 "Coal India invites banker bids for foreign buys")
"CIL has sought expression of interest (EoI) from investment bankers, owners/owners’ representatives for acquisition of coal assets abroad," the company said. Coal India Videsh, through which CIL pursues acquisition of coal assets abroad, has invited the bids.
CIL, which fires more than half of India’s power generation capacity, faces government pressure to ensure uninterrupted supplies to utilities and cut blackouts that could reduce economic growth to the slowest in a decade. The company’s bid to raise output has been stymied by delays in land purchases, slow environment approvals and frequent labour unrest.
The Centre has recently proposed import of coal to meet the domestic demand and pooling domestic and international prices by CIL. The demand-supply gap of coal was 161.5 million tonnes (mt) last financial year.
CIL has already got requisition for import of about eight mt. However, the price pooling remains a sticking point, despite the cabinet approving the model. The finer details still need to be worked out between the coal and power ministries.
Meanwhile, CIL is likely to miss the annual production target of 464 mt in the current financial year as well. In the first 10 months of 2012-13, CIL has recorded a production of 355.5 mt.
According to analysts, acquisition of assets by CIL could be a long-term solution to the coal shortage. “With a huge cash reserve, CIL should certainly look into aggressive acquisition for a long-term solution of the output shortage. The demand-supply gap is estimated to go up to 200 mt in 2016-17,” one sector analyst said, requesting anonymity. CIL had a cash reserve of Rs 65,000 crore as on September 2012.
In August 2009, CIL made its first acquisition abroad by taking over two blocks in Mozambique, after incorporating a wholly-owned subsidiary, Coal India Africana Limitada. The two blocks — A1 and A2 — in Motaize, Tete province of Mozambique, are spread over 324 sq km. The company has engaged Thribeni Mineral Mozambique for the drilling, which began in October last year.
CIL officials indicated that rigid government norms had been a hindrance to aggressive acquisition of assets abroad, despite having adequate cash reserves.
"Until 2011, the government did not allow CIL to acquire foreign unlisted assets citing transparency issues. Now, CIL can acquire unlisted entities, but there are certain riders," an official said, who also preferred anonymity.
India’s annual thermal coal demand is expected to climb 43 percent to 730 mt by 2017, while supplies from local mines may increase 38 percent to 565 mt, the Planning Commission’s energy adviser I.A. Khan said on February 18.