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FT.com / Energy - Adani buys Australian coal port for $1.98bn
India has underlined its desire to play a bigger role in the development of Australia’s coal sector after Adani Enterprises, the country’s largest coal importer, agreed to buy Queensland’s Abbot Point Coal Terminal for A$1.83bn ($1.98bn).
It is the latest in a spate of deals by Indian groups in Australia and elsewhere as the country secures more energy resources to meet rising demand for power to complete vital infrastructure projects.
Although India is rich in coal, production has been constrained by conservative environmental regulations and a strengthening Maoist insurgency, which has made many reserves in the country inaccessible.
Mike Elliott, global mining & metals leader at Ernst & Young, said Indian groups were losing their reputation as “perennial tyre kickers” when it comes to completing deals.
He said an analysis of the global mining and metals sector saw India jump from 14th place in 2009 to 7th in 2010, with the value of deals surging from $823m to $5.5bn.
The battle for resources between India and China, its major rival, has moved to Australia, which is a preferred destination for many Indian companies keen to acquire coal assets and infrastructure.
GVK, one of India’s largest power and infrastructure groups, is close to completing a deal potentially worth A$8bn to buy two Australian coal mines from Hancock Prospecting, which is privately controlled by the billionaire Gina Rinehart.
Meanwhile, Lanco Infratech, an Indian power group, acquired assets of Australia’s Griffin Coal for A$750m last year, while Adani acquired Linc Energy’s Australian assets for A$2.72bn in August.
“China gets a lot of focus when it comes to buying mining and metals assets globally but Indian groups have been at least as successful in recent times,” Mr Elliott said.
He added the value of India’s outbound investment in the mining and metals sector globally reached $4.6bn in 2010, for the first time surpassing China’s outbound investment of $4.5bn. “As well as Australia, Indian companies are looking at Indonesia and Africa,” he said.
He said India was a late investor in Australian coal assets and its “price of admission” included making strategic investments in infrastructure assets, such as ports. Ownership of infrastructure assets could strengthen India’s power to negotiate supply agreements with Australian coal miners.
Mergers and acquisitions
FT In depth: News, comment and analysis on global M&A activity
..
Arvind Mahajan, head of natural resources at KPMG in Mumbai, said that many Indian groups prefer Australia because the risk of doing business there is lower than in politically unstable but resource-rich countries and regions such as the Middle East.
“India is heavily dependant on Middle Eastern oil imports but given the recent wave of unrest in the region, Indian chief executives are always looking for alternative places to do business,” said Mr Mahajan.
“We have seen a lot of big deals in Australia in recent months and we are likely to see more in the future as the opportunities are big and the risk of doing business there is low.”
The Queensland government said the sale of Abbot Point, one of Australia’s bigger coal terminals with annual capacity of 21m tonnes, was above its “initial expectations” of A$1.5bn. The deal has been approved by Australia’s Foreign Investment Review Board.
Adani, which has been one of the most acquisitive Indian groups overseas, invested $1.6bn to build a 270km railway line and coal terminal in remote Sumatra last year.
India could face a coal shortage of almost 50m tonnes by the end of March 2011, according to government data.
However, independent analysts warn the shortage could exceed 200m tonnes by 2011, as the number of power projects is set to double.
India’s demand for coal is currently outpacing the country’s production, which has been growing at about 6-7 per cent, said Mr Mahajan.
India has underlined its desire to play a bigger role in the development of Australia’s coal sector after Adani Enterprises, the country’s largest coal importer, agreed to buy Queensland’s Abbot Point Coal Terminal for A$1.83bn ($1.98bn).
It is the latest in a spate of deals by Indian groups in Australia and elsewhere as the country secures more energy resources to meet rising demand for power to complete vital infrastructure projects.
Although India is rich in coal, production has been constrained by conservative environmental regulations and a strengthening Maoist insurgency, which has made many reserves in the country inaccessible.
Mike Elliott, global mining & metals leader at Ernst & Young, said Indian groups were losing their reputation as “perennial tyre kickers” when it comes to completing deals.
He said an analysis of the global mining and metals sector saw India jump from 14th place in 2009 to 7th in 2010, with the value of deals surging from $823m to $5.5bn.
The battle for resources between India and China, its major rival, has moved to Australia, which is a preferred destination for many Indian companies keen to acquire coal assets and infrastructure.
GVK, one of India’s largest power and infrastructure groups, is close to completing a deal potentially worth A$8bn to buy two Australian coal mines from Hancock Prospecting, which is privately controlled by the billionaire Gina Rinehart.
Meanwhile, Lanco Infratech, an Indian power group, acquired assets of Australia’s Griffin Coal for A$750m last year, while Adani acquired Linc Energy’s Australian assets for A$2.72bn in August.
“China gets a lot of focus when it comes to buying mining and metals assets globally but Indian groups have been at least as successful in recent times,” Mr Elliott said.
He added the value of India’s outbound investment in the mining and metals sector globally reached $4.6bn in 2010, for the first time surpassing China’s outbound investment of $4.5bn. “As well as Australia, Indian companies are looking at Indonesia and Africa,” he said.
He said India was a late investor in Australian coal assets and its “price of admission” included making strategic investments in infrastructure assets, such as ports. Ownership of infrastructure assets could strengthen India’s power to negotiate supply agreements with Australian coal miners.
Mergers and acquisitions
FT In depth: News, comment and analysis on global M&A activity
..
Arvind Mahajan, head of natural resources at KPMG in Mumbai, said that many Indian groups prefer Australia because the risk of doing business there is lower than in politically unstable but resource-rich countries and regions such as the Middle East.
“India is heavily dependant on Middle Eastern oil imports but given the recent wave of unrest in the region, Indian chief executives are always looking for alternative places to do business,” said Mr Mahajan.
“We have seen a lot of big deals in Australia in recent months and we are likely to see more in the future as the opportunities are big and the risk of doing business there is low.”
The Queensland government said the sale of Abbot Point, one of Australia’s bigger coal terminals with annual capacity of 21m tonnes, was above its “initial expectations” of A$1.5bn. The deal has been approved by Australia’s Foreign Investment Review Board.
Adani, which has been one of the most acquisitive Indian groups overseas, invested $1.6bn to build a 270km railway line and coal terminal in remote Sumatra last year.
India could face a coal shortage of almost 50m tonnes by the end of March 2011, according to government data.
However, independent analysts warn the shortage could exceed 200m tonnes by 2011, as the number of power projects is set to double.
India’s demand for coal is currently outpacing the country’s production, which has been growing at about 6-7 per cent, said Mr Mahajan.
