5 merchant bankers to advise CIL

The five merchant bankers are Citibank, Deutsche Bank, UBS, J P Morgan and ABN Amro.

Responding to the invitation of letters of intent (LoI) issued globally a few months ago, six merchant bankers had applied for the deal. Of them, five were selected and these would be vetted at the board meeting of the CIL arm on July 11 2008.

The criterion fixed for selection was those identified will have to be category-I merchant or investment bankers with experience of operating with mining companies in host countries for five years identified by Coal Videsh. The countries identified are Australia, Canada, Indonesia, South Africa and Mozambique.

Recently, two high level expert teams had visited Indonesia and Mozambique for identifying and acquiring coal mining properties. The teams identified six such properties in these two countries.

The team will do due diligence of the identified properties. It was stipulated in LoI that those merchant bankers which had contracted two coal mining deals each worth $250 million in two countries in the last three years will get priority.

The team leader will also have to fill the same norm laid down for other members of the team. CIL chairman P S Bhattacharya said, "We have zeroed in on the merchant bankers for Coal Videsh but the matter is confidential and cannot be disclosed before it is cleared by the board."

Other than mining coal overseas, CIL may be importing coal of upto 200 million ton during the 11th Plan to meet domestic demand. This apart there are problems arising out of issue of Letter of Assurances (LoAs) to the power sector.

The total number of LoAs issued for supply of coal to power units far exceeds the targetted production during the 11th Plan. A worried CIL was now rushing for coal supply from overseas for such domestic users.

The demand for coal by the end of the 11th Plan was estimated to be in the region of 721 million ton and CIL's output would be around 200 million ton less. To meet other coking and non-coking coal needs in future, another special purpose vehicle (SPV) called International Coal Ventures Limited (ICVL) was formed by five PSUs - SAIL, CIL, RINL, NMDC and NTPC.

It would also be acquiring overseas properties. ICVL recently identified 10 investment bankers for overseas acquisitions. ICVL had authorised capital of Rs 10,000 crore and a paid-up equity of Rs 3500 crore, with SAIL and CIL to put in Rs 1000 crore equity each and RINL, NMDC and NTPC Rs 500 crore each as balance equity.