India plans huge spend to acquire overseas coal supplies

“We have the equivalent of US$ 7.4 billion in cash which we can use for acquisitions,” said Partha Bhattacharrya, the company chairman, “We have all this money and no debt and we want to use it for acquisitions to meet shortages.”

India needs the extra supplies because currently it has to import up to 10% of its energy needs. Last year coal imports surged from 30 million t to 60 million t. India Coal Ltd plans to increase coal imports to up to 81 million t. Two of the mines it is after belong to Peabody Energy Corp., who are said to be in talks with Coal India about arranging long-term supply agreements and joint venture projects with them.

Coal India Ltd has appointed Bank of America, Merril Lynch, Royal Bank of Scotland, Plc and Royal Bank of Canada to do due diligence on the mines. The assessment is expected to take up to four months and the purchases could take another six months after that. Partha Bhattacharyya said, “We are confident we will be able to strike a deal for at least two of the five proposals.”

Further to these arrangements for shares in overseas coal mines, Coal India Ltd has also been acquiring more space for importing new coal supplies. It is close to signing a deal to accommodate the import of 4 – 5 million t of coal through Vizag Steel’s port at Visakhapatnam. It is also looking at tying up with other ports, including Gangavaram, Krishnapattanam and Kandla.

The Indian government is also planning to publicly float the company. The government hopes to raise some US$ 2.7 billion selling public shares in the initial flotation. The Finance Ministry has invited bids for lead managers for the initial flotation; it plans to appoint six appropriate merchant bankers to serve as book running lead managers. Coal India Ltd plans to use the funds raised to invest in domestic coal production to help reduce its annual shortfall.

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