JPMorgan: Indian power producers: Australian government proposes carbon tax on mining:: JPMorgan

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

 The Australian government proposes to levy carbon tax at A$23/ton
(US$21.5) of CO2 equivalent on all mining activities. This would rise
at 2.5% p.a. real rates (2.5%+CPI in nominal terms) for 3 years, post
which the prices for carbon tax will be market based. The proposed date
of implementation is July 2012 and approval for the same will be sought
in parliament in Aug / September. See detailed note of J.P. Morgan
Australian resources team over the weekend on this issue.
 The tax of A$23/ton of CO2 equivalent would translate into A$1.8-
2/ton (US$1.7-1.9) of coal produced, based on benchmark emission
norms for most coal mining companies, as per Australian coal
association.
 Our colleagues covering Australian resources opine that the details
of the scheme are in-line with expectations already built in for the
mining sector. The escalation rates are lower than what they were
expecting. They have estimated reasonably small EPS impact for their
coverage universe. Based on this commentary, our prima facie view is
that the impact on Indian power producers with coal mining interests in
Australia, would not be significant.
 The proposal details assistance for emission-intensive trade exposed
industries (EITE), which is not applicable for coal mining. On the other
hand, the coal sector will receive special assistance under the A$1.3bn
Coal Sector Jobs Package, which will help existing gassy mines by
compensating 80% of emissions above 0.1t CO2-eq/t saleable coal, albeit
based on 2008-09 emissions levels.
 The carbon tax would increase cost for 1) Lanco – Griffin mines, 2)
Adani Enterprises – Linc Energy and Abott point mines and 3) GVK -
Hancock mines. Other players pursuing coal mine acquisition in
Australia would need to factor it in, too - Eg: NTPC / GMRI: Bandanna,
RPWR – Metrocoal. While carbon tax does not seem to be of significant
impact (prima facie), uncertainty on the mining tax regime itself persists.
See our recent detailed note on Australian mining tax implications for
Lanco and other power producers in India.