Middle East Coal offers equities in Kalimantan mines to Indian power firms

Middle East Coal, a Singapore-based company that owns mines in Indonesia, is talking to large Indian power companies, including Tatas, Birlas, Reliance Power and GMR, for the ownership-swap, The Economic Times of India reported.

Middle East Coal vice-chairman Madhu Koneru, who was in Mumbai recently for the talks, said: ?The (coal) supplies would typically be long-term so that power producers can focus on completing their projects and this would also keep costs down as the contracted price would be at cost level.? The company?s coal mines in the Kalimantan region of Indonesia have proven reserves of over 2 billion tonnes.

The move comes at a time when power producers are scouting globally to buy coal mines and have been facing problems in verifying the exact reserves as most assets are in remote provinces.

The supply of coal under the ownership-swap model, typically for 15-20 years, is at cost-plus-royalty price, which would be lower than the market price and would also be insulated from the extreme fluctuations.

The report also said that several coal mining firms from Indonesia are also in talks with Indian power producers for equity-for-long-term-supply swap arrangement. (*)