Lanco Infratech has agreed to buy an Australian coal mining company with over 1.1 billion tonne of thermal coal reserves for an undisclosed amount.
The deal is valued at $800-850 million, according to a report in The Australian newspaper, though the company did not reveal the size of the buyout.
The move will help the company ensure fuel supply for its fast-paced capacity addition in power generation.
The company?s Australian subsidiary, Lanco Resources Australia has concluded an agreement with Griffin Energy Group and Carpenter Mine Management Holdings to purchase Griffin Coal.
Sources said Lanco had snapped up Griffin Coal after outbidding three other contenders in the race including GVK Group. Griffin Coal has an estimated enterprise value of $ 1 billion.
Griffin Coal, based out of Collie in Western Australia, owns the largest operational thermal coal mines in Western Australia. The mine currently produces over 4 mtpa of coal and can be ramped up to over 15 mtpa in the near term, post development of evacuation infrastructure. The mining tenements contain over 1.1 billion tonnes of thermal coal resources.
?The acquisition of Griffin Coal is an important component of our development strategy, providing increased fuel security for our current power generation assets and future power portfolio expansions. This acquisition also presents an opportunity to Lanco to participate in the burgeoning natural resources trading market. We are committed to expanding Griffin Coal?s export capacity and making a significant contribution to the Collie community and South-West region more broadly. We are excited about the future prospects for both Griffin Coal and all its stakeholders,? Suresh Kumar, CFO, Lanco Infratech, was quoted as saying in the statement.
He said that it?s a large coal asset with a large resource base. The acquired property will boost production ?significantly? in the next three or four years. Lanco Infratech is funding the deal through debt and expects it to immediately start adding to revenue, Kumar said. “Our acquisition is free of debt. So, we have not taken over any of the debts that work on the books of coal assets. We have been given an asset which is absolutely liability free,?? he was quoted talking to a channel. The company will also keep looking for more acquisitions in Australia, Africa and Indonesia, he added. Lanco Infratech?s power portfolio includes an operating capacity of 2,082 mw.
As per the bidding norms, Lanco will have to build a greenfield seaport close to the mine step up exports. The mine currently exports 1.5 million tonnes of coal through two nearby ports, and after the construction of the new port, exports could be scaled up to 5 million tonnes.
According to analysts, the acquisition would help Lanco to ensure steady supply of feedstock for its current and upcoming power projects. The company currently uses a mix of imported and domestic coal to fire up its projects. The company has made a major push into power generation and power trading and has plans to have an installed capacity of 4,000 mw by the end of the current fiscal. It is also in the process of setting up 10 power projects based on different feedstocks with a combined capacity of 7,153 mw and has another five projects under its belt which with a combined capacity of 2,550 Mw.
The company has clocked a turnover of Rs 2,125.80 crore during the quarter ended September, 2010 and a net profit of Rs 117.11 crore. Lanco closed on NSE at Rs 61.05, up by 0.10%.
