INDIA BUSINESS WORLD SEPTEMBER (1st - 15th) 2007
The Month that was ...
CHENNAI CO IN $1.5-B DEAL FOR INDONESIAN COAL
COAL & Oil, a Chennai-based importer of thermal coal, has signed an agreement with Indonesia's trading major Samtan-Kideco to source 50 million tonnes of the mineral over 10 years. At current prices, the agreement is valued at $1.5 billion and is claimed to be the largest of its kind in the country.
"These imports will account for 10% of the total projected imports of coal into India in the next five years and translate into generation of about 1,500 mw of power per year," C&O president & CEO Ahmed Buhari said.
The $450-million C&O is a fuel management company that provides logistics and materials to companies in India. The privately-held company has already tapped Tata Power Company and Reliance Energy to give them thermal coal sourced from Samtan-Kideco.
Samtan-Kideco, which has captive coal mines, is the third-largest supplier of coal in Indonesia and has partnered C&O for the latter's Indian operations for almost a decade now.
Spurred by infrastructure development, India is expected to add 73,000 mw in the next five years, at least 65% of which will be generated through coal-based thermal plants. According to industry estimates, about 3,000 tonnes of thermal coal is needed every year to generate 1 mw.
"The agreement complements our plan to become a long-term player in India," said Mr Buhari. Son of Abdur Rahman, co-founder of the $3-billion ETA-Ascon Group, Mr Buhari set up C&O in 1998. From the initial trade of 300,000 tonnes of coal in 1998, C&O now annually supplies about 7 million tonnes, more than 90% of which is to its Indian customers.
"We also source coal from Australia, Russia and South Africa, but most of it comes from Indonesia. We are also looking to increase our clientele in West Asian and West African markets," said Mr Buhari. He added that the company wants to double its volumes in the next five years.
Though India is home to one of the world's largest reserves of coal, quality thermal coal is hard to find. Indian power companies initially depended on imports to meet needs, but the recent spree of greenfield projects has forced the players to look for opportunities aboard. Earlier this year, Tata Power Company bought stake in two coal mines owned by Bumi Resources of Indonesia. JSW Energy, part of the JSW Steel group, was also involved in a similar deal in the South-east Asian country.
But rising demand means that companies will still have to bank on importers like C&O to meet needs. C&O operates from 17 ports in the country, including Mumbai, Chennai, Surat and Kolkata. "In the longterm, we want to integrate our operations, from having own fleet of ships to captive mining and possibly taking part in power generation," Mr Buhari said. Though he confirmed that the company is looking at mining and power generation possibilities within and outside the country, he declined to give details.
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