India Seeks African Coal Mines to Plug Domestic Supply Shortfall

Bloomber Dec 22---Indian state-run companies are seeking to buy coal mines in South Africa, Botswana and Mozambique to plug a shortfall in domestic supply, Coal Minister Sriprakash Jaiswal said in an interview yesterday.

“The top priority is to buy coal mines,” Jaiswal said of his trip to Africa starting Jan. 4. “We already have two mines in Mozambique and the government is seeking more there and in other countries in Africa.”

Companies such as Coal India Ltd., the world’s biggest producer of the fuel, and Neyveli Lignite Corp., a miner and generator, are seeking deposits overseas to meet demand from power stations and steel mills. India’s economy grew at over 8.6 percent for three straight quarters ending Sept. 30. Coal India is also studying potential acquisitions in the U.S., Australia and Indonesia, and has set aside $1.3 billion for purchases this year.

“It makes sense for Coal India to try and make acquisitions abroad for India’s raw material security,” said Juergen Maier, a fund manager at Raiffeisen Capital Management in Vienna, who helps manage about $1.3 billion of assets, including Indian stocks.

Local supply may fall short of coal demand by 83 million metric tons in the year ending March 31, Jaiswal said. Coal users imported 72 million tons of the fuel last financial year, he said.

Missed Target

Coal India, in which the government sold a 10 percent stake in October to raise 152 billion rupees （$3.4 billion）, may miss its target to produce 461 million tons of the fuel this fiscal, the minister said.

“There are delays on environment clearances,” Jaiswal said. “We need to increase production as coal will be the most important fuel for power generation for at least another decade.”

India’s government has pledged to provide electricity nationwide by 2012 and needs to increase installed generation capacity to 200,000 megawatts to sustain economic growth, according to the power ministry. More than half of the country’s current capacity of 167,278 megawatts is fueled by coal.

Coal demand in India may more than triple in the next two decades to 2 billion metric tons, Jaiswal said Sept 24. India produced 530 million tons of coal last year, the minister said. The country’s power plants may import 60 million tons of coal next financial year, Power Secretary P. Uma Shankar said Dec. 9.

Coal India is considering buying a Peabody Energy Corp. mine in Australia, one owned by Massey Energy Co. in the U.S., and another in Indonesia, Chairman Partha Bhattacharyya said Nov. 25, declining to name the third company. While Coal India hasn’t started due diligence on two more mines in Australia, it may appoint banks soon to evaluate offers, he said.

“It’s more expensive to bring coal from the U.S. to India because of the distance,” Jaiswal said. “Africa is an ideal location.”