NTPC to float global offer to acquire equity stakes in coal assets

Instead of going out and hunting for coal assets, the country’s largest power producer, NTPC, has decided to invite offers from foreign miners that may be on the lookout for strategic investors.The change in strategy comes after NTPC’s efforts to acquire strategic coal assets overseas through negotiated equity and acquisition deals have not seen much success.
The company will soon float a global offer to acquire equity stakes in coal assets through an expression of interest (EoI).“The EoI route is expected to bring many more players to the table who otherwise are difficult to locate,” NTPC chairman and managing director R S Sharma told ET, adding that it will continue to look at assets through merchant bankers.
NTPC’s coal imports are expected to increase from about 14 million tonne per annum (mtpa) now to 30 mtpa by 2017, and it needs secure supplies to keep costs under check. Imported coal is priced about 40% higher than that available through Coal India and could be a big cost head for the company by 2032 when the state-owned power major will have generation capacity of about 1,28,000 MW, against 32,000 MW currently.
The proposal is expected to be taken up by the company’s board in the next few weeks and could seek a wide mandate including acquisitions of entire operations with a coal offtake clause.
NTPC has been looking at overseas acquisition of coal assets in countries such as Mozambique, Indonesia, Australia and South Africa for few years now without much success.
India’s biggest power producer is currently evaluating two projects in Queensland and New South Wales in Australia and is also in advanced stages of discussion to pick up equity stake in two coal fields in Indonesia. It has also evinced interest in two coal blocks on offer in Mozambique and one South Africa.
“The EoI route will help to get response from several properties in coal rich countries, which otherwise fail to get attention from the merchant bankers,” said another official of the power ministry asking not to be named.
NTPC requires about 160 million tonne of coal currently to fuel its over 32,000 MW of power generation capacity, 80% of which is based on coal.Its requirement is expected to increase by 20 million tonne every year with 4000 MW expected to be added now every year.
In view of the large and rising coal needs of the company, the government has allowed the PSU to go in for direct imports of coal bypassing state-owned trading firms such as MMTC and State Trading Corporation of India. The company has already issued an international tender for the direct procurement of 14.5 million tonnes of coal for the first time.
Apart from coal offtake deals and acquisitions in overseas market, NTPC is also developing its eight captive coal blocks with peak production capacity of 83 million tonne per annum.
In addition, another special purpose vehicle of PSUs — International Coal Ventures Ltd (ICVL) — is also scouting for coal properties abroad and is studying a thermal coal mine in Indonesia and coking and thermal coal mine in Australia and three greenfield properties in South Africa.
Mr Sharma had told ET earlier that NTPC is also exploring the possibility of setting up two coal-based power plants in Kazakhstan. “Our aim is also to source coal from the country that has large reserves of about 32-34 billion tonne of coal,” he had said.