Monnet Ispat completes Indonesian coal mine deal

PTI New Delhi | Updated on March 21, 2011

Monnet Ispat and Energy (MIEL) has completed the deal to acquire PT Sarwa Sembada Karya Bumi’s thermal coal mine in Sumatra, Indonesia, for $24 million.

Spread over 25,000 hectares in the East Asian nation’s Jambi province, the mine provides the company access to one of the largest thermal coal deposits in the world and gives it a captive source to fire its upcoming power projects, the Monnet Group Executive Vice-Chairman and Managing Director, Mr Sandeep Jajodia, told PTI.

It would also help Monnet Ispat cash in on the boiling coal market by selling the excess production in the open markets, as the output would far outstrip its captive demand.

“The worldwide coal markets are expected to do very well in the coming years and especially India and China would remain strong buyers,” he added.

According to the Coal Ministry estimates, the coal deficit being faced by Indian power utilities is expected to double to 104 million tonnes in the next fiscal.

At present, the deficit is being met through imports. Of the total installed power capacity of 159,398 MW in India, almost 50 per cent is based on coal.

Coal prices are already ruling high following flash floods in Australia’s Queensland province, a major producing region.

MIEL has so far explored only about 1,500 hectares of the total lease area and was able to establish 65 mt of coal reserves in that area itself.

“We expect these reserves to go up substantially after completing the exploration of the total area,” Mr Jajodia said, adding that coal from the mine would help Monnet Ispat access low-cost fuel for its planned coast-based power projects.

MIEL is currently working on a 1,700-MW thermal power plant in Orissa and plans to put up one more plant of 1,300-MW capacity somewhere in Gujarat or Tamil Nadu to meet the growing needs of the country. The location for the second plant has not yet been firmed up.

While the plant in Orissa would take another three to three-and-a-half years to go on stream, MIEL would meanwhile sell the fossil fuel in the open markets, ensuring a long-term source of revenue for the company, Mr Jajodia added.

The acquisition, made by Monnet Ispat’s wholly-owned subsidiary Monnet Global (MGL), is also value-accretive as the logistics cost would be comparatively lower in view of the excellent coastal location of the mine in Sumatra.

Published on March 21, 2011

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