International Coal Ventures (ICVL) power project in Mozambique may bring synergy among promoters

Faced with several problems – including two of its original promoters being rather reluctant to stay put – International Coal Ventures (ICVL) is pinning hopes on a proposed 200 megawatt (MW) power plant that is to be established on a build-own-operate basis in Tete Province to infuse fresh life into the joint venture.

The power plant, for which an expression of interest (EoI) was floated by its promoters including SAIL and NMDC in March, would not only help the company dispose of thermal coal, low-heat-value coal and tailings from its Benga mine but also help the consortium bring its truant promoters – NTPC and CIL – back to its fold.

ICVL was incorporated in 2009 with the aim of acquiring coal assets with equity participation from SAIL, CIL, RINL, NMDC and NTPC in the ratio of 2:2:1:1:1. However, CIL and NTPC stopped contributions after initial payments of Rs2.8 crore and Rs1.4 crore, respectively.

As of March 2015, SAIL held 49.59% stake in the special purpose vehicle (SPV) while RINL and NMDC held 24.8% each. NTPC had 0.54% holding and CIL had 0.27%. NTPC and CIL do not have board representation either.

They were reluctant to be a party because ICVL’s focus was on coking coal while the duos focus was on thermal coal.

The two also did not participate in ICVL’s maiden acquisition of Rio Tinto’s Mozambique coking coal asset in 2011 for US$50-million in which SAIL, RINL and NMDC contributed in the ratio of 48:26:26. Meanwhile, ICVL’s lone operating Benga coking coal block from the acquired mine has been lying idle since January this year.

The prices of the raw material have been on a declining trend since the acquisition, forcing promoters to cash support continuously. Tata Steel has 35% stake in the Benga mine, which has 5.2-million ton production capacity.

“Some restructuring will have to be done in ICVL. We are trying to make efforts to bring NTPC and CIL back”, a highly-placed official in the Indian Steel Ministry said, adding that efforts would be made to retain the “good” asset and minimize cost given its importance in the long-run for the country.

Efforts would also be made to bring NTPC and CIL back into the fold, given NTPC’s expertise in power generation and CIL’s expertise in handling of thermal coal.

With regard to the EoI, ICVL said the successful bidder would supply all necessary finance for the design, materials, equipment accessories, resources, services and construction works both of a temporary and permanent nature as well as the operation of the power plant.

It would also be responsible for project management and operation, including marketing and sale of electricity, as the owner of Benga power plant project and installations.

“ICVL may exercise an option of participating in the power project in view of the facilities and rights to be provided to the project proponent”, it said.

Source: The Financial Express

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