Indonesian Coal Price Hike Singes Indian Power Companies.

AHMEDABAD: A sudden increase of about 30% in the price of Indonesian thermal coal has raised the cost for Indian power producers who depend on imports for more than half the generation in the country.

Indonesia adopted a new pricing method last week, aligning its rates with international markets under the benchmark prices called the HBA Index, taking the price of coal above $100 a tonne.

India generates 55% of power through thermal coal and depends on Indonesia for 30% of its power generation. This year, India was tipped to increase its imports from 60 mt and surpass Japan's 65 mt to become the largest importer of Indonesian thermal coal.
But this may not happen in a hurry now.

More than 60% of India's coal imports are through spot or short-term contracts and experts say the power producers are finding the sudden increase in price too sharp for comfort. Costlier imports are likely to impact the quantity of coal imported from Indonesia, they say.

Tata Power's executive director, finance, S Ramakrishnan, says his company may face a loss up to $100 million due to the new pricing policy. He says the company will blend the fuel with cheaper coal having low calorific value in order to reduce the cost of generation. The company imports coal from Indonesia to feed its ultra mega power project near Mundra that has a capacity of 4,000 mw.

"Now, importers will have to renew short-term contracts by paying higher prices. This will impact further buying quantity," says Kalpana Jain, senior director, Deloitte India, a consultancy and advisory firm.

Adani Power, which has a stake in Bunyu mines in Indonesia, will also be impacted but on a smaller scale. "Adanis have their own port and transportation facilities. They also own coal mines. Therefore, they have an advantage over the others," says Deven Choksey, MD of KR Choksey Securities. Adani Power sources 4.6 mtpa coal from Adani Enterprises at $36 per tonne and the total import requirement for the operational capacities is up to 6 mtpa. Adanis did not respond to ET's queries.

Reliance Power's ultra mega power project in Sasan is expected to generate power by end of 2012, but the company did not reveal its strategy to deal with the costlier imports from Indonesia.

Besides private producers, state-run Coal India also imports coal from Indonesia, mainly to feed NTPC and other public sector units.

Source : economictimes.indiatimes.com