China and India : Coal demand set to outstrip supply

As China tries to cope with what may be its worst power shortage in years, coal demand from the world's biggest consumer is likely to take centre stage at one of Asia's largest coal industry gatherings in Indonesia next week.

China will face stiff competition for coal shipped by Indonesia, the world's biggest exporter of thermal coal, from India where demand for electricity is rising in an economy seen growing around 8.5 percent.

"With domestic prices rising so strongly -- they are basically on par with import prices now -- the likelihood of China being strong importers of thermal coal over the summer is extremely high," said Daniel Hynes, director of commodity research at Citigroup in Sydney.

Chinese domestic coal prices rose to the highest level in more than two years last week as utilities stocked up ahead of the summer months, making imports more attractive.

Chinese buyers have already been on the hunt for Indonesian cargoes as well as some Australian coal over the last few weeks to fill requirements.

If Beijing lifts restrictions on how much coal-fired power plants are permitted to charge more for electricity, as it has already done in some provinces, import demand could grow even higher as utilities burn more coal

Indian demand for Indonesian coal is also on the rise, and India's short-term and long-term demand is likely to be a focus.

"Over the last couple of months, you're actually seeing the share of India coal imports from Indonesia, increasing... India has made a lot of progress with imports, with year-on-year growth. People will want to see where they are at the moment," said one Indonesia-based analyst who asked not to be named.

Growing demand for Indonesian coal by India, to fill the widening gap between domestic coal output and demand, is likely to continue, the analyst added, resulting in intense competition between India and China for tonnage.

Indian and Chinese companies are also seeking to acquire stakes in Indonesian coal mines to secure their supply, with Coal India , the world's largest coal miner, in advanced talks to buy up to 40 percent of Indonesian low-grade coal producer Golden Energy Mines for up to $1 billion, three sources with direct knowledge of the deal said.

Although India is home to 10 percent of global coal reserves, it is plagued by a shortfall in local supplies as demand has grown rapidly with the increase in coal-fired power plants.

Source : Economic Times

Coal India net profit up 42% : Statistics and news

Net profit is seen up 42% at Rs 3734 crore versus Rs 2626 crore.

-Dispatches may increase 5% QoQ

-realizations to increase 6.2%QoQ

EBITDA margin is seen at 33% vs 27%.

· Co increased coal prices of Grade A & Grade B coal by 30% on Feb 27, 2011

· Price increase is partly to offset cost increases (~10% YoY) given increased staff costs (Dearness allowance increased by 50%) and other costs.

· Employees Wages and Benefits in FY11Q3 at Rs.4500 cr, should come in much higher

· Global coal prices have increased 20%+ since 3QFY11, and could lead to improved realizations for e-auctions.

· Have 70 million tonne of coal stocks that we had at the end of previous fiscal.

· 70 million tonne of coal stock translates to nearly 1/6th of our production merely 2 months production which is undesirable.

· There is an issue of movement of coal from the pithead to the consuming centers.

· Have been able to liquidate 4.5 million tonne of coal from stocks recently

Production:

· Coal India reported flat production of 431mt for FY11(unchanged YoY)

· Down 6.5% from its target driven by project delays and infrastructure constraints.

· Production in FY11 was estimated at approx 440m tons

· Raised selling prices to selective customers in Q4 FY11 to offset lower production.

· The new pricing mechanism would offer more exposure to the spot coal market

· Expect spot-based sales volumes to rise to 23% in FY12 from 16% in FY11.

· Production target for FY12 at 454mt

Further Price Hike on cards:

· Co may raise price of coal from July 1, 2011

· To increase prices to offset wage hike

· To decide on price hike by end of June

· Co to decide on another price hike post wage increase which may Increase wages by 30% In FY12

· To accommodate the proposed proposed mining bill

· Total Wage Bill Increase At 32% In FY11

E-Auctions

Coal India fuming at the Planning Commission's move of curbing down the amount of coal offered for e-auctioning:

· Feels e-auctions of coal should continue as e-auction has approval of the Supreme Court.

· States that the PSU will continue its 10% e-auction unless there is a new directive.

· 81% premium in e-auction comes over fuel supply agreements (FSA) and it will facilitate clearance of huge inventories.

· Any change in the e-auction policy will call for changes in the new coal distribution policy.

· Planning Commission had said that 10% of coal, which is e-auctioned by Coal India, should be cut down.

· The commission feels that CIL should adopt pool pricing for thermal coal and should also plan for import of coal.

· E-auction accounts for 11-12% of CIL's volumes and CIL's FY12E earnings could be hit 26% if discontinued

· 80% of the offered coal to e-auction goes by road and only 20% goes by rail.

· Power sector is demanding some coal from the e-auction.

· Ended up last year with 70 million tonne of coal stock.

· The last fiscal had offered to the power sector something around 335 million tonne of coal.

· But what reached them or what they could lift was only 304 million tonne.

· Feel that the e-auction should continue because this provides for only 10% of our total produce to those needy consumers who have not been getting linkages

· Providing linkages to the non-coal sector consumers was stopped since 2001.

· But by and large the entire power sector has been untouched from an increase in prices so far.

· Feels the infrastructure in the Indian Railways needs to be increased.

· The target for volume off take is 454 million tonne for FY12 and 11% of that would go for e-auction

· Have earmarked 347 million tonne for the power sector.

· There is absolutely no chance of this 50 million tonne being sold at fuel supply agreement (FSA) prices

Logistics Problem

· Indian Railways have increased the availability of rakes.

· In April 2010 the average rakes availability was 158 per day and this year April it has been 180 per day, which is about 22 rakes per day availability increase.

· Hoping this trend continues as it will help in liquidating stock

Sources

Price pooling of coal - Report on 25th May

A committee under the chairmanship of the Central Electricity Authority (CEA) chairperson was set up earlier this month to look into the matter. The committee comprises officials from the power, coal and environment ministries, the Planning Commission and state government officials.

Pooling refers to the process in which domestic and international prices of material are averaged out to enable uniformity of rates for all consumers, irrespective of where they are sourcing the material from.

As reported the pooling of coal prices is likely to be based on the same price pooling principle adopted by the government for LNG. In the case of liquefied natural gas, the price of LNG sourced through long-term contracts at a cheaper price is pooled with the rates for more expensive LNG sourced from the spot market to ensure that consumers across the country avail of an uniform, average price.

The Power Ministry is exploring every opportunity possible to make coal available to companies at a low price so that electricity generation does not suffer and power tariffs are not driven up.

Coal India to defend any action against e-auction, blames railways linkage for the problems

Coal India is fuming at the Planning Commission's move of curbing down the amount of coal offered for e-auctioning. In an interview to CNBC-TV18, NC Jha, Chairman of the company said that e-auctions of coal should continue. He informed that e-auction has approval of the Supreme Court.

Jha stressed that the PSU will continue its 10% e-auction unless there is a new directive. He explained that 81% premium in e-auction comes over fuel supply agreements (FSA) and it will facilitate clearance of huge inventories.

He added that any change in the e-auction policy will call for changes in the new coal distribution policy.

Earlier, the Planning Commission had said that 10% of coal, which is e-auctioned by Coal India, should be cut down. The commission feels that CIL should adopt pool pricing for thermal coal and should also plan for import of coal.

Chairman of Coal India Mr. Jha said in an interview that the e-auction system was introduced in our coal sales based on a judgment from the Supreme Court. The basic issue was those consumers who have not been getting linkages after 2001 should get some access to coal and this system of e-auction was introduced. As per the new coal distribution policy which was developed by the ministry of coal, with the opinion received from different ministries including power, it provides for 10% of the coal produced by Coal India to be offered under e-auction. So e-auction was introduced in 2006 and it is continuing.

The issue is that about 80% of the offered coal to e-auction goes by road and only 20% goes by rail. I have also come across certain news, that the power sector is demanding some coal from the e-auction. The question is, is the coal not available? We ended up last year with 70 million tonne of coal stock. The last fiscal we had offered to the power sector something around 335 million tonne of coal. But what reached them or what they could lift was only 304 million tonne. We had to add 7 million tonne of our produce to this stock.

So is it an issue that the coal is not available, so whatever is going through the e-auction to be offered to the power sector? No, it is not. I feel that the e-auction should continue because this provides for only 10% of our total produce to those needy consumers who have not been getting linkages, because providing linkages to the non-coal sector consumers was stopped since 2001. Now all those new industries which have come up after that from where should they source coal?

This is one thing which had the approval of the Supreme Court and which was factored in the new coal distribution policy and is under implementation. Now whether this will continue or not continue is not in my hands. My mandate is to provide a minimum of 10% coal through the e-auction route to the needy consumers. As long as the new directive does not come, we will continue to offer this coal to the e-auction consumers.

Twenty eight power plants face critical coal stock

Twenty eight power plants face critical coal stock

As many as 28 coal-fired power plants across the country are in a critical state with coal stock of less than seven days. Of the 28 power stations, 14 are in a super critical state with coal stock of less than four days, according to the latest report compiled by the Central Electricity Authority (CEA).

The situation is possibly the worse in Gujarat where four out of five thermal power stations are reeling under critical coal stock. The four thermal power stations (TPS) grappling with critical coal stock are Gandhi Nagar TPS (870 MW), Ukai TPS (850 MW), Sikka TPS (240 MW) and Wanakbori TPS (1470 MW). While the Gandhi Nagar, Sikka and Wanakbori TPS are bogged down by less receipt of coal, the dip in coal stock in case of Ukai TPS has been due to higher generation of power.

In the eastern region, eight out of 24 power stations are reeling under critical coal stock, six of them being in the super critical state. In Orissa, two coal-based power plants-the 3000 MW NTPC Kaniha and the recently commissioned 600 MW unit of Sterlite Energy’s 2400 MW independent power plant (IPP) at Jharsuguda are in a critical state.

While the NTPC Kaniha plant, a pithead power plant, has a coal stock of 281,000 tonnes which would barely last for six days, the condition of Sterlite IPP is even worse. The IPP is grappling with super critical coal stock and has a stock of 38000 tonnes which would last for only two days. Both NTPC Kaniha and Sterlite IPP have been let down by less receipt of coal.

In West Bengal, three power stations- Mejia TPS, Bandel TPS and Kolaghat TPS are facing critical coal stock. The Bandel and Kolaghat TPS are getting less coal whereas in case of Mejia TPS, the coal stock has dwindled because of higher turnaround time of coal transport. In Bihar, the Muzaffarpur TPS (220 MW) and Kahalgaon TPS (2340 MW) of NTPC are in a super critical state due to less receipt of coal.

Similarly, in Jharkhand, the 890 MW Chandrapura TPS of Damodar Valley Corporation (DVC) has a coal stock of only 9000 tonnes. Punjab and Haryana are the only two states where the coal-based power plants are not facing the problem of critical coal stock.

State of MP to import 8 lakh tonne of coal to run power plants

To overcome the hurdles in power generation due to coal shortage, the Madhya Pradesh government has decided to import 8 lakh metric tonne of fossil fuel for its thermal power stations this fiscal. The power generating capacity of the state has been hit by the shortage of coal and the central quota of fossil fuel to the state was inadequate, Madhya Pradesh Power Generating Company Limited (MPPGCL) CMD, AM Sajnani said.

The CMD said that around Rs 500 crore to Rs 550 crore are required for the coal procurement. The Plant Load Factor (PLF) or efficiency of thermal power stations in Madhya Pradesh dipped to 61.10 per cent in FY11 from 62.86 per cent in FY10.

According to Sanjani, the coal shortage made the MPPGCL to suffer a financial loss of around Rs 40 crore due to the decline in the PLF and that their thermal power stations have an installed capacity to generate 2,932.5 Mw. Last year, Madhya Pradesh had to import 1.5 lakh metric tonne of fossil fuel from Indonesia.

Coal India on a hiring spree

Besides hiking the coal prices and giving a 24% annual return Coal India is all set to go on a hiring spree. Coal India (CIL) will induct around 1,100 management trainees by October this year, in keeping with its massive expansion plans. The Maharatna firm, which already has a staggering 3.97 lakh workforce, had hired around 1,000 personnel in the last two years following a decade-long freeze on recruitment drive.

The selection of the candidates would be done through a national-level written examination followed by a personal interview

The new faces will be inducted into the parent firm and its subsidiaries in various disciplines - mining, electrical, mechanical, civil and chemical/mineral, the company said.

The recruitment of the white-collars is necessitated as the world's top coal producer plans huge expansions, including setting up of 20 new washeries with a combined capacity of 111.1 million tonnes at an estimated cost of Rs 2,500 crore.

Besides, CIL is also awaiting environmental and forest clearances to start work on about 150 projects stranded since 2009. CIL, which accounts for over 80 per cent of the domestic coal production, has set a target of 452 million tonnes for the current fiscal from around 432 million tonnes production last fiscal.

Indian Coal Reserves Facts

Coal reserve up to 1200 million tonnes

Proved Reserve – 109.8 Btn

Indicated Reserve – 130.6 Btn

Inferred Reserve – 35.6 Btn

Total Reserve – 276.81 Btn

Total coal bearing area in India is 22400 sq.km

Out of this only Approx.10200 sq.km. has been systematically explored through regional/Promotional drilling

Out of 10200 sq.km area only 22.5% area explored through detailed drilling.

Growth of coal production is 6.0% whereas demand and supply gap has widened over  at an average growth rate of 7% to 8%.

As on 01.04.2010, Source: CMPDI/ GSI

Investment in coal washeries picks up steam

Indian Power Market ran an article regarding the carbon footprint of India in top 5 and its increasing reliance on coal for its power needs. It asked a question if coal washeries are the answer to India's need for quality coal. It seems like investment in coal washeries is picking up steam with Coal India investing in as many as 20 washeries. India has the largest deposits of coal in the world but most of it is not coking grade coal. Coking grade coal that is imported form Australia and Indonesia (and now from Russia) is 45-50% dearer and is usually blended with Indian coal. Coal washeries reduce the ash content of coal and make it suitable for combustion.

Coal India MD, Mr. Jha, said Coal India has planned 20 washeries at an investment of around Rs 2,500 crore, with a capacity of 111 million tons. However, the new plan will see Coal India now invest another Rs 3,500 crore on more washeries, said Jha. Out of the proposed 20 washeries, a small number will serve major clients that are far from the mines or production areas and customers who are small players close to the mines but have been left out, indicated Jha.

Coal India has already floated tenders for five of the washeries and work has been awarded for three washeries. Out of the three with work clearances, one has already attained environmental clearance as well. These 20 washeries will be set up over a period of 2.5-3 years. industry estimates have placed coal washeries to be a $5 billion opportunity in India.

Indian Energy Sector - Risk Factors: India's Carbon Footprint in top 5

Indian Energy Sector - Risk Factors: India's Carbon Footprint in top 5: " India's greenhouse gas emissions grew more than half between 1994 and 2007, helped up by a largely coal-reliant power s..."

Coal Block De-allocation due to non action

The Coal Ministry took a decision to de-allocate 14 coal blocks and 1 lignite block awarded to public sector companies like NTPC and DVC, besides 3 private firms, over their failure to develop the same for captive use, an official said. “The ministry is going to de-allocate 15 blocks, including five allotted to National Thermal Power Corporation (NTPC). These firms were allotted 14 coal blocks and one lignite block in 2007, but failed to explore and develop the same despite showcause notices,” a senior Coal Ministry official"

30 % Imported Coal bound to raise power prices in India

Minister of Power Shri Sushil Kumar Shinde said today that "Coal is an issue, but we are not concerned with linkages for 80,000 Mw which is done, though it has 30 per cent import component,” said power minister Sushil Kumar Shinde." Under the 12th five year plan the Govt. plans to add 100,000 MW of capacity for which coal linkage is an issue of prime importance.

As of now the proportion of imported coal being blended is around 10% and there is increasing concern over rising power prices. State regulators are under pressure to make Discoms financially viable on one hand while on the other hand they are under political pressure to keep power prices as low as possible.

The increased proportion of imported coal is going to make the task of ascertaining financial viability of ailing Discoms even more difficult.

Coal India proposes Rs 3,500 cr investment in washeries

Coal India Ltd has lined up another set of new investments for setting up coal washeries. The public sector company which planned around Rs 2,500 crore earlier for setting up washeries is now planning to invest another Rs 3,500 crore.


N C Jha, CMD, Coal India, said the company has planned 20 washeries at an investment of around Rs 2,500 crore, with a capacity of 111 MT. “Now we plan to invest another Rs 3,500 crore on more washeries.”

He noted, the company produces 431 million tonnes currently, of which 10 per cent are sold through e-auction barring rest has to be washed and sold. According to Jha, through washing the company plans to improve the supply quality of coal to the customers, since it will have 7-8 per cent of Ash rejection.


He added, these washieries would help the company increase the quality of coal which the company offers and will also help get better prices.According to CIL, the company’s products are 50 per cent cheaper than imported coal and CIL has the scope to increase the price.
According to industry estimates coal washeries are estimated to be a $5 billion opportunity in India. According to Jha, the present capacity for washing coal in the country is 130 MT, mostly with the private operators, and utilisation is around 40 per cent only.

Coal Mining Development proposals for Jharkhand

A unit of Australia’s Leighton Holdings Ltd. and India’s Singareni Collieries Co. are among about half a dozen companies that have bid to develop power producer NTPC Ltd.’s Chatti-Bariatu coal mine in the eastern state of Jharkhand.

“The papers submitted [by the bidders] are being examined,” said NTPC Chairman Arup Choudhury. “I think we should be able to finalize the contractor in three-four months’ time.” The utility is now rushing to start production at six coal deposits awarded by the government, and faces the threat of the Coal Ministry cancelling its rights on these mines if it misses development deadlines.

The government has opened up India’s coal-mining sector to increase output, which in turn can help expand the nation’s electricity generation. While commercial coal mining in India is still limited to state-run Coal India Ltd. and Singareni Collieries, the government has been allocating coal blocks for captive mining to steel, cement and power producers in order to boost output, although many of these reserves remain underdeveloped. Choudhury didn’t put a value on the contract.

In December, Leighton’s unit Thiess won a 20-year, US $5.5 billion contract to develop and operate NTPC’s Pakri Barwadih coal mine in eastern India, which is around three times larger than Chatti-Bariatu. It was the first of NTPC’s six blocks to have been awarded. As India’s laws prevent foreign companies from owning or selling coal, under the terms of its contract, Thiess will collect fees for developing and managing the facility.

NTPC now hopes to start output at its Pakri Barwadih mine in 2012, Choudhury said, after having missed an earlier deadline in 2009. Coal shortages are crippling output from NTPC’s coal-fired power plants at a time it is planning a rapid buildup of capacity. Around 80 per cent of NTPC’s installed generating capacity is coal-based.

NTPC plans to add 5,000 Mw of new capacity annually for the next six years, and expects capital expenditure of 160 billion rupees (US $3.6 billion) to 170 billion rupees (US $3.8 billion) each year to achieve it. “Fuel can be a limiting factor in expansion,” Choudhury said. “So we are taking all measures to ensure supply.”

Coal Shortage throttles Power output for April

The country added record power capacity in the year ended March 31, expanding output by 15,795 Mw. More than 45% of this capacity addition is from private investors like Adani Power Ltd, Reliance Power Ltd and Tata Power Co. But the power output for the month of April is 8 percent less electricity than a state-mandated target amid a shortage of coal, as per the Central Electricity Authority . Electricity production from April 1 to April 29 was 63,655 million kilowatt-hours compared with a targeted 69,237 million, as per CEA report.

There were 28 coal-fired generators with fuel stockpiles at a “critical” level of less than seven days’ supply and 11 generators with a “super critical” level of less than four days’ inventory on April 28, according to the Central Electricity Authority. That compares with typical stocks of 25 to 30 days, the authority said.

A couple of days ago NTPC chairman denied any news of coal shortage and stated that the shortage is only a price related phenomenon as state distribution utilities are not ready to by costlier power. Stocks of infra and power sector companies are  already reeling under the hawkish credit policy released by the RBI to rein inflation. A fall in power output in the summer season which is supposed to be the season of peak demand does not give good encouragement to investors.

India's Adani wins bidding for Australia's Abbot Point -| Reuters

India's Adani wins bidding for Australia's Abbot Point -Reuters

India's Adani Enterprises has agreed to buy the Abbot Point Coal Terminal in Australia's Queensland state in a deal valued at around A$1.85 billion ($2 billion) and expected to be announced later on Tuesday, sources said.

Adani, which was competing with a last-minute offer for the asset by Australian mining tycoon Nathan Tinkler, had won the bidding, three sources familiar with the deal told Reuters.

Standard Chartered Bank is arranging debt for Adani's bid. A successful sale would make it one of the largest acquisitions of an Australian asset by an Indian company since Adani acquired Linc Energy's Gaililee coal project for $2.7 billion last August. Adani or Tinkler were not immediately available for comment. A Queensland government spokesman declined to comment.

Morgan Stanley was arranging debt for Tinkler's International Port and Logistics Company, while Hong Kong-based hedge fund Noon Day was investing about A$200 million in mezzanine debt, sources said. Located in North Queensland, the terminal services three mines in the Bowen Basin. It is currently undergoing expansion to increase capacity to 50 million tonnes per annum from 21 million tonnes.

The Queensland government has already raised at least $6.3 billion from the sale of the Port of Brisbane and the $4 billion float of rail freight business QR National Ltd. Other groups which also looked at the asset included Brookfield Infrastructure Patners and Macquarie Group Ltd , sources have told Reuters previously.

Credit Suisse is advising on Tinkler's bid. Bank of America Merrill Lynch is advising the Queensland government. ($1 = 0.914 Australian Dollars) (Additional reporting by Narayanan Somasundaram in Sydney and Stephen Aldred in Hong Kong; Editing by Ed Davies)

Indian Power Market: Coal Prices may be regulated in near future

Indian Power Market: Coal Prices may be regulated in near future

No coal shortage. Think out-of-box, says NTPC chief - Money - DNA

No coal shortage. Think out-of-box, says NTPC chief - Money - DNA: "Coal shortage is the biggest impediment for power generators. How do you see this affecting the sector — and that includes you?
I want to ask a counter-question: Is the country facing coal shortage? There is none. The government has to find a way so that Coal India Ltd is able to meet the requirement of the country. After all, if there is a requirement of power and the only reliable fuel available in the country is coal, then it should be Coal India’s responsibility to ensure that it meets the requirement to match a GDP growth of 8-9%. And if it is not able to mine coal in the country, then it should import and sell to us at a pooled price."