The Hindu Business Line : L&T, Karnataka Power close to deal for Indonesian coal mine acquisition

Bangalore, Sept. 1 Engineering major L&T Ltd and Karnataka Power Corporation Ltd (KPCL) are on the verge of entering into a joint venture agreement for acquiring a coal mine in Indonesia.

KPCL is the Karnataka state government owned public sector power producer, with both thermal and hydel assets. KPCL’s Managing Director, Mr S.M. Jaamdar, confirmed the development and said, “We are still exploring the possibility and hope to arrive at an arrangement soon.” The financial modalities for the joint venture were still under discussion, he said. But indications are that it was likely to be on a 50:50 basis and would be leveraging on each other’s core competencies. KPCL is among the largest integrated power producers in the country.

Mr Jaamdar said KPCL was also examining extension of the joint venture with L&T for building large power plants to overcome balance sheet limits. KPCL’s preference was for super critical plants or boiler turbine generation equipment of about 600 MW plus. If the joint venture materialised it would be one of the first public private partnerships in the country between a state government owned entity and the private sector for power generation in the country.

Coal Sources

KPCL, Mr Jaamdar said, was pushed into looking for alternative coal sources. KPCL was faced with a shortage supplies from Coal India in view of flooding in Mahanadi Coal fields. He said, “We need to ensure fuel supply security for our generating stations.” Stockyard position is currently precarious, with only about 12 days supplies. Besides, thermal plants were now being fully utilised in view of low reservoir inflows.

KPCL’s annual coal requirements are estimated to be in the region of about 17 lakh tonnes a year for its eight units (8 x 210 MW) of the Raichur Thermal Power Station and the 500 MW Bellary Thermal Power Station. KPCL was importing some of its coal requirements from Indonesia and other South East Asian sources.

Tariffs

However, there were tariff pressures. Imported coal currently costs about $200 (Rs 8700) a tonne cost insurance and freight. Domestic coal costs Rs 3,000 a tonne. Coal prices were treated as pass through item for fixing power tariff. Mr Jaamdar said the tariff impact was mitigated in view of the high efficiency of international steam coal.