Adani Enterprises Secures Contract to Develop and Operate 40 Million-Ton Chendipada Coal Mine in Orissa

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's Adani Enterprises Limited (BSE:512599) (AEL) (Ahmedabad, Gujarat), a subsidiary of the Adani Group (Ahmedabad), has secured the rights to develop and operate the 40 million-ton-per-year Chendipada coal mine in Orissa. With this contract, the company's mining operations portfolio is expected to reach 110 million tons per year, making it India's largest domestic private-sector miner.

The Chendipada coal mine, which is in the Talcher district, has total reserves of 1.6 billion tons. The mine was allotted to the UCM Coal Company Limited, a joint venture between Maharashtra State Power Generation Corporation (Mumbai), Chhattisgarh Mining Development Company Limited (Raipur, Chhattisgarh) and Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (Lucknow, Uttar Pradesh). As part of the agreement, AEL will undertake development of the mine; activities related to land acquisition; resettlement and rehabilitation; establishment of coal washery units; mining plan and environmental clearances; construction of railway sliding and allied infrastructure; and the supply of washed coal to power projects in Maharashtra, Uttar Pradesh and Chhattisgarh.

AEL also will develop a 2,000-MW power project as an 89:11 joint venture with UCM Coal. An investment of $1.8 billion will be made in the venture. The coal washery units are expected to produce 11 million to 12 million tons of rejects that will be used as feed in the power plant.

Earlier, the company secured mining developer and operator projects from Rajasthan Rajya Vidyut Utpadan Nigam Limited (Jaipur, Rajasthan), Mahaguj Collieries Limited (Mumbai) and Chhattisgarh State Power Generation Company Limited (Raipur, Chhattisgarh). Coal production from these projects is expected to begin in 42 to 48 months. The coal will be used to fuel power projects in Rajasthan, Chhattisgarh, Maharashtra and Uttar Pradesh.

In a related development, AEL completed the acquisition of Australia's Galilee Basin coal mine from Linc Energy Limited (ASX:LNC) (Brisbane, Australia) for about $2.8 billion. The mine, which is in Queensland, has estimated reserves of 7.8 billion tons. Early this month, the company announced an investment of $6.9 billion on various development activities at this site. The first coal output from the Galilee Basin coal mine is expected by 2014, with full production of 50 million to 60 million tons by 2022. The company is scouting for partners for this project and is reportedly holding talks with Coal India Limited (Kolkata, West Bengal). Recently, AEL signed a $1.65 billion agreement with PT Bukit Asam (Persero) Tbk (Tanjung Enim, Indonesia) and the Indonesian government to secure exclusive coal-mining rights and to develop port and railway infrastructure in the country.

According to Chairman Gautam Adani of the Adani Group, these projects are part of the group's strategy to attain 200 million tons of coal-mining agreements, 20,000 MW of power generation capacity, and 20 million-ton-per-year cargo-handling capability by 2020. Presently, the group's power portfolio consists of 18,500 MW of projects in various stages of development and operations. Adani Power Limited (BSE:533096) (Ahmedabad), a group affiliate, is proposing 16,500 MW of new coal power-generating capacity. These include 4,620 MW in Mundra, 2,640 MW in Dahej, and 3,300 MW in Bhadreshwar, all three of which are locations in Gujarat; 1,320 MW each in Madhya Pradesh and Rajasthan; and 3,300 MW in Maharashtra.

For the second quarter ending September 30, 2010, AEL's combined net profit increased by 3.4 times from the same quarter last year to $115 million. During this period, the total revenues were $1.35 billion. For the July-September period, the company's consolidated sales grew 8%.

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