NTPC Ltd., Asia’s second-biggest electricity generator by market value, is seeking to buy coal mines overseas that may help source as much as 67 percent of the company’s current imports of the fuel.
The utility based in New Delhi will use part of its $3 billion in cash reserves and also raise debt to fund the purchase of mines in Australia, Indonesia and Mozambique that can supply as much as 10 million metric tons of coal a year, Chairman R.S. Sharma said by telephone today.
“Having your own mines, above all, ensures consistency of supplies,” Novonil Guha, a Mumbai-based analyst with Brics Securities who has an “outperform” rating on the stock, said by telephone. “Having their own mines shields them from being exposed to the volatility of international coal prices.”
Indian energy companies are seeking to acquire assets across the world as demand from its 1.2 billion people rises and companies build more factories. State-owned Coal India Ltd., the world’s largest producer, may buy mines abroad to supply the equivalent of 8 percent of domestic output, according to Alok Perti, additional secretary to the coal ministry.
NTPC shares have declined 15 percent this year compared with a 3 percent increase in the benchmark Sensitive Index. The stock fell 0.2 percent to 199.15 rupees in Mumbai trading today.
“Imports are rising at 10 percent every year and it makes sense to have our own mines overseas from where we can bring good quality coal,” Sharma said. “We shouldn’t have any problems funding these acquisitions.” NTPC imports about 15 million tons of coal every year, he said.
Power-station coal prices at Australia’s Newcastle port, an Asian benchmark, fell 1.3 percent to $97.06 a metric ton in the week ended July 9. That’s a 15 percent increase from $84.75 in the week ended Jan. 1.
Coal demand in India, Asia’s third-largest energy consumer, may double from 2008 to 2015 to exceed 1 billion tons, Wood Mackenzie said on July 1.
India’s annual coal output of 535 million tons will fall short of demand from power generators by as much as 80 million tons by next year, Perti said in an interview July 7. Coal is used to fire more than half of India’s current installed generation capacity, according to the Central Electricity Authority.
India proposes to add 78,000 megawatts of electricity-generating capacity in the five years to March 2012 and 100,000 megawatts in the following five years.
NTPC plans to issue tenders for boilers and turbines for nine units of 800 megawatts each in August or September, Sharma said. This tender, along with one for 11 units of 660 megawatts each, is likely to be awarded in the year ending March, he said.
The utility will send a team of executives to Australia to look at possible coal mining investments, Sharma said last month. NTPC was set to acquire a controlling interest in a coal field near Perth, the Economic Times reported on June 3.