Imported coal to now make power costlier

Ending a year-long drama surrounding supply of coal to power plants, the Union Cabinet today allowed power companies to pass on to consumers the extra cost of importing coal to bridge the domestic fuel shortage. The decision will need regulatory go-ahead. If cleared, it will increase the electricity price in the country by an average 20-25 paise per unit.

Reacting to the government move, the stocks of power companies rose by up to two per cent on BSE. The scrip of NTPC rose 2.11 per cent over its previous close to Rs 143.05, while those of PowerGrid and Tata Power climbed 1.18 per cent and 0.74 per cent, respectively.

The Cabinet decision covers 78,000 Mw of power capacity commissioned in six years through March 2015. Over 36,000 Mw of this has already come on stream since March 2009. “Costly power is better than no power. More than Rs 1 lakh crore has already been invested in setting up around the 25,000-Mw capacity stranded at present. The choice is between paying more for electricity or having no electricity at all,” Finance Minister P Chidambaram said, announcing the decision.

The finance minister, who was accompanied by Coal Minister Shriprakash Jaiswal, said it was difficult to work out the exact quantum of increase in power rates, as it would vary from one power plant to another. He added implementing the decision would require modifications to the coal distribution policy and tariff guidelines.

The government had last year asked state-run miner, Coal India Ltd (CIL), to meet power companies’ coal demand, corresponding to at least 80 per cent of their annual contracted quantity (ACQ). The Cabinet has now decided CIL would meet 65 per cent of ACQ through domestic linkages in the current financial year. To meet the balance supply obligation, CIL will supply imported coal and supply on a cost-plus basis. The power firms would have the choice of importing coal on their own. Actual supplies would begin only after power purchase agreements (PPAs) are signed.

“We have advised the electricity regulator (CERC) to allow the increased cost of imported coal as a pass-through on a case-to-case basis, to ensure power investments remain viable,” Chidambaram said, calling the pass-through only an interim measure. He added power plants with more than 4,660 Mw of capacity would be left without assured coal supply even after today’s decision.

CIL will have to import six mt coal in the current financial year to meet the shortfall. “This import quantity would vary every year, depending on how many FSAs (fuel supply agreements) materialise. However, there would not be any need for imports in the terminal year (2016-17) at 80 per cent commitment level, given the growth in our coal production,” CIL Chairman S Narsing Rao told Business Standard. He also said power firms were likely to opt for sourcing imported coal through CIL, owing to assurance of supply and competitive prices.

The approval for pass-through cheered the power industry. “The Cabinet decision breaks the fuel impasse that was threatening the viability of the generation segment in the power sector and creating systemic risk for the banking sector,” said Ashok Khurana, director-general, Association of Power Producers.

The country’s largest private power generator, Tata Power, called for a similar mechanism for imported coal-based projects. “Such projects have been impacted due to extraneous factors beyond the control of developers,” the company said in a statement, referring to its 4,000-Mw Mudra project in Gujarat. The power regulator had recently allowed a compensatory tariff increase for the project after costly imported coal jacked up costs.

The government had originally asked CIL to meet supply obligations for projects with 60,000 Mw capacity. It was later increased to 78,000 Mw after taking into account the 7,000-Mw projects with valid letters of assurance (LoAs) and likely to be commissioned by March 2015, and 11,000 Mw of capacity that has been granted tapering linkages. However, today’s decision might lead to legal complications, as a sizeable chunk of this capacity has been set up through competitive bidding for tariffs.

According to the decision, CIL will continue supplies for the plants commissioned before 2009 at 90 per cent of ACQ.

For those commissioned after 2009, its supply commitment would increase gradually from 65 per cent this year to 75 per cent in the terminal year of the current Plan period. CIL produces 452 mt coal annually, leaving a shortfall of 120 mt, which is met through imports.

Source- Buisness Standard

GVK Hancock Coal appoints Thiess as preferred Mine Operations Contractor fot Alpha Thermal Coal Project

GVK Hancock Coal has appointed Thiess as preferred mine operations contractor for its $10bn Alpha thermal coal project in the Galilee Basin.

An Early Services Agreement signed this week will see GVK Hancock working exclusively with Thiess to develop a 10-year mine plan and budget. Thiess' technical, engineering and plant expertise will be applied to develop the operational strategy and management plans, ensuring the thermal coal mine is a world-class, cost competitive operation. The team is expected to finalise the operational strategy, mine planning and management plan by the end of the year.

Speaking on the development, Dr. GVK Reddy, Founder Chairman and Managing Director, GVK said, "We are delighted to have Thiess on board to help deliver the next phase in Alpha's operational development. It is our endeavour to take innovation to another level and embed industry leading technology and best practice from the early planning stages."

GVK Vice-Chairman, Mr G V Sanjay Reddy stated, "We look forward to working closely with Thiess in responsibly promoting the development of the Alpha Thermal Coal project. We are resetting the paradigm on everything from plant and equipment to local sourcing. I can now confidently say that we have set the tone for what will be Australia's largest coal mine."

Thiess Managing Director Bruce Munro said "Thiess is excited to extend its working relationship with GVK to deliver the next phase in Alpha's operational development. The next six months are a critical time for Thiess and GVK Hancock to work together to reinvigorate Australia's position as the world leader in safe and highly productive operations."

Alpha Coal Mine is located in the Galilee Basin with the first coal to be extracted by 2016. When fully commissioned, the mine will produce 32 million tonnes of thermal coal per year.

In September 2011, GVK had acquired 79% equity stake each in Alpha Coal and Alpha West Coal Mines and 100% equity stake in Kevin's Corner Coal Mines, located in Queensland, Australia from Hancock Coal Pty. Ltd for USD 1.26 billion. These mines have reserves of about 8 billion tonne and a capacity of more than 60 million tonne per annum. When combined, these projects will create one of the largest thermal coal mining operations in the world. GVK had acquired 100% stake in a 500 km rail link and 60 million tonne per annum port as part of the 'pit-to-port' logistics solution.

Shares of GVK Power & Infrastructure Ltd was last trading in BSE at Rs.8.07, down by Rs.0.11 or 1.34%. The stock hit an intraday high of Rs.8.22 and low of Rs.8.

The total traded quantity was 9.17 lakhs compared to 2 week average of 4.91 lakhs.

Source - Equitybulls

'We can't afford' mining's old ways

JAMIE WALKER 

• From:The Australian 

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THE man selected by Gina Rinehart to drive development of the nation's first pit-to-port coal project and defy the mining slowdown says the industry can no longer afford "standard Australian practice".

The $10 billion joint-venture between Mrs Rinehart's Hancock Prospecting and India's GVK group is the key to unlocking a vast new coal field in Queensland's Galilee Basin at a time when big miners, including Rio Tinto, Glencore Xstrata and BHP Billiton, are shelving projects or winding back production.

"We cannot afford to adopt carte blanche standard Australian practices. Australian productivity has gone south, the costs have gone north and prices have come down," GVK Hancock Coal managing director Paul Mulder said.

"The perspective of the company has to be to ensure that this project can operate even in a commodity down cycle, and it is attractive to investors even in a commodity down cycle.Yet Mr Mulder is no fan of employing foreign workers on 457 visas to cut labour costs. "It's quite clear from government policy that it costs more to employ people under a 457," he said. "You have to pay the same rate, but you also have to train them, induct them, socialise them into Australian society, so that comes at a material cost. If you are paying an Australian a base (rate) of one, with a 457 visa it's one-plus . . . you would only get a 457 person if it was necessary for finance and to get the project up and running."

As the $50bn coal industry comes under the hammer from low prices and a high dollar, forcing the scrapping of massive new coal terminals on central Queensland's Balaclava Island and in NSW's Hunter Valley, the Galilee Basin would come on line as the construction phase of Queensland's coal-seam gas industry was winding down in the second half of the decade, should any or all of the nine planned mines pan out.

The multi-billion-dollar race involves a second Indian company, Adani Mining, Clive Palmer's Waratah Coal and exploration group Bandanna Energy, all of which have projects at various stages of planning and approval. Collectively, they are worth an estimated $25bn, capable of producing 180 million tonnes of coal a year. The planned GVK Hancock development near Alpha, 1000km northwest of Brisbane, is considered the most advanced of them.

GVK Hancock has entered a non-binding agreement with rail operator Aurizon to construct a 500km link to the coal port of Abbot Point as well as new loading terminals, adopting the "pit-to-port" model from iron-ore mining in Western Australia. Development of a third mine at Alpha West, would come later.

Getting the project off the ground will test international financial markets' confidence in Australian resources and the mettle of miners to secure gains in productivity and control costs.

Mr Mulder said the business plan was to extract thermal coal -- burnt by power stations -- at a cost of $US55 ($57.5) a tonne, compared with the average cost in Queensland of about $US77 a tonne. This would put the running cost of its proposed mines in the lowest 25 per cent quartile of coal producers.

He said the joint venture's aim was to finalise construction bids by the end of the year "one for the ports, one for the rail, one for the mining infrastructure, one for the wash plant" -- and go to the market for finance early next year.

Asked to rate the prospects of the project getting up, Mr Mulder said: "We are a project that is attractive even in this current commodity downswing."

GVK Power gets 'green' signal for Kevin's Corner mine project

Hyderabad-based GVK Power & Infrastructure Limited has received environmental approval by the Coordinator-General for its $4.2-billion Kevin's Corner mine project in the Galilee Basin in western Queensland of Australia.

The Kevin's Corner project, proposes a 30-million tonne per annum (mtpa) underground and open-cut coal mine and other associated infrastructure 65 kilometre north-west of the Alpha township.The project would rely on the railway infrastructure of the adjacent Alpha Coal project to transport coal to the Port of Abbot Point, Bowen.

"This development is yet another breakthrough towards our goal to be the premier and the most reliable coal supplier to the world. The progress in this project further strengthens our commitment to develop world-class projects in a timely and responsible manner," GVK chairman and managing director, GV Krishna Reddy, stated in a press release on Saturday.

In May 2012, GVK's Alpha Coal Project received key environmental approval from Queensland government. In August 2012, the project got federal government approval under the Environment Protection and Biodiversity Conservation Act 1999 (EPBC).

In March this year, GVK Coal Infrastructure (Singapore) Pte Ltd (GVK Hancock) and Aurizon signed a non-binding term sheet to jointly progress the development of rail and port infrastructure to unlock Galilee Basin coal reserves including GVK Hancock's Alpha, Kevin's Corner and Alpha West coal mines and a process to support the next phase of coal growth in the Bowen Basin.