Indian power firms head to Indonesia for coal: Report

The enactment of a new, more liberal, mining legislation in Indonesia is drawing coal-starved Indian power utilities and coal firms to the island-nation in droves. The Hindu Business Line reported

Coal India Ltd (CIL), through its joint venture with NTPC Ltd, Steel Authority of India Ltd (SAIL) and NMDC, as well as trading major PTC India Ltd, are among utilities that are firming up plans for picking up stakes in Indonesian coal blocks.

This comes in the wake of the new legislation, which proposes to open up a regime for foreign direct investment in coal mining in that country. Besides, Indian firms are hopeful of striking better valuations by taking advantage of the current slump in coal prices.

?Coal India Ltd, through its joint venture company International Coal Ventures Ltd (ICVL) and its internal Coal Videsh division, intends to acquire coal assets in Indonesia due to a combination of factors like availability of reserves, possibility of low cost opencast mining and cheaper ocean freight to India.

?The recent enactment of New Mining Law in Indonesia has also opened up a new regime for foreign direct investment in coal mining in Indonesia,? a CIL official said. The implications of New Mining Law are under examination by CIL prior to taking any investment decision, he added.

Acquiring mines
PTC India Ltd is also eyeing the opportunity to acquire coal mines in Indonesia. ?We are planning for coal to be brought back into India for electricity generation,? said Deepak Amitabh, PTC?s Director-Finance.

The new mining laws in Indonesia are favourable for foreign companies and coal prices have also stabilised from the levels seen last year, thereby opening opportunities to buy coal assets, he added.

Indonesia has reserves of coking coal and low-ash non-coking coal. Hitherto, foreign companies could pick up stakes in Indonesian companies that own mining assets and then work out coal evacuation arrangements from these mines.

Indications are that the New Mining Law, the regulations for which are still to be formally announced, could permit direct participation by foreign companies in mines in Indonesia, an official with one of the firms added.

ICVL, a special purpose vehicle floated by CIL, SAIL, NTPC, NMDC and Rashtriya Ispat Nigam (RINL), has been scouting for coal properties abroad for the last one year.

The SPV has a paid-up equity of Rs 3,500 crore, out of which SAIL and CIL have contributed Rs 1,000 crore each, while the other three PSUs have contributed Rs 500 crore each. (*)