CESC scouting for overseas coal blocks

Written by fe Bureaus | Kolkata | Updated: Oct 30 2009, 06:07am hrs
CESC Ltd, the $3 billion RPG Groups flagship power company, has started hunting for overseas coal blocks to source foreign coal at a price cheaper than that of imported coal.

CESCs requirement for foreign coal comes at the wake of the government order asking it to import at least one third of its total coal requirement for the 2,250 mw greenfield merchant thermal project at Haldia.

Sanjiv Goenka, vice chairman, said as per the current prices of imported coal, per unit generation cost from the Haldia project would be 32 paise more than from the other CESC utilities using Coal India Ltd (CIL) coal.

This is prompting us to look at overseas coal block so that we can source foreign coal at costs lower than that of the cost of imports, Goenka said.

Public sector coal major, CIL, is also trying to acquire overseas coal assets to cut costs on imports.

Of its 2250 mw Haldia project, CESC plans to set up 3x200 mw in phase I on 320 acres, of which it has so far got 280 acres from the state.

We planned financial closure of our Haldia project in October- December quarter but we are not going to make it unless we have the entire 320 acres in hand, Goenka said.

However, the companys hunt for overseas coal assets will continue and we can grab any asset with reserves ranging from 30 million tonne to 600 mt in any coal bearing countries like Australia, South Africa and Indonesia, Goenka said.

So far we have seen six coal mines only in Indonesia but the actual reserves in each of these mines were a fraction of the declared reserves, he added.

Besides the cost factor of foreign coal, increase in prices of CIL coal would also affect CESCs bottomline if tariffs dont go up, Goenka said.

CESC has to buy coal from CILs Eastern Coal Fields Ltd, the prices of which has gone up by 15%.

A 15% rise in coal price is a steep rise, although we havnt calculated the cost impact of it as yet. Very soon we will approach the state elecricity regulatory authority demanding a price revision, Goenka said.

The company reported a profit after tax of Rs 126 crore for the quarter ending September 30, against Rs 124 crore during the corresponding period last fiscal.

CESCs sales volume during this quarter grew by 3.9% over that of the corresponding quarter and there was also increase in power imports. However, the revised tariff structure effective from April gave CESC a marginal increase in profit this quarter against the corresponding quarter, although tax pressures were high, Goenka said.

The company will make the financial closure of its 600 mw Chandrapura power project in Maharashtra, in November. CESC has already acquired a little over 50% stake from Dhariwal Infrastructure Pvt Ltd (DIPL), a Manikchand Gutkha Group Company for Rs 200 crore and hopes to acquire the rest in another few months.

DIPL had 450 acres of land in its possession as well as the required clearances for setting up the power project. After buying the entire project, CESC plans to invest Rs 2,850 crore for setting up the generating unit.

CESC is already in talks with bankers for funding the project, Goenka said.