Coal India falls fuel supply agreements seen risky

COALINDIA-SHARES:Coal India falls fuel supply agreements seen risky

Shares of Coal India fell as much as 3.6 percent after its agreement to supply at least 80 percent of the coal needed to fuel new Indian power projects was seen exposing the miner to risks to its margins.

Coal India's board on Monday agreed to use a mix of 15 percent imported coal to meet its fuel supply agreements, raising worries about a potential hit to its margins from sourcing the commodity from overseas markets.

The miner's board also failed to agree on the amount of penalty it would need to pay utilities in case it falls short of meeting the supply guarantees.

 

Electric utilities had asked for penalties equal to 10 to 20 percent of a shortfall in supply, while Coal India had earlier agreed to only 0.01 percent, but traders worry the state miner will have to agree to higher penalties.

Coal India shares were last down 3.2 percent.