In less than a month, Adani Enterprises — flagship of Ahmedabad-based, Rs 27,000 crore Adani Group — has closed another major overseas deal involving an investment of $1.65 billion. The company will undertake a port and rail project in Indonesia’s Tanjung Enim region.
India’s biggest coal importer, Adani Enterprises had earlier this month acquired the Australian coal assets of Linc Energy in a cash-and-royalty deal worth $2.7 billion (around Rs 12,500 crore).
Gautam Adani-promoted Adani Enterprises, through step-down Indonesian subsidiary PT Adani Global, has entered into a binding tripartite agreement with the regional government of Sumatra, Indonesia, and PT Bukit Asam, an Indonesian government-owned coal mining company, to set up a dedicated port and rail project.
“As per the agreement, Adani Group, through its various subsidiaries, will own, construct and operate a 250-km rail line, which will connect Tanjung Enim, a coal mining area, to Tanjung Carat, where Adani will build a port with a capacity to handle a minimum 35 million metric tonnes per annum (MMTPA) of coal, which could be expanded to 60 MMTPA,” the company said in a statement. Mundra Port and Special Economic Zone Ltd (MPSEZ) will set up this port.
The port-rail deal also provides Adani the right to purchase coal produced from PT Bukit Asam's mines in south Sumatra on take-or-pay basis for a maximum period of 30 years, initially, which can be extended by mutual agreement. “PT Bukit Asam will sell 60 per cent of coal to Adani at a government notified price and the balance tonnage would be a contract carriage for Bukit Asam,” the company added.
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“The Indonesian government company estimates 60 MMTPA of coal production in South Sumatra, of which Adani will be sold 60 per cent. This works out to 35 MMTPA. This means more coal supply to Adani for its power and coal trading business. While the rail and port will help Adani earn revenues by handling coal in Indonesia,” explained a company official.
The project is estimated to cost $1.65 billion and will be constructed within 48 months.
Adani Enterprises already owns a coal mine in East Kalimanthan in Indonesia, which currently produces 6 MMTPA of coal.
And, the present initiative in Sumatra will further strengthen its coal sourcing reach from Indonesia. The company's coal mine in the Galilee Basin of Queensland state of Australia bought early this month has a thermal coal resource of 7.8 billion tonnes and the company expects to produce 50 million tonnes of coal per year from that mine.
As a mine developer and operator, Adani operates two coal mines in Chhattisgarh and one in Orissa. It estimates 70 million metric tonnes per annum of coal production from all three mines. The coal from its Indonesian and Australian sources would make Adani Enterprises the largest importer of thermal coal in India. It will also support and enable the rapid expansion of its power and coal management businesses.
Adani Group has set a target of achieving 20,000 Mw of power generation capacity by 2020, of which power projects of 13,200 Mw are being executed by the company at present. The company has tied up the quantity needed for 6,600 Mw.
"Adani has a clear focus on the energy sector and constantly strives to enhance the coal value chain. These initiatives will bring Adani closer to achieving its stated target of 20,000 Mw of power generation, 200 MMTPA of coal mining and 200 MMTPA of cargo handling by 2020," the company added.