Indian coal SPV mulls global asset buys amid financial crisis

The Financial Express reported that the global economic meltdown has come as a blessing to Coal Ventures International Limited with the prices of coal assets coming down across the globe. The Mega SPV of Coal India Limited, NTPC Limited, Rashtriya Ispat Nigam Limited and National Mineral Corporation is now trying to acquire Appalachia coal block in the US, which till recently had been pricing out CVIL’s USD 2.7 billion war chest.

CVIL has been scouting for coal blocks abroad to secure coking coal supplies for existing as well as new steel projects. But its USD 2.7 billion corpus was dwarfed because of sharp increase of coking coal prices for which it could not go for acquisitions aggressively.

Mr PS Bhattacharyya chairman of CIL said that the prices of coal assets have become one-third of what it was being quoted before the meltdown. CVIL is trying to take full advantage of this current situation and is aggressively hunting for coal assets in Canada and Indonesia, besides the US.

But as a commodity, coal will continue to have its demand worldwide and prices of coal assets will start rising shortly. A team, comprising the Union coal minister of state Mr Santosh Bagrodia, Mr Partha Bhattacharyya and other senior CVIL officials recently visited the US and has initiated talks on acquiring the Appalachian coal mines.

If CVIL acquires the US mine, it might be its second acquisition after Mozambique. A 6 member technical team visited Mozambique in January and identified a 230 square kilometer block of which a 20 square kilometer patch is assumed to have coal reserves. CVIL is currently conducting a techno feasibility study on it.

Mr Bhattacharyya said that there are several mines in the Appalachian mountain region, which is in the east of the US and acquiring that would benefit CVIL to a large extent. Each mine is supposed to have a reserve of over 40 million tonnes. He said that “Before acquiring the coal mines, we have to ensure that the metallurgical coal available there suits Indian steel plants’ requirement.”

The team has also initiated talks with 6 merchant bankers Royal Bank of Canada, Royal Bank of Scotland, Union Bank of Switzerland, Merill Lynch, Citi Bank and Deutche Bank, to help them scout for coal assets in the US and Canada.