Coal India Sets Aside $6.5 Billion to Buy Overseas Mine Assets

Coal India Ltd. (COAL), the world’s biggest producer of the fuel, has set aside 350 billion rupees ($6.5 billion) to buy and develop mines overseas over the next five years to bolster domestic supplies.

The state-owned company plans to spend 100 billion rupees on exploration and building logistics infrastructure in Mozambique, junior coal minister Pratik Prakashbapu Patil said in a written reply today to parliament questions. Coal India has prospecting rights for two blocks in Mozambique’s Tete province. It will spend 250 billion rupees to buy assets in countries including the U.S., South Africa, Indonesia, Australia and Colombia, the minister said.

“There are more coal mines available for buyouts as thermal coal prices have crashed partly because of the weak economic scenario and partly due to new energy sources in the form of shale gas,” Sushil Maroo, chief financial officer at Jindal Steel & Power Ltd. (JSP), India’s largest steel producer by value, said in an interview last week.

Coal India, which fires more than half of India’s power generation capacity, faces government pressure to ensure uninterrupted supplies to utilities and reduce blackouts that crimp economic growth. The Kolkata-based company’s attempts to raise output at home have been stymied by delays in land purchases, slow environment approvals and frequent labor unrest.

Coal India shares have fallen 5.4 percent in the past year in Mumbai, compared with an 11 percent increase in the benchmark S&P BSE Sensex. The stock fell 0.4 percent to 319.15 rupees at the close in Mumbai today.

Failed Attempts

The company’s efforts to purchase stakes in assets of St. Louis-based Peabody Energy Corp. (BTU) and Indonesia’s PT Dian Swastatika Sentosa were foiled by government delays. A 30 percent stake in Swastatika Sentosa unit Golden Energy Mines, which Coal India pursued for more than a year, was eventually bought by Bangalore-based GMR Infrastructure Ltd. (GMRI)

Still, the company is pushing ahead with its plans for overseas acquisitions. It asked investment banks, mine owners willing to sell stakes or their representatives to place initial offers in an advertisement in India’s Mint newspaper on Feb. 27, without giving price or timing details. The company is examining seven stake sale proposals from Indonesia and Australia, two people familiar with the matter said on Feb. 10.

Coal India, which started exploration in its Mozambique blocks, has called bids for additional drilling in the area, according to a document on its website. The company plans to award the contract by March, two people familiar with the plan said last month. Talks are on with the South African government for a similar venture in the country’s Limpopo province, they had said.

To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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