In an attempt to secure coal supplies NTPC Ltd may spend an estimated $1 billion (Rs4,870 crore) to acquire a South African coal mining firm with the exploration licence for 1 billion tonnes of coal reserves. On acquisition of the firm, NTPC will also get the licence to mine the coal. With NTPC having huge cash reserves, it is in an advantageous position for a deal of this size, according to sources. Going by recent coal deals, if the reserves are not proven, the valuation of a mine is around 10-20 cents per tonne. For proven resources, it is 50-60 cents per tonne. Operational mines come with a much higher price tag of around $2-3 per tonne.
While NTPC’s projects are facing an acute coal shortage, it has not succeeded in any of its overseas plans for sourcing either coal or gas. At the same time, the company has a sizeable war chest, with cash reserves of Rs44,393 crore. Coal is critical for NTPC, as at least 80% of its installed capacity of 30,644MW is coal-based. With about 67% of the total power generation currently based on coal, the power sector is the largest consumer, absorbing nearly 78% of
NTPC could be competing with leading Chinese government-run coal miners such as China Shenhua Energy Co. Ltd and Yanzhou Coal Mining Co. Ltd, which are actively engaged in acquiring mining concessions overseas.
Coal mining costs are expected to rise, due to demand pressures on equipment and human resources in particular, but it will still have value for investors who choose to mine rather than purchase at prevailing market rates.
| Company Name | CMP |
|---|---|
| NTPC | 397.90 |
| Tata Power | 433.65 |
| Adani Power | 200.80 |
| Power Grid Corp | 319.60 |
| Torrent Power | 1605.70 |
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