NTPC drops plans to acquire Griffin assets in Australia

State-owned NTPC Ltd has dropped plans to buy a power plant and associated coal assets for $1.2 billion (Rs5,616 crore) from beleaguered Australian firm Griffin Coal Mining Co. Pty Ltd.

"After we did our due diligence, we didn't find it viable," an NTPC executive said, speaking on condition of anonymity. "Not only would it have involved underground coal mining, but we also would have had to develop the rail and port infrastructure that would have resulted in the coal costs being high."

India's biggest power generation utility is looking at other opportunities in Australia and trying to secure coal from other sources, said another executive at the firm. He, too, asked not to be identified. Although Australia has quality coal and a sound regulatory environment, concessions and freight costs are costly.

Griffin Coal is a unit of the Griffin Group, a diversified company that has debts of at least A$700 million (Rs2,750 crore), according to Bloomberg. While its operating mine has a capacity of 150 million tonnes (mt), a greenfield concession has reserves of around 400 mt.

A proposal of sale was brought to NTPC by merchant bankers and was in the preliminary stage, with an actual offer yet to be made. NTPC wanted to acquire the Australian company's 416MW Bluewaters project, located 4.5km north-east of Collie in western Australia.

While NTPC's plants are facing an acute coal shortage, the utility has not succeeded in any of its overseas plans to source either coal or natural gas. Coal shortages have become endemic in India. In what could be the worst case of coal shortage faced by the power sector, 28 thermal projects had less than a week's coal reserves in May to support power generation. Fresh coal supplies are critical for NTPC as the fuel powers at least 80% of its installed capacity of 31,134MW. The utility requires 122.94 million tonnes per annum of coal and expects this to grow further as a substantial portion of the capacity it is adding will be based on coal. The firm plans to have an installed capacity of 75,000MW by 2017.