Nalco’s Indonesia project trips on coal supply

Jayanta Mallick Kolkata | Updated on July 25, 2012 Published on July 25, 2012

National Aluminium Company Ltd (Nalco) has stumbled on a coal linkage hurdle for its proposed 0.5-mpta aluminium smelter project in Indonesia.

Nalco, which is banking on local coal supply to run a planned 1,250-MW captive plant to power its smelter, has not been able to wrap up the deal in the past year. “Even after completing an elaborate due diligence exercise and selection from among the expressions of interest, things could not move as the chosen supplier developed problems of its own”, a Mines Ministry source told Business Line.

Mr B.L. Bagra, Nalco CMD, admitted the delay in clinching the agreement, but declined to elaborate. Sources said the selected Middle East Coal (MEC), which holds the concession containing the JORC-compliant 1.5 billion tonnes of resources, could not achieve financial closure for its local mining project. Nalco has also been told that it was considering an equity restructure. In the event of any change in the equity structure, the due diligence on the MEC’s financial bid would have to be redone.

“Moreover, the MEC’s bid selection was subject to financial closure of its mine project,” a source explained. MEC is a joint venture between Ras Al Khaima Investment Authority and Trimex group of Dubai.

supply infrastructure

In September 2010, the PSU had floated a tender for coal concession holders in East Kutai Regency of Kalimantan province for supply of 5 million tonnes thermal coal annually for its proposed $4-billion project. Its in-house feasibility study, validated by M.N. Dastur & Co, favoured the East Kalimantan project over another proposal in South Sumatra on the grounds that the mine, rail and port infrastructure development would provide a time advantage.

MEC, through a separate entity, is developing a 125-km and 60-mtpa rail corridor linking the mine site to the eastern coast of Kalimantan and a jetty. Nalco, under a MoU, is to have the right to use this infrastructure to bring in alumina from India and export aluminum.

The MoU also provided for a share swap between the two entities if the project takes off.

Published on July 25, 2012
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