GMR plans coal trade to boost revenue

GMR Infrastructure, which already has coal mines in Indonesia and South Africa, recently added another Indonesian mine to its portfolio.

Last week, the company agreed to acquire 30 per cent in PT Golden Energy Mines (GEMS).

The new mine comes with an offtake agreement giving it additional security for its projects that already have linkages and supplies in place. Back home, however, the company does not have any imported coal-based power project at present.

“If Coal India decreases production, we will use the extra coal to power our coal-based plants. If the supply to our projects is on track, we will use the extra coal for trading,” said A Subba Rao, chief financial officer of GMR Infra.

The latest acquisition comes at a time when its earlier coal acquisitions are coming of age. The company’s fully-owned greenfield PT Barasentosa Lestari (PT BSL) in Indonesia, is all set to start commencing production next month. The coal will be sold in the local market.

“Initially, a few lakh tonnes of coal will be produced, but production will be ramped up to a million tonnes a year. The reserves there are huge, at around 110 million tonnes,” said Rao. He claimed they are ready to increase production to three million tonnes, should necessity arise.  

The Kendal mines of Homeland Energy, in South Africa, is expected to produce a million tonnes of coal this year. GMR has 30 per cent stake in these mines.

It plans to sell coal in the local market until a huge requirement in its power projects arises. To facilitate the same, it has not signed any long-term binding contracts for its coal sales.

“In case we can get all the coal, we will sell it in the market. But how much coal we will set aside for trading, is not yet decided,” he said. The company is also open to trading coal in India.

Rao, however, said he hopes coal for own projects and trading will make make significant contribution to its revenues.   

Coal supply from Indonesia has become concern from Indian companies. The Indonesian government has, in an order, decided to link the price of coal exported from the country with a benchmark based on international prices of coal.

“At the holding company level, we will not lose any value because of the transfer pricing mechanism,” said Rao.

Yet another regulation stalls export of coal below 5,100 KCal.

The company claims this rule will have no effect on them because the coal’s grade is much above the specified limit.