By Debjoy Sengupta, ET Bureau | 17 Jun, 2013,
KOLKATA: State-owned monopoly miner Coal India is seriously considering acquisition of two Australian companies for over $4 billion (about Rs 23,000 crore), a move that will enable it to import 28 million tonnes high quality thermal coal a year.
CIL has sent the proposals to pick majority stakes for $2 billion each in the two companies, with annual output of 12 million tonnes and 16 million tonnes, respectively, to the company's foreign acquisition committee, a senior official of the coal ministry told ET.
"After the committee's clearance, the proposals will be forwarded to the board and CIL will be ready to take them over. The entire process is likely to take at least three months because CIL will conduct a due diligence through its merchant bankers on the assets to make sure the return on investment is in stipulation with the government norms," said the official, who did not wish to be named. Although the official declined to name the target firms, he said these were large companies and had been in operation for a few years.
CIL recently received 32 proposals when it floated an expression of interest for acquiring assets overseas, from countries including Indonesia, Australia, USA, Mozambique, Chile and Columbia. These included a few firms that had offered their properties earlier as well when CIL attempted to acquire assets abroad.
Armed with about Rs 30,000 crore, CIL aims to complete the acquisition as soon as possible. "We need to be fast. If we delay the process the assets offered to us may not be available after some time because these companies also have the compulsion of engaging with other parties for selling them," CIL chairman S Narsing Rao had earlier told ET.
Talks did not mature the last time round because the properties were not likely to offer the government-stipulated 12% return on the investment that was to be made.
A sharp fall in international coal prices triggered a renewed hunt earlier this year for foreign assets by CIL, which is now looking at picking majority stakes.
Thermal coal prices have declined by more than 25% on average over the past few months and this has had its effect on coal producers as well. Prices have declined between 19% and 27% in Indonesia and about 21% in Australia. American coal producers have been forced to reduce output, lay off workers and close mines as a number of power plants have started using gas instead of coal, fuelling the decline in asset valuation.
KOLKATA: State-owned monopoly miner Coal India is seriously considering acquisition of two Australian companies for over $4 billion (about Rs 23,000 crore), a move that will enable it to import 28 million tonnes high quality thermal coal a year.
CIL has sent the proposals to pick majority stakes for $2 billion each in the two companies, with annual output of 12 million tonnes and 16 million tonnes, respectively, to the company's foreign acquisition committee, a senior official of the coal ministry told ET.
"After the committee's clearance, the proposals will be forwarded to the board and CIL will be ready to take them over. The entire process is likely to take at least three months because CIL will conduct a due diligence through its merchant bankers on the assets to make sure the return on investment is in stipulation with the government norms," said the official, who did not wish to be named. Although the official declined to name the target firms, he said these were large companies and had been in operation for a few years.
CIL recently received 32 proposals when it floated an expression of interest for acquiring assets overseas, from countries including Indonesia, Australia, USA, Mozambique, Chile and Columbia. These included a few firms that had offered their properties earlier as well when CIL attempted to acquire assets abroad.
Armed with about Rs 30,000 crore, CIL aims to complete the acquisition as soon as possible. "We need to be fast. If we delay the process the assets offered to us may not be available after some time because these companies also have the compulsion of engaging with other parties for selling them," CIL chairman S Narsing Rao had earlier told ET.
Talks did not mature the last time round because the properties were not likely to offer the government-stipulated 12% return on the investment that was to be made.
A sharp fall in international coal prices triggered a renewed hunt earlier this year for foreign assets by CIL, which is now looking at picking majority stakes.
Thermal coal prices have declined by more than 25% on average over the past few months and this has had its effect on coal producers as well. Prices have declined between 19% and 27% in Indonesia and about 21% in Australia. American coal producers have been forced to reduce output, lay off workers and close mines as a number of power plants have started using gas instead of coal, fuelling the decline in asset valuation.
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