Indian power requirements forced our industrialists buy coal mines abroad.
Indian power sector is going through the hyper growth phase Power or electricity is one of the most critical components of infrastructure affecting economic growth and well being of nation. The existence and development of adequate infrastructure is essential for confirmed growth of the Indian economy. Infrastructure investment in India is on rise, but growth may be constrained without further improvements.
The power sector provides one of the most important inputs for the development of a country. The availability of reliable and inexpensive power is critical for its sustainable economic development. To endorse GDP growth rate of around 8-9 %, it is imperative that the power sector also grows at the same rate.
Even after the considerable growth in the power sector infrastructure and the supply of electricity, many parts of the country will continue to face severe power shortages, as consumption by commercial and industrial consumers has been increasing at a faster rate than the electricity supply.
Power is one area of infrastructure where India lags far behind even in comparison to other developing countries. The per capita annual consumption of electricity in India is low when compared to all other in the world, it is approximately 734 kwh (2008-09)
Power sector is a highly capital intensive business with long gestation periods before commencement of revenue streams (construction periods of 4-5 years) and an even longer operating period (over 25 years). Since most of the projects have such a long time frame, there are some inherent risks in both the internal and external environment. We monitor the external environment and manage our internal environment to mitigate the concerns on a continuous basis. Some of the key concerns being faced by the sector currently are coal supply position.
coal supply position
More than 50 percent of India's generation capacity is coal based. According to the Integrated Energy Policy, by FY31-32, India requires 2,040 million tonnes of coal for power generation, more than 5 times its current consumption levels. The shortage of coal is so acute that most of the power generation companies are looking at imported coal as a viable alternative to domestic coal.
Increasing importance of private sector
India has emerged as one of the fastest growing economies in the world. Its current economic performance reflects a healthy trend based on increased consumption, investment and exports. Over the next five years, this growth is expected to continue. A key risk of the continued growth of the Indian economy is inadequate infrastructure. Infrastructure investment in India is on the rise, but growth may be constrained without further improvements. The Government of India has identified the power sector as a key sector of focus to promote sustained industrial growth. It has embarked on an rapacious mission -"Power for All by 2012"- and has undertaken multiple reforms to make the power sector more attractive to private sector investment.
Latest developments in acquiring coal mines abroad by private players in power sector
Wesfarmers boss Richard Goyder put the asset on the block in March after approaching the number of interested parties after the Griffin coalmine neighbouring Premier was auctioned for about $800 million to India's Lanco Infratech late last year.
Indicative bids for Premier were submitted about a week and a half ago and Wesfarmers and its advisers at Gresham and UBS started the second stage of the process this week.
The auction was expected to be dominated by Indian and Asian players seeking coal for energy. Apart from Reliance, India's GVK Infrastructure, which was negotiated with Gina Rinehart's Hancock, Prospecting over two coalmines in the Galilee Basin. Lanco were others who linked with Premier. It's understood that Reliance was interested in Griffin at a very early stage of that process.
On UBS estimates, India's coal imports are set to reach almost 70 percent in the next five years.
Reliance is a part of the sprawling conglomerate run by Anil Dhirubhai Ambani, with interests ranging from telecommunications to finance.
Reliance Power aims to generate 35,000 megawatts of power by 2017, of which 5000 MW was expected in the next two years, and its coal subsidiary agreed to tip in $US5bn into two Indonesian coal projects earlier this year.
Premier has reserves of more than 100 million tonnes of sub-bituminous thermal coal used for power generation.
Earnings before interest and tax from the mine have been estimated at just $30m-$35m -- about 5 per cent of the company's total resources income.
While Wesfarmers would love a sale at similar prices to Griffin, analysts have estimated the value of the asset at $400m-plus.
One difference between Griffin and Premier is that most of the Griffin's coal will be exported to Lanco's power stations in India, whereas Premier's annual output of 4 million tonnes is sold mainly to state-owned electricity generator Verve Energy.
However, a foreign buyer is expected to look to expand production and divert more coal to the export market.
The power sector provides one of the most important inputs for the development of a country. The availability of reliable and inexpensive power is critical for its sustainable economic development. To endorse GDP growth rate of around 8-9 %, it is imperative that the power sector also grows at the same rate.
Even after the considerable growth in the power sector infrastructure and the supply of electricity, many parts of the country will continue to face severe power shortages, as consumption by commercial and industrial consumers has been increasing at a faster rate than the electricity supply.
Power is one area of infrastructure where India lags far behind even in comparison to other developing countries. The per capita annual consumption of electricity in India is low when compared to all other in the world, it is approximately 734 kwh (2008-09)
Power sector is a highly capital intensive business with long gestation periods before commencement of revenue streams (construction periods of 4-5 years) and an even longer operating period (over 25 years). Since most of the projects have such a long time frame, there are some inherent risks in both the internal and external environment. We monitor the external environment and manage our internal environment to mitigate the concerns on a continuous basis. Some of the key concerns being faced by the sector currently are coal supply position.
coal supply position
More than 50 percent of India's generation capacity is coal based. According to the Integrated Energy Policy, by FY31-32, India requires 2,040 million tonnes of coal for power generation, more than 5 times its current consumption levels. The shortage of coal is so acute that most of the power generation companies are looking at imported coal as a viable alternative to domestic coal.
Increasing importance of private sector
India has emerged as one of the fastest growing economies in the world. Its current economic performance reflects a healthy trend based on increased consumption, investment and exports. Over the next five years, this growth is expected to continue. A key risk of the continued growth of the Indian economy is inadequate infrastructure. Infrastructure investment in India is on the rise, but growth may be constrained without further improvements. The Government of India has identified the power sector as a key sector of focus to promote sustained industrial growth. It has embarked on an rapacious mission -"Power for All by 2012"- and has undertaken multiple reforms to make the power sector more attractive to private sector investment.
Latest developments in acquiring coal mines abroad by private players in power sector
Wesfarmers boss Richard Goyder put the asset on the block in March after approaching the number of interested parties after the Griffin coalmine neighbouring Premier was auctioned for about $800 million to India's Lanco Infratech late last year.
Indicative bids for Premier were submitted about a week and a half ago and Wesfarmers and its advisers at Gresham and UBS started the second stage of the process this week.
The auction was expected to be dominated by Indian and Asian players seeking coal for energy. Apart from Reliance, India's GVK Infrastructure, which was negotiated with Gina Rinehart's Hancock, Prospecting over two coalmines in the Galilee Basin. Lanco were others who linked with Premier. It's understood that Reliance was interested in Griffin at a very early stage of that process.
On UBS estimates, India's coal imports are set to reach almost 70 percent in the next five years.
Reliance is a part of the sprawling conglomerate run by Anil Dhirubhai Ambani, with interests ranging from telecommunications to finance.
Reliance Power aims to generate 35,000 megawatts of power by 2017, of which 5000 MW was expected in the next two years, and its coal subsidiary agreed to tip in $US5bn into two Indonesian coal projects earlier this year.
Premier has reserves of more than 100 million tonnes of sub-bituminous thermal coal used for power generation.
Earnings before interest and tax from the mine have been estimated at just $30m-$35m -- about 5 per cent of the company's total resources income.
While Wesfarmers would love a sale at similar prices to Griffin, analysts have estimated the value of the asset at $400m-plus.
One difference between Griffin and Premier is that most of the Griffin's coal will be exported to Lanco's power stations in India, whereas Premier's annual output of 4 million tonnes is sold mainly to state-owned electricity generator Verve Energy.
However, a foreign buyer is expected to look to expand production and divert more coal to the export market.
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