 4, 2013.
  21. "Societe Generale pulls out of GVK’s Australian project", The Economic Times, December 9, 2014.
  22. "Case update: Kevin’s Corner coal mine", Environmental Defenders Office, November 21, 2014.
  23. "India’s CIL starts coal mine development in Mozambique", Mining Weekly, August 19, 2011.
  24. "Exploration of CIL’s Mozambique mines may be completed in 2014", Live Mint, August 5, 2013.
  25. "Coal India assessing reserves of Mozambique mines", Live Mint, September 8, 2014.
  26. "Coal India To Soon Start Mining In Mozambique", Business Insider India, December 1, 2014.
  27. "India’s CIL Dumps Coal Mining Project In Mozambique," Ventures, February 9, 2015
  28. "Power", Essar energy website, archived on July 10, 2011.
  29. "REG - Essar Energy PLC - ESSAR ENERGY RESULTS - FULL YEAR END 31 DEC 2010", Reuters, March 21, 2011.
  30. "Essar Ports seeks shareholders’ approval to invest in Mozambique’s Beira coal terminal", The Hindu Business Line, April 1, 2014.
  31. " Moz government passes law for new Beira coal terminal", African Cargo News, August 4, 2014.
  32. Sarah Thompson and Anthony Macdonald, "Rio appoints UBS to manage Mozambique assets sale", Australian Financial Review, June 27, 2013. Subscription required).
  33. "Rio Tinto agrees sale of coal assets in Mozambique", Rio Tinto press release, July 30, 2014.
  34. "ICVL to spend $300m to expand Benga mine in Mozambique", Mining Technology, August 11, 2014.
  35. "Rio Tinto completes sale of Benga coal to ICVL", Mining News, October 9, 2014.
  36. "First shipload of coking coal from Benga arrives, says ICVL", Economic Times, November 27, 2014.
  37. "India's Jindal wins 25-yr coal licence in Mozambique" Reuters, February 4, 2011.
  38. "Mozambique" Jindal Africa website, accessed January 2015.
  39. "Mozambique unit of India's JSPL dispatches first coal shipment" Mining Weekly, May 17, 2013.
  40. "Coal project aims to produce more than 10m tonnes in 2015" Mining Weekly, June 6, 2014.
  41. "Jindal Mozambique semi-hard coking coal shipping at $80/mt FOB" Platts, July 21, 2014.
  42. Bumi Resources, "Bumi Announces Sale of 30% stake in its coal companies to Tata Power", Media Release, March 30, 2007.
  43. "Tata Power Exits its Stake in Arutmin Coal & retains KPC mines", Press Release, January 31, 2014.
  44. "Tata Power May Sell $250 Million Stake in Indonesian Coal Mine ", Bloomberg, July 4, 2014.
  45. "Tata Power may soon divest over $1 bn stake in Indonesian mines", Business Standard, September 9, 2014.
  46. Tata Power, "Tata Power acquires 26% stake in large mines at PT Baramulti Suksessarana Tbk ("BSSR"), Indonesia", Media Release, November 08, 2012.
  47. "Subsidiaries, Joint Ventures and Associates", Tata Power website, accessed January 2015.
  48. "Mining - Indonesia: Project Details & Milestones", Adani website, accessed January 2015.
  49. "Adani group eyes coal assets in Mozambique for $400 mn", Business Standard, July 17, 2012.
  50. "Adani Power Q3: Loss seen despite improving coal situation", moneycontrol.com, January 27, 2014.

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