ICVL consortium, namely SAIL, RINL & NMDC are planning to form SPV for acquisition of overseas coal assets. However, the other two members, NTPC & CIL are not willing to participate in this deal.
ICVL, a five members’ consortium, namely SAIL, NMDC, RINL, CIL and NTPC, was formed by the Steel Ministry with an objective to secure supply of metallurgical Coal and thermal Coal. On a recent acquisition of Coal asset in Mozambique, three of the members – SAIL, NMDC & RINL have decided to form a special purpose vehicle (SPV) for purchasing Coking Coal assets in Mozambique as it’s their primary requirement.
However, the other two members – NTPC & CIL have announced last month that they are not keen to take part in ICVL’s specified deal.
Projected deal involves 65% stake in Mozambique based Benga mine as 35% venture already belongs to Tata Steel. The deal also includes a 100 % stake in Zambeze and Tete East Coal assets.
As per some market participants, formation of the SPV for Mozambique assets acquisition will strengthen their supply source and may give a logistical advantage as well. On the other hand, companies are increasing their production capacity, and it is anticipated that Coking Coal requirement will increase. Perhaps, this acquisition might help to reduce their dependence on import.
India is trying to diversify its sourcing of Coal through various overseas assets’ acquisition. It will enable the country to reduce supply risks as well as manage price volatility.
SAIL faces Break-even Challenges
ICVL’s newly acquired mine, which is led by SAIL, is losing USD 35/MT in production of Coking Coal. SAIL stated that the company is capable to reach at break-even point over the next 18 months at Benga mines. The company fulfills its 85% Coal requirement through import.