Tuesday, July 17, 2012

Adani group eyes coal assets in Mozambique for $400 mn: Discussions under way with NCondezi to acquire stake in mine block
Reghu Balakrishnan & Katya Naidu / Mumbai Jul 17, 2012
Adani Enterprises, the Gujarat-based Adani group’s flagship firm, is in discussions with the Mozambique-based NCondezi Coal to acquire a minority stake in its coal assets. The deal with the AIM-listed NCondezi is expected to be in the range of $350-400 million (Rs 2,000-2,200 crore). Standard Chartered Bank is advising NCondezi on finding a partner.
According to sources in the know, Adani Enterprises is looking to become a strategic partner of NCondezi by acquiring a part of its assets. The acquisition is for its subsidiary, Adani Power, which has targeted a 20,000-Mw expansion plan in the power sector by 2020.
“We do not provide comment on market speculation,” said a spokesperson of Adani Enterprises, in response to an emailed questionnaire. An email sent to Hanno Pengilly, chief development officer, NCondezi, did not elicit any response.
The Ncondezi project is located in the Zambezi Coal Basin in Tete province, one of the largest undeveloped coal regions in the world. Rio Tinto’s Benga mine and Vale’s Moatize mine are both located in the same region.
NCondezi had announced recently that feasibility studies for both the coal mine and power plant were near completion. The AIM-listed company expects to start thermal coal production from its project in the second half of 2015 and its coal resource base could be able to produce more than 10 million tonnes of the coal used in power generation over a 20-year period.
NCondezi planned to produce up to five million tonnes of export-quality thermal coal and seven million tonnes of domestic power plant production, the company said recently.
“The past two years have seen significant development of the export thermal market as China and India play an increasing role as importers. Ncondezi is targeting production of two export thermal coal products that are ideally suited to these markets,” an NCondezi statement added.
Pukhraj Sethiya, manager (mining) at PricewaterhouseCoopers, says Africa is emerging as a more attractive destination for coal asset acquisitions than Indonesia and Australia, given fewer regulatory challenges, though the infrastructure could pose challenges for coal offtake. “Given that, if companies can fetch good valuations for assets, acquisitions in the current scenario are good and would also help tie up financing for power projects and provide a firm supply source,” he said.
About 33 per cent of Adani Power’s coal comes from the Bunyu mines in Indonesia, owned by Adani Enterprises, while the other 67 per cent is procured at higher prices from the open market. According to a recent CRISIL report, an 80 per cent increase in the fuel cost of Adani Power in 2011-12 was on account of a lower-than-expected quantity of coal received from Bunyu.
“Adani Power was to receive this coal at a price of $36.5 per tonne. However, on account of a shortfall in supplies from Adani Enterprises, Adani Power had to purchase expensive imported coal in the spot market at $80-100 per tonne in 2011-12, resulting in a sharp increase in its fuel cost,” the report added.

No comments: