As global mining giants scale back their ambitions in Australia's coal sector, billionaire Gautam Adani is showing no such caution and plans to push full-steam ahead with a $4.5 billion project in a bet on rising Indian demand.Adani expressed confidence in being able to secure funding for the Carmichael coal mine in Queensland, Australia, by the end of the year. The group aims to start production in 2014 and build up to annual output of 60 million tonnes by 2020.However, he also said his Adani Group could reduce its debt-to-equity ratio to below one by 2015 if its power firm, Adani Power Ltd, is allowed by Indian authorities to pass on more of the increasing cost of imported fuel to end users.Concerns about the group's debt, currently 2.3 times equity, have contributed to a near 18 per cent fall in Adani Power shares this year."Our Australia plan is completely on the dot, as per schedule," Adani told Reuters in an interview."We have our ready market, our own consumption, our own trading, country's need, country's need will improve, as well our aspiration of also entering the global trading market," he said.Global miners, including BHP Billiton, Rio Tinto and Xstrata, have put investments on hold and cut workers in Australia, after a sharp fall in iron ore and coal prices as China's demand growth cools.A $246 billion pipeline of planned mining investments in Australia is on increasingly shaky ground as a fall in prices tightens operating margins and puts a spotlight on cost cutting.Adani acquired the Carmichael tenement in Galilee basin and the Abbott Point coal terminal at the top of the Australian resources boom in the past two years.The Adani Group imports most of India's coal, operates power stations in India and the country's biggest private-sector port, an integrated structure that Adani said will help offset risks in developing the Carmichael coal mine.He said a fall of as much as 20 percent in labour and equipment costs in Australia's mining sector since the sector slowdown began was also offsetting some of the risks."Our focus is not on short term. We are not looking at today's price and deciding," said the soft-spoken 50-year old in his modest-looking office in Ahmedabad.His India-centric business made him different from global miners, he said."The project will last for generations. For that $100 million of pain here and there doesn't make any difference," he said.The group is in talks with export credit agencies, including the US Export-Import Bank, Australian lenders, as well as State Bank of India and Standard Chartered, and expects to tie up funds for the project by the end of 2012.He said there is "no negativity" in the talks with lenders to suggest financing may be a problem.Adani said the group could sell a stake in the Abbott Point Port in one to two years' time. He had no plan to sell a stake in the mine, but would consider listing it on a stock market at a later date.Shares of Adani group companies have plunged over the past year, partly due to uncertainties in India's power sector, including unreliable coal supplies from domestic producers.Adani is locked into long-term power purchase agreements with some state electricity boards that do not allow him to pass on increases in the cost of imported fuel and is in adjudication proceedings to change the tariff agreements.If the adjudication is in favour of the company, Adani said he was confident of reducing the current group level debt-equity ratio to less than one by 2015.However, if the tariff issue is not settled, Indian power projects risked becoming financially unviable, he said.India approved a plan on Monday for a $35 billion debt restructuring of cash-strapped power distributors to improve their financial health.Adani said he is also keen to build on the success of the group's Mundra port, India's biggest private-sector port, which is located on the west coast.He is eyeing opportunities to expand his operations into Odisha and Chennai on the east coast. He said he was very interested in buying a majority stake in Dhamra port in Odisha, whose current owners -- Larsen & Toubro Ltd and Tata Steel Ltd are keen to sell.(Reuters)
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Indian banks, which take on the debt of state-run power distribution companies in an overhaul of the energy sector, cannot hold that debt as part of their mandatory government-approved securities, the government said on 25 September.On 24 September, the government announced a bailout of the power sector under which regional governments would take on half of power distributors' short-term debt and convert them into long-term bonds over a period of time.Power Secretary P. Uma Shankar's clarification came after local media quoted Power Minister Veerappa Moily as saying the restructured debt of cash-strapped power distributors would be given statutory liquidity ratio status (SLR).The distinction is important because should the restructured power debt be given SLR status, banks would need to sell some of their existing securities to be able to buy into those bonds.Banks have to invest at least 23 per cent of their deposits in approved securities, such as government or state bonds, in what is known as the statutory liquidity ratio.The 10-year benchmark bond yield had risen from the session's low of 8.14 per cent after Moily's comments, but stabilised to trade at 8.17 percent, just up 1 basis point on the day.(PTI)
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Cairn Energy has raised about $922 million (approx Rs 4,886 crore) by selling an 8 per cent stake in Cairn India, a source with direct knowledge of the situation said on Tuesday. Cairn Energy sold nearly 153 million shares of its former Indian unit at Rs 323.10 a share, said the source, declining to be named as the information is not public yet. The British oil firm had launched the offering on Monday for between Rs 317.90 and Rs 328.30 per share, a discount of 5-8.7 per cent from Cairn India's closing price on Monday. Cairn Energy last year sold a controlling stake in Cairn India to London-listed miner Vedanta Resources in an $8.7 billion deal. The British oil firm owned nearly 22 per cent of the Indian company as of 31 March. In June, Cairn Energy sold 3.5 per cent of Cairn India to raise about $360 million. Citigroup was the sole bookrunner for the transaction.
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A trio of state-controlled Indian oil companies on Monday said it has bid $5 billion (approx Rs 26,500 crore) for stakes in Canadian oil sands assets owned by ConocoPhillips, in what could be the next major test of Canada's appetite for foreign investment in its energy resources. A completed deal by a group that includes producers Oil and Natural Gas Corp and Oil India Ltd, along with refiner and retailer Indian Oil Corp, would be the first in Canada for Indian energy companies after years of strong public expressions of interest in the Alberta oil sands. "We have bid along with Oil India and Indian Oil Corp," a source at ONGC Videsh, the overseas investment arm of ONGC, told reporters on Monday. A source at Oil India said the bid was submitted at the end of July. India is the world's fourth-largest oil importer, buying nearly 80 per cent of its needs from abroad. With demand and refining capacity rising, the government has told state firms to secure energy assets overseas to help power the expanding economy. In January, ConocoPhillips put stakes in six Alberta properties on the auction block. They produce 12,000 barrels of oil a day from an estimated 30 billion barrels of bitumen. The one producing project in the package is Surmont, run in a joint venture with France's Total SA. Located south of the oil sands hub of Fort McMurray, Alberta, the steam-driven development pumps about 25,000 barrels per day. The partners are working to boost that to 136,000 bpd, starting in 2015. ConocoPhillips declined to comment on the bid from the Indian firms, the timing for announcing the results of the auction, or the overall level of interest. "We do not comment on market rumours," spokeswoman Davy Kong said. India's bid comes as Canada undergoes an extensive study of its capacity for investment by foreign state-owned enterprises in the tar sands, the world's third-largest crude source, following a $15.1 billion bid for Calgary-based Nexen Inc by CNOOC Ltd, the Chinese state-owned oil company. The Conservative government of Prime Minister Stephen Harper has promised to release a framework for future deals when it announces its decision on the Nexen takeover later this year. The Comptroller and Auditor General (CAG) of India last month flayed ONGC, the country's top oil company, for its tardy pace of exploration and lax efforts in development. Its output has been almost stagnant for years. ONGC Videsh announced a shift in policy last year, when its then-managing director, Jomen Thomas, said his firm would seek to buy assets in politically less risky regions such as North America to cut its risk and boost output. It aims to invest $20 billion to help increase its output seven-fold by 2030. In 2011-12, ONGC Videsh produced 7.4 per cent less oil and gas output than a year earlier, at about 175,000 bpd. Managing director D. K. Sarraf said on Monday that oil and oil-equivalent gas output from the company's assets may also decline in the current fiscal year due to geopolitical problems in Sudan and Syria. He said he hoped output would improve in 2013/14 when new fields including those in Myanmar's A1 and A3 blocks are commissioned. Sarraf declined to comment on a bid for ConocoPhillips but said: "The market (for mergers and acquisitions) is reasonably good. There is a lot of action in North America, Canada as huge credible resources are there." The other properties in the ConocoPhillips package are assets known as Thornbury, Clyden, Saleski, Crow Lake, McMillan Lake. The land totals 715,000 acres. ONGC Videsh recently bought the 2.7 per cent stake of Hess in the large Azeri, Chirag and Guneshli (ACG) group of oil fields in Azerbaijan, and ONGC Chairman Sudhir Vasudeva said his firm could supply that equity oil to its refining unit MRPL, which recently raised capacity to 300,000 bpd. MRPL buys Azeri light crude through spot tender and short-term deals. The move will help MRPL in replacing some of the oil it used to buy from Iran, as western sanctions aimed at curbing Tehran's nuclear program disrupt shipments. (Reuters)
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The cabinet approved a plan on Monday to bail out cash-strapped power distributors saddled with more than $35 billion (approx 1.8 lakh crore) in debt, but which analysts said offered little to reform a sector whose dysfunction has exacerbated a growth-sapping energy crisis. The country's mostly state-owned distribution utilities are drowning in losses and were blamed for triggering one of the worst blackouts in history in July, when power was cut for two consecutive days in an area with 670 million people. Years of populism, corruption and mismanagement have driven power distributors into losses, which amounted to 1.9 trillion rupees by the end of the 2010-11 financial year, necessitating their second bailout in a decade. Under the rescue plan, state governments will take on half of power distributors' resulting short-term debt over the next two to five years and convert it into long-term bonds, a government statement said after the cabinet approved the bailout. Lenders, which are mostly government-run banks, will recast the rest into long-term loans and offer a moratorium on repayment of principal. "This restructuring will benefit the entire power sector value chain as power generators and traders can expect timely payment from distribution companies," said Salil Garg, director of the Indian unit of rating agency Fitch. This would also mean distributors will have more funds to buy power and can step up supplies to factories and homes, which now resort to expensive diesel generators and solar panels to plug their energy gaps. For lenders with huge exposure to distributors, the bailout plan offers an easy way to keep their books clean. But they will have to wait longer to be paid back, hampering their ability to repay short-term liabilities. "The concern that banks will have large non-performing assets on account of distribution companies is subsiding now," said Manish Ostwal, banking analyst at Mumbai-based brokerage KR Choksey. Read: Heart Of Darkness by Prosenjit Datta It was not immediately clear whether lenders will also be expected to accept lower yields on the restructured loans. With loans to power distributors accounting for 4-7 per cent of their respective books, Indian Bank, Union Bank of India, Bank of India, Oriental Bank of Commerce and Canara Bank are among those with the highest exposure, according to a report by Bank of America Merrill Lynch. Half MeasuresThe bailout package is the latest in a series of actions by Prime Minister Manmohan Singh's government, which has been hit by a spate of scandals and accused of dithering over policies needed to address structural problems slowing down Asia's third-largest economy. The plan, however, does not address long-term problems in the sector, analysts said. "The debt restructuring as it stands appears largely a breather as it is not accompanied by any concrete reform measures," Kameswara Rao, a partner at consultancy PricewaterhouseCoopers, said before the cabinet approval. Distribution companies, under political pressure to sell below cost and losing more than a quarter of their power supply to theft and decrepit networks, have been borrowing for years to fund their losses. Kuljit Singh, a partner at consultancy Ernst and Young, said the government should bring private players into power distribution, which would make the sector healthier in the long run. Under the plan, the federal government will offer monetary incentives to states to reduce distribution losses and will reimburse 25 per cent of the principal repaid by the states. (Reuters)
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The Central Vigilence Commission on 24 September asked the CBI to probe all coal block allocations since 1993, PTI reported. This means coal block allocations during UPA's first tenure besides that during NDA rule will come under investigation.The CVC has also forwarded a letter by coal minister Sriprakash Jaiswal that coal block allocations since 1993 be probed.Jaiswal had earlier forwarded a letter by some MPs seeking a probe. CBI is already investigation into allotment of 67 coal blocks that were referred by CVC earlier. Based on these investigations, CBI has registered seven cases. With more coal blocks coming under scanner, state government entities are also expected to face a probe.The CBI on 22 September registered two new cases against two private companies, their directors and other public servants in the coal block allocation case and conducted raids in seven cities across the country.The agency, which has been already probing the case, has charged Vikash Metals and Powers Limited and Grace Industries with alleged misrepresentation of their net worth and joint ventures to illegally get coal blocks, CBI sources said.The agency also conducted raids at the offices and residence of the accused persons in seven cities - Nagpur, Chanderpur (Maharashtra), Kolkata, Asansole, Purulia (West Bengal) and Ghaziabad (Uttar Pradesh).The managing directors of these companies and some unknown government officials have been charged with cheating, and criminal conspiracy as well under the Prevention of Corruption Act, the sources added.One of the cases was against the Kolkata-based Vikash Metal & Power Ltd, and its directors Vimal Patni, Vikash Patni, Anand Patni, Virender Kumar Jain, Kailash Chander Jain, Vijay Kumar Jain and Anand Malick, who is authorized signatory for the company along with others.Nagpur-based Grace Industries Ltd and its directors Mukesh Gupta and Seema Gupta along with unknown public servants and other unknown persons were booked in second case.The alleged irregularities in the coal block allocations came under judicial scrutiny on 14 September with the Supreme Court directing the Centre to explain if the guidelines were strictly followed in allotting the natural resource to private companies.Turning down the Centre's plea that the court should not go into the issue as it is being looked into by a Parliamentary committee, the apex court said "these are different exercises."A bench of justices R M Lodha and A R Dave said the petition raised serious questions and "it requires explanation from the Government"."There is difference in exercise done by the Public Accounts Committee (PAC). Parliament and PAC can proceed with the issue on the basis of the CAG report. We don't want to encroach upon their exercise but the petition raises different things altogether. There are sufficient averments which require explanation from you," the court said.CBI had earlier registered five cases and conducted searches at 30 locations on Sep 4.A preliminary enquiry to examine the irregularities, if any, in the allocation of coal blocks by ministry of coal during the period 2006-2009 was registered on a reference from Central Vigilance Commission (CVC), in June this year.(BW Online Bureau & PTI)
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The government on 24 September cleared the proposal to restructure debt worth nearly Rs 2 lakh crore of state electricity boards, giving a boost to the ailing power sector.The Cabinet Committee on Economic Affairs (CCEA) has cleared the Rs 2 lakh crore restructuring package for the state electricity boards (SEBs), sources said.The plan for restructuring the debt of discoms has been in the works for some time now.The Power Ministry had earlier prepared a Cabinet note on the issue. It reworked the proposal, reportedly after the Finance Ministry expressed reservations.Years of populism, corruption and mismanagement have driven the power distributors, most of them state-owned, deep into the red. They had accumulated Rs 92,600 crore in losses by the end of the 2010-11 financial year, according to government data.The country's mostly state-owned distribution utilities are drowning in losses and were blamed for triggering probably the worst blackout in history in July, when power was cut for two consecutive days in a massive area home to 670 million people. Shares in some power sector lenders and power producers rose 2-3 per cent on hopes that the cabinet would approve the plan, the latest in a series of actions to address structural problems slowing down Asia's third largest economy. A lifeline for power distributors would free up cash and help them buy more power to supply factories and homes that resort to expensive diesel generators and solar panels to plug their energy gaps. Last week, the government cut subsidies on diesel and opened up the country's vast retail sector as well as aviation to foreign investment to win back investor confidence and attack the country's ballooning fiscal deficit. Prime Minister Manmohan Singh, defending the measures, said "money does not grow on trees" and that failure to bridge the gap between government spending and income would stoke inflation and lead to further loss of confidence in the economy. Under the rescue plan for power distributors, provincial governments will take on half of their short-term debt and convert them into long-term bonds over the next three years. Lenders, who are mostly government-run banks, will be asked to turn the rest into long-term loans and offer a moratorium on repayment of the principal for three years. But they will not be expected to reduce interest rates on the restructured loans, Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, said.Half MeasuresBut analysts said the bailout plan did not address the country's long-term energy problems and may only drag government lenders deeper into the red. "The debt restructuring, as it stands, appears largely a breather as it is not accompanied by any concrete reform measures," said Kameswara Rao, a partner at consultancy Pricewaterhouse Coopers. With loans to power distributors accounting for 4-7 per cent of their respective books, Indian Bank, Union Bank of India, Bank of India, Oriental Bank of Commerce and Canara Bank are among those with the highest exposures, according to a report by Bank of America Merril Lynch. The country's largest lender, State Bank of India, and leading private banks have no exposure to the distributors, according to the report. "The restructuring could worsen their (banks') asset liability mismatch," Rao warned. That is because banks will have to wait longer to be paid back, hampering their ability to repay short-term liabilities. Years of populism, corruption and mismanagement have driven power distributors into losses that had accumulated to 926 billion rupees by the end of financial 2010/11. Under political pressure to sell below cost and losing more than a quarter of power supply to theft and decrepit networks, distribution companies have been borrowing for years to fund their losses. Just seven of the country's 28 states - Rajasthan, Uttar Pradesh, Haryana, Tamil Nadu, Punjab, Madhya Pradesh and Andhra Pradesh - have between them accumulated short-term debt of Rs 1.9 trillion from power distribution.(Agencies)
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Cairn Energy is selling an 8 per cent stake in India-focused oil explorer Cairn India in a deal that could raise up to $940 million, a source with direct knowledge of the deal said on 24 September' 2012. Cairn Energy is selling nearly 153 million shares of Cairn India for between Rs 317.90 and Rs 328.30 per share, said the source, declining to be named as he was not authorised to speak to the media.(Reuters)
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