GVK seals $1.26-bn Hancock deal

Infrastructure developer GVK group on Friday said it had acquired a strategic part of a large coal resource and infrastructure development project from Hancock Prospecting in Queensland, Australia, for $1.26 billion.

The Hyderabad-based group acquired up to 79 per cent in the Alpha and Alpha West coal projects in the Galilee Basin of Queensland. It also acquired the Kevin’s Corner coal project, adjacent to Alpha, and the rail and port project connecting these coal projects to the port of Abbot Point and Abbot Point T3 expansion project, whilst retaining some tonnage capacity for the Hancock Group.

For this, GVK Coal Developers (Singapore), a step down subsidiary of GVK Group company GVK Natural Resources, in joint venture with GVK Power and Infrastructure, entered into various acquisition documents with Hancock Prospecting and its affiliated entities.
 

PROJECT HIGHLIGHTS

• The project has 7.9 billion tonnes of coal, with 3.3 billion tonnes in measured and indicated categories and potential for more tonnage 
• It involves development, ownership and operation of an integrated infrastructure development project, consisting of a 495-km rail line and a 60-million tonne per annum (mtpa) port at Abbot Point
• The three coal projects together are expected to supply about 84 mtpa
• The first phase of production, expected to start in 2014, envisages a production of over 30 mtpa of high-quality thermal coal
• The coal mines will deliver high-quality thermal coal, with a gross calorific value of 5,800-6,000 kcal/kg and low ash and low sulphur content
• Total investment in the first phase is estimated at approximately $10 billion. This includes capital expenditure on mines, rail line and port

The Hyderabad-based group will pay the $1.26 billion in a phased manner, with $500 million now. Of the balance, $200 million will be paid within a year from closing and $560 million on financial close for the project (anticipated to be in 2012), but in any event, no later than three years from closing.

“The funding for the acquisition is tied up with banks. The financing documents are being executed with the banks and the transaction is expected to close and assets transferred in about two weeks,” the company stated in a release. The group sees the acquisition furthering its interests in the natural resources and energy sectors.

“This is a significant and land mark acquisition for us and India and we are happy that the transaction is closed,” GVK vice-chairman G V Sanjay Reddy told Business Standard.

The company said these were one of the largest integrated coal development projects in the world. Ernst & Young was the sole financial advisor, Amarchand & Mangaldas & Suresh A Shroff & Co acted as the legal advisors, and Minter Ellison Lawyers as the Australian legal advisors to GVK.