8 NOV, 2012, RACHITA PRASAD, ET BUREAU
MUMBAI: JSW Steel has almost abandoned the transfer of its Mozambique coal mines to utility JSW Energy, breaching a promise it made to investors at the time of the initial public offering of the power producer. A study of the mine shows that it possesses more of coking coal, an input for steel making, rather than thermal coal used to fire power plants.
Also, lack of infrastructure in the African nation to transport the coal and the nature of the fuel makes it less useful to the power producer, a company official said. "That's not a proposal that we are actively pursuing," JSW Energy's joint managing director and chief executive officer Sanjay Sagar told ET recently.
The Mozambique asset could have helped JSW Energy lower costs which have been otherwise high due to the lack of captive coal to run its thermal plants. JSW Energy has been hit by the double whammy of rising fuel prices and weak merchant power prices, as the company had adopted a strategy which leaned more in favour of short-to-medium term agreements on both sides.
"We maintain our 'underweight' rating on account of vulnerability of earnings to fuel and merchant prices as well as a pipeline which lacks visibility of fructifying in the medium-term," JPMorgan analysts wrote in a recent report.
At the time of JSW Energy's Rs 2,700-crore IPO, the company had said that the mine may have more thermal coal which could be sold to JSW Energy. Since both JSW Energy and JSW Steel are listed entities, any transfer of asset would have required approval by boards of both the companies and a financial consideration. But no formal decision has been taken on it yet.
MUMBAI: JSW Steel has almost abandoned the transfer of its Mozambique coal mines to utility JSW Energy, breaching a promise it made to investors at the time of the initial public offering of the power producer. A study of the mine shows that it possesses more of coking coal, an input for steel making, rather than thermal coal used to fire power plants.
Also, lack of infrastructure in the African nation to transport the coal and the nature of the fuel makes it less useful to the power producer, a company official said. "That's not a proposal that we are actively pursuing," JSW Energy's joint managing director and chief executive officer Sanjay Sagar told ET recently.
The Mozambique asset could have helped JSW Energy lower costs which have been otherwise high due to the lack of captive coal to run its thermal plants. JSW Energy has been hit by the double whammy of rising fuel prices and weak merchant power prices, as the company had adopted a strategy which leaned more in favour of short-to-medium term agreements on both sides.
"We maintain our 'underweight' rating on account of vulnerability of earnings to fuel and merchant prices as well as a pipeline which lacks visibility of fructifying in the medium-term," JPMorgan analysts wrote in a recent report.
At the time of JSW Energy's Rs 2,700-crore IPO, the company had said that the mine may have more thermal coal which could be sold to JSW Energy. Since both JSW Energy and JSW Steel are listed entities, any transfer of asset would have required approval by boards of both the companies and a financial consideration. But no formal decision has been taken on it yet.
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