Coal India May Set Up Power Plants Because of Shortfall in Rolling Stock

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31 Aug 2010

Coal India Ltd., the world’s largest producer of the fuel, said it may be forced to set up power plants to use coal that’s piling up because there aren’t enough railway wagons to carry supplies to utilities. “It’s not a business we would naturally like to be in because there are already so many players,” Chairman Partha Bhattacharyya said in New Delhi today. “If stocks keep building up, we may not have an option.”
More than half of India’s electricity generation is coal fired and imports to meet a shortfall in local production have fallen short of target as cargoes are held up at ports awaiting transportation to plants. There were 24 coal-fired generators in the country with fuel stockpiles to last less than seven days compared with a typical 25 to 30 days as of July 31, the Central Electricity Authority said in a report.
State-owned Coal India has stockpiles of about 53 million metric tons of coal, Bhattacharyya said. That’s equivalent to about 12 percent of the miner’s output in the year ended March.
Coal India, based in Kolkata, West Bengal, deferred its first-ever tender to import 10 million metric tons of coal, which was to be issued in April, as it waited for power producers to confirm their needs, a company official said, asking not to be identified, citing policy.
The company also sought clarity on how coal would be transported from the Visakhapatnam and Gangavaram ports on the east coast, where a shortage of railway wagons has led to pile up of imported coal, the official said.
Coal India is seeking 10-year import contracts to help meet a shortfall in the country, where demand for the fuel is growing at 10 percent annually, Bhattacharryya said.
Indian power plants imported 1.53 million tons of coal in July, short of the target of 2.92 million tons, according to mjunction Services Ltd., a trader.
The miner’s current average selling price of coal is $21 a ton, Bhattacharyya said.
An initial public offer of Coal India shares will start Oct. 18 and conclude on Oct. 21, Bhattacharyya said. The shares will start trading within 12 days of the sale, he said.
The government may raise as much as 150 billion rupees from the sale of shares in Coal India, according to two people with knowledge of the matter. That would make the sale the nation’s largest IPO, surpassing Reliance Power Ltd.’s 116 billion rupee offering in January 2008, according to data compiled by Bloomberg.

Source: Bloomberg