Mar 20, 2008

R-Power to pick 100% in Indonesia coal mine

R-Power to pick 100% in Indonesia coal mine

NEW DELHI: Reliance Power, the flagship power company of the Anil Dhirubhai Ambani group, has struck a deal to buy out a coal mine in Indonesia located in South Sumatra. The valuation of the coal mine, based on its reserves, is estimated to be around Rs 20,000 crore. The company is expected to announce its acquisition in a day or two.

The coal mine, which has resources of 2 billion tonnes, is spread over 100,000 acres, equivalent to Greater Mumbai area. The greenfield coal mine, a discovered asset, will be the prime source of fuel for Reliance's power project in Krishnapatnam in Andhra Pradesh. It is estimated that the Krishnapatnam ultra mega power project would require about 14 to 15 million tonnes of coal every year.

Reliance Power is understood to have acquired the coal mine for about Rs 1,000 crore. It has acquired 100% interest in this coal mine. When contacted, Reliance officials declined to comment on the development.

Experts say that this coal mine could be compared to one of the largest coal mines in India — the Gevera coalmine — in Chhattisgarh which has reserves of 1.2 billion tonnes and is producing around 35 million tonnes annually. Given that the acquired mine has resources of 2 billion tonnes, it is expected that the production from this mine should be more than the largest mine in India.

Although, the coal from this mine would be brought in for the Krishnapatnam project, it would also fuel other coal based power projects of the company. The acquisition is significant as it India is competing with energy hungry countries like China to acquire stakes in oil and coal blocks and secure energy security.

Tata Power, another leading power company which won the first imported coal based power project at Mundra have also bought a 30% stake in a coal company Bumi in Indonesia to meet its coal requirements. Other power and steel companies are also looking at Indonesian coal reserves with interest.

In fact, the coal special purpose vehicle (SPV) formed by five leading public sector undertakings (PSUs) including NTPC is also likely to make its first coal acquisition in Indonesia.

Indonesia presents an attractive market for Indian companies due to its proximity to country's shores. Besides, Indonesian better in quality than Indian coal having loess of ash content and higher calorific value.