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The Adani, GVK and Lanco groups are looking to sell part of their stakes in Australian coal mining projects to reduce debt and get financial and technical partners on board.
Senior executives of the Adani and GVK groups confirmed they were in talks with contractors and customers to pick up stakes in their coal, port and railway projects because that would help them get technical and construction experts on board. Coal mine stakes are also being offered to companies that have set up power plants across Asia and want guaranteed coal supplies.
“We may look at selling a stake in the railway project to a railway company and a stake in the port project to a port operator,” said a GVK group executive, who did not wish to be named.
The Adani group plans to invest $15.4 billion and the GVK group $10 billion in Australia to develop coal mines, railway lines to transport the output, and dedicated ports. Both groups were over-leveraged which made it difficult for them to raise debt \(see chart) for the projects, and hence the plan for stake sales, bankers said.
On the other hand, the Hyderabad-based Lanco group might sell its holding in Australia’s Griffin Coal Mining Company as it tried to lower its Rs 34,000-crore debt, bankers added. The group expects a valuation of Rs 3,100 crore for Griffin Coal Mining Company, which it bought for $750 million in 2011. An email to the Lanco group did not elicit a response.
A senior Adani executive who did not wish to be named said the group was looking to sell a 50 per cent stake in its australian coal mine and railway and was in talks with Chinese and South Korean investors.
In August 2010, Adani Enterprises spent $490 million to acquire the rights to develop the Carmichael coal mine in Queensland and has invested close to $2 billion, including on a dedicated port. Last year, the coal mine project was taken over by the group’s promoters to reduce Adani Enterprises’ debt.
In September 2011, the GVK group spent $1.26 billion to acquire the rights to develop the Alpha, Alpha West and Kevin’s Corner coal and infrastructure projects.
But energy experts say the projects will not be viable and the cost of electricity produced by imported Australian coal will be very high for Indian consumers. Tim Beckley, director of energy finance studies at the Institute of Energy Economics, Sydney, said both the Adani and GVK coal basin proposals were running three-four years late, with financing not in place.
“A power purchase agreement of Rs 5.4-5.70 per kWh would be required, plus price indexation of four per cent a year to justify the construction of a power plant in India based on Australian coal. This is double the last reported average sales price of electricity across India of Rs 3 per kWh and triple the local coal-fired power purchase price signed over recent years,” he said.
