• A resource held ‘captive’: Only 26 of the 215 coal blocks allocated since
1993 had started production as of Jun-2010. Despite delays, so far only
eight blocks have been de-allocated. Captive coal blocks allocated so far
amount to 45BMT of resources, quite similar to 52.5BMT proven
geological reserves with CIL. However, captive mines produced 44.5MMT
in FY10, ~8.4% of total production of 530MMT. ~60% of captive coal
resource has been allocated to power sector.
• What is causing delays? We analyzed the status of captive coal blocks held
by IPPs to evaluate the fuel risk for the associated power project. We
conclude that the majority of coal blocks analyzed were delayed due to
pending forest clearance and land acquisition.
• A key risk to valuations; major IPPs with exposure include:-
• NTPC: Allocated blocks have ~5.9BMT of reserves. Earliest block
allocated in Oct-2004 (Pakri Barwadih), unlikely to commence production
before FY12, in our view. Stage-II forest clearance and MDO appointment
pending for this block. Captive coal mines can potentially support 15GW of
target capacity of 70GW by FY17.
• Essar Power: All 3 blocks allocated fall in ‘no-go’ forest area classification
of Min. of Environment & Forest (MoEF). Over 55% of capex on dependent
Mahan-I (2x600MW, CoD est. 3QCY11) has been incurred. Underconstruction
Tori-I (2x600MW, CoD est.4QCY12) also faces fuel risk.
• GVK: Tokisud mine expected to start production by Dec-11, ahead of CoD
of unit-1 of Goindwal Sahib (2x270MW) in 3QCY12. Stage-II forest
clearance and land acquisition are still pending.
• JSW Energy: 2x800MW West Bengal project (contributes 17% to SOP, or
Rs21/share) is dependent on 3 coal blocks being developed by the state
minerals development company. Coal blocks are unexplored, as yet.
Assurance of commencing coal production by Dec-2013 is at risk.
• Adani Power: Still seeking alternative block in return for Lohara allocation
which was rejected due to proximity to tiger reserve. Alternative block
allocation a upside for Tiroda-I (1980MW)- ~Rs26/share or 17% of SOTP.
• Tata Power: Production of Tubed block to commence by FY13 and
Mandakini by mid-2014. As per ministry of coal stage-I forest clearance is
pending for both. Tata Power is basing 2.4GW of pipeline on these blocks
(we have factored value for 1GW in SOP, ~Rs146/share or 10% of SOP).
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