Archana Chaudhary

Mumbai: Reliance Power Ltd, the energy company controlled by billionaire Anil Ambani, plans to invest $650 million to develop an Indonesian coal mine to ensure supplies as prices rise to a record.

The cost includes the mine, a railway and a jetty to ship coal from the South Sumatra province to a power station being built in southern India, chief executive officer Jayarama Chalasani said in an interview in Mumbai. The deposit may hold as much as 1.2 billion metric tonnes of coal, he said, equal to about 25% of Indonesia’s known reserves.

Coal rose 56% to $130.93 a tonne for Australian exports since the company won a contract in November to build the generator in Krishnapatnam that will supply power at a fixed cost for 30 years.

India’s energy shortage cuts two percentage points from annual economic growth, the government estimates.

“It’s critical for Reliance to have fuel linkages and acquiring a coal asset is certainly a good move,” said Mahesh Patil,who helps manage $800 million in equities at Mumbai-based Birla Sun Life Asset Management Co. “Execution remains a challenge.”

Global coal prices rose to a record $142 a tonne in the week ended February 15 after supplies were disrupted by floods in Australia, China’s worst snowstorms in 50 years and a power shortage in South Africa.

Reliance Power plans to spend $28 billion setting up 13 plants in five years in a country where peak demand outstrips supply by 14.8%.

The coal supplies from Indonesia will meet all of the 4,000-megawatt Krishnapatnam plant’s needs when it starts in 2013, Chalasani, 50, said on April 27.

Coal from the Indonesian mine will have as much as 30% moisture content. The company will pay the seller of the mine only once production starts in fiscal 2012, he said.

“The grade we plan to buy from Indonesia is not linked to the trading indices since it’s low-calorific coal,” he said.

“Global coal prices don’t really count for such a deal.”

Reliance Power plans to buy at least six new Capesize and Panamax vessels to carry coal to Krishnapatnam and to two 600-megawatt units at Shahapur, Chalasani said.

The company plans to use coal from the Indonesian mine to build an additional 4,000-megawatt project in Gujarat or Tamil Nadu, he said.

Source : DNA