Hyderabad-based infrastructure player Lanco Infratech Ltd has acquired Griffin Coal, the second largest coal mines in Western Australia, owned by the debt-ridden Griffin companies, for an undisclosed amount.
But, a report in The Australian says, the Indian company paid 800-850 million Australian dollars (US$795-845 million) for 100% ownership of the mine which currently produces over 4 mtpa of coal and can be ramped up to over 15 mtpa in the near term. The mining tenements contain over 1.1 billion tonnes of coal resources. Lanco beat short-listed bidders from China and Japan to buy Griffin Coal.
In a statement to BSE, Lanco Infratech said, its step down Australian subsidiary, Lanco Resources Australia Pty Ltd, has concluded a binding agreement with Griffin Energy Group Pty Ltd and Carpenter Mine Management Holdings Pty Ltd to purchase 100% shares of Griffin Coal Mining Company Pty Ltd and Carpenter Mine Management Pty Ltd (Griffin Coal).
The group plans to expand the capacity of the mines and export the coal to India for use in its power stations. Lanco, which has a market capitalization of $3 billion, has eight power stations across India including, coal, gas, wind and hydro with a total installed capacity of 2082 MW. The company is planning to add over 9700 MW through its under development projects. Of this, 7,720 MW will be produced from coal-based power projects, including a 600MW imported-coal based power project in Uduppi, Karnataka. The acquisition is believed to help the company to meet its coal requirements.
The mine is strategically located on the western coast of Australia, hence closer to India compared to the mines in the New South Wales and Queensland areas of Australia. Significantly, the Griffin coal mines are well connected to two ports through both rail and road. The nearest port being the port of Bunbury located at a distance of 85 kilometers from the mine.
"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,” said Suresh Kumar, CFO of Lanco.
“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," he said.
The debt-ridden Griffin coal, controlled by Western Australian businessman Ric Stowe, was placed under administration in January this year when it failed to meet the repayment deadlines. It employs over 500 people.
Leading Australian firm KordaMentha which was appointed Griffin's administrator after the firm missed a A$25 million payment due on December 31, as well as a A$5 million payment to the Australian Tax office, shortlisted four companies including Lanco for the sale. Its total debt is over 700 million Australian Dollars ($695 milion) as it owes U.S. bondholders $475 million. The Australian Government had refused to bail out the company.
Following this, the administrator had decided to sell Grifin’s assets. But the sale to Lanco does not include Griffin’s nearby Bluewaters power stations, which will be sold in a separate process next year. UBS and Macquarie Capital Advisers acted as advisers to KordaMentha on the sale process.
Indian Firms Chasing Global Coal Assets
In one of the largest coal mine deals by an Indian group, the country's largest coal importer Adani Enterprises had in August bought Australia-based Linc Energy's Galilee coal tenement in the Queensland for about Rs 12,600 crore. Adani Enterprises also entered into a $1.65 billion deal with the Indonesian government and its mining company PT Bukit Asam for setting up rail and port infrastructure in the island nation and get rights to source coal to India.
Besides, Anil Ambani Group firm Reliance Power has bought three coal mines in Indonesia. Essar Group had earlier this year bought Trinity Coal Corp in the US for $600 million and is aggressively looking for a similar acquisition in Australia. Earlier this year, Jindal Steel & Power vied with China's Meijin Energy Group to buy Rocklands Richfield. Tata Power also bought stakes in mines in Indonasia.
Five Indian state-owned Public Sector Undertaking (PSU) companies led by SAIL have decided on an initial investment of Rs 3,500 crore (around $885 million) to buy coal assets abroad and are talking to coal companies in Australia, Mozambique, Canada, and the US.
Coal India, which has earmarked Rs 6,000 crore this fiscal for acquisition of coal mines abroad, is in advanced talks with the US-based Peabody Energy Corp to buy 10% stake in its asset in Australia. The company is in advanced talks with Indonesia's Sinar Mas and US-based Massey Energy Company for acquiring coal assets in their respective countries.
According to a Platts report, India's coal imports are expected to touch 164 million tonnes by 2015 as against the current 73 million tonnes.