Power Capital ?in advanced negotiations? for coal off-take agreements
Thursday, February 20 2014 - 10:18 AM WIB
LSE-listed natural resources trading and logistics group Power Capital Global Ltd, said that it is in advanced negotiations for new coal off-take agreements as the company struggles to expand its coal trading business in Indonesia after a key off-take deal fails to deliver as expected.
?The company continues to source alternate off-take opportunities in Indonesia and is in advanced negotiations for further off-take agreements. Any such agreements would be subject to appropriate financing being in place,? the company said in a statement on Wednesday.
Power Capital Global set up in August of 2012 a thermal coal trading business joint venture in Indonesia called PCG Coal (Indonesia) Ltd (PCI), in which it holds a 51 percent controlling stake. But expanding the coal trading business unit has been hampered by an off-take agreement which turned sour, affecting its cash flow.
The company announced in March of 2013 that PCI had entered into an off-take agreement (the Agreement) with coal miner PT Perdana Maju Utama (PMU) for one million metric tons of thermal coal. PCI has since provided advance payments under the Agreement of US$2 million (the Advance).
PCI traded approximately 10,700 metric tons of thermal coal on trial barge shipments in early August 2013. Coal quality was in line with specification but delivered volume was below expectation, the company said.
Subsequently, PCI renegotiated certain terms of the Agreement and in September 2013 signed an addendum under which PMU is permitted to sell its mined concession thermal coal direct to third party customers rather than PCI but is required to compensate PCI at a rate of US$3.2 per metric ton sold, with minimum committed monthly sales of 50,000 metric tons. The cost of PMU coal delivered in August was set-off in full against the Advance.
PMU sold 57,800 metric tons of coal in September 2013 and effected commission and Advance repayments to PCI totaling approximately $185,000, reducing the Advance outstanding to approximately $1.6 million. ?The company understands that, since the end of September, due to wet weather conditions in East Kalimantan, limited sales of thermal coal have been completed by PMU,? Power Capital Global said.
PCI invoiced PMU in accordance with the addendum to the Agreement for its minimum contract payment of $160,000 in each of October, November and December 2013 (of which the October and November invoices have been settled in full and the December invoice is partially settled).
?PMU has confirmed it will continue making monthly payments to PCI on the basis of a minimum 50,000 metric tons per month until such time as the equivalent of one million metric tons of PMU coal has been sold and the Advance has been fully repaid,? the statement further said.
Elsewhere, Power Capital Global said it has made no material progress in further developing a vertically integrated tin dredging and smelting operation in Bangka, Indonesia. ?The next step in the development of this business opportunity is to commence cassiterite dredging operations and, for this stage of works to commence, the company will need to secure additional funding,? it ended.
Editing by Reiner Simanjuntak