Gautam Adani-led Adani Enterprises Ltd. (AEL) on Tuesday entered into a pact with Australia's Linc Energy to buy the latter's coal assets for Australian dollar 500 million (about Rs.2,100 crore).
In addition, Adani will pay a royalty of A $2 on every tonne of coal mined over the next 20 years to the Australian miner, under the purchase agreement inked by its subsidiary, Adani Mining Pty.
The royalty payments are estimated at A $2.5 billion (about Rs.10,500 crore), taking the overall deal size to Rs.12,600 crore.
“We were in search of coal mines to enable the rapid expansion of the power business of Adani Power in India while also expanding AEL's coal business, where we are the largest importer of thermal coal,” AEL CFO Devang Desai told reporters here.
“As per our Vision 2020 development plan, we aim to increase our power generation capacity from 13,000 MW to 20,000 MW,” Mr. Desai said.
The Galilee tenement, which Adani agreed to buy, had resources of 7.8 million tonnes of coal, which makes it the single largest tenement in Australia in terms of coal resources, he said, adding that the entire transaction had been financed from the company's own accruals and loans from banks.
“The purchase has received approval of the Foreign Investment Review Board (FIRB) and the indicative approval of the Queensland government,” he said.
“We will be able to start mining from these mines in the next four years,” Mr. Desai further said.
“While multiple evacuation routes are available for the mined coal, Adani (through Mundra Port and SEZ Ltd) has recently been awarded the preferred proponent status for the development of the Dudgeon point terminal in Macay, Queensland, which gives Adani the right (subject to technical and commercial feasibility) to develop a coal terminal with a capacity between 30-60 mtpa,” Mr. Desai said.
“We will develop all the infrastructure required there,” he said, without giving any details of the proposed investment in Australia.
Domestic energy firms, mainly private players, have increasingly been looking for assets abroad to meet their expansion plans, as the world's second fastest growing large economy's energy needs are increasing by the day.
In the recent past, Essar Power bought a coal mine in Indonesia and ICVL, the PSU consortium of Coal India, SAIL and NTPC among others, is also scouting for overseas coal mines. Of late, Adani has been focussing on its power business and it hopes to achieve generation capacity of more than 16,000 MW by the end of 2013.
