NTPC seeks govt’s help in acquiring coal mines

State-owned NTPC Ltd, which plans to acquire the assets of the beleaguered Griffin Coal Mining Co. Pty Ltd, including a power project and its associated coal mines, has sought the Indian government’s help to secure the deal and is also concerned about the Australian government’s proposal to impose a resource super-profit tax.

Australian Premier Kevin Rudd’s proposal to replace royalties with a 40% tax on all mining profits is facing intense opposition from mining firms such as Rio Tinto Plc and BHP Billiton Ltd, among others.India’s largest power generation utility wants to acquire the Australian company’s 416MW Bluewaters project, located 4.5km north-east of Collie in western Australia. While the total deal is valued at around $1.2 billion (Rs5,640 crore), the proposal brought to NTPC by merchant bankers is at a preliminary stage, with the actual offer yet to be made.“While an offer is only expected to be made by June, we want the Indian government’s help. We are also concerned with the new tax proposal as it might affect our plans. Once they float an expression of interest, we will bid for it. We will also have to see whether we can take the coal back to India for our power projects,” said a senior NTPC executive..

Griffin Coal is a unit of the Griffin Group, an energy-to-cattle company that has debts of at least A$700 million (around Rs2,689 crore), according to Bloomberg. While the operating mine has a capacity of 150 million tonnes (mt), the greenfield concession has reserves of around 400 mt.

“The proposal is at a very preliminary stage,” said another NTPC executive, who also did not want to be identified due to the sensitive nature of the deal.

NTPC is expected to be in competition with leading Chinese government-run coal miners such as China Shenhua Energy Co. Ltd and Yanzhou Coal Mining Co. Ltd, which are actively engaged in acquiring mining concessions overseas.

While questions emailed to the Griffin Group remained unanswered at the time of filing this story, the first NTPC executive said: “We will ask our power minister to take up the topic of government intervention for the deal when he meets Australian government representatives.”Indian power minister Sushil Kumar Shinde is in Australia to attend the Australia-India Energy and Minerals Forum and has held meetings with government representatives including Australian foreign minister Stephen Smith on Monday.Shinde expressed the Indian government’s support in seeking Australian help for coal mine acquisitions by Indian companies.

“We have asked Australia to facilitate the plans of our companies, such as NTPC.” Shinde said.

Australian foreign minister Smith tried to assuage the concerns of investors over the proposed tax.

“We currently are on a consultation process with the mineral and energy industry, and for any Indian companies that are interested, there is a consultation process, and they are very welcome to approach the treasury consultation process as well or they need to approach the minister for mineral and resources,” he said. 

Several Indian firms have been looking to acquire overseas coal assets, with the fuel being the source of almost 70% of the power generated in India keeping it in short supply.

“Anyone who is prospecting for coal, it has to be a commercial decision,” said Indian power secretary P. Uma Shankar.Thus far, NTPC has been unsuccessful in securing coal concessions overseas and analysts say that bids by Indian miners tend to be relatively uncompetitive because most of them seek the coal for their own end-use projects, while rival bidders may have higher-margin alternative plans.

While Australia offers better quality coal along with a sound regulatory environment, the valuations of the coal concessions along with transportation costs are high.However, the mines located in the western and north-western part of the country suit Indian demands as the shipping distance is shorter compared with mines located in the other parts of the continent.

India imported coal worth $6 billion from Australia during the last fiscal, besides sourcing iron ore and gold of the same value.