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UBS Investment Research
Asia on the Ground: India Coal Sector
W hat’s happening on the execution side
Drove to Raniganj to visit Eastern Coalfields (ECL); met stakeholders
Last week we drove from Kolkata to Raniganj to visit the Sonepur Bazari mines
(ECL—subsidiary of Coal India (CIL)). We met officials from ECL and CIL. We also
met high-level officials in the Ministry of Coal in Delhi, washery and railway wagon
manufacturers, and coal traders in Kolkata.
We wanted an update on progress on expansions, wagon availabilty
We wanted to get a perspective on the key issues impacting CIL’s earnings and stock
price performance i.e. 1) progress on coal washeries; 2) progress on wagon production;
3) production/despatch outlook; 4) coal pricing outlook; and 5) impact of proposed
mining tax bill (26% share of profit).
Our findings: washery progress slow; sales volume contingent on wagons
Our findings: 1) Washeries: progress is slow as only one out of 20 washeries has been
contracted. 2) Production/despatch target of 452mt /477mt for FY12 could disappoint
due to execution/wagon availability issues. 3) Railway wagon ordering is delayed—
Budget 2012 had targeted 18,000 new wagons in FY12—however, the tender will open
in August. 4) Wage negotiations have not started (due in July). We do not expect CIL
to be able to take meaningful price hikes in the next 6-12 months. 5) We do not expect
significant downside to CIL’s profits from the proposed mining bill (details below).
UBS view and action: we maintain Neutral on CIL with PT of Rs400
We believe CIL needs to outperform its volume guidance for a further rerating given no
visible price hikes in the next 6-12 months. We value CIL on 15x FY13E EPS.
Trip Findings—Summary
Last week, we drove from Kolkata to Raniganj to visit the Sonepur Bazari mines
(ECL). We met officials from ECL and from CIL. We also met high-level
officials in the Ministry of Coal in Delhi, washery and railway wagon
manufacturers, and coal traders in Kolkata. Our key findings from the trip are:
Washeries—Progress is slow as only one out of the 20 washeries (111mt
capacity) has been awarded a contract. CIL is calling for a rebid of the
washeries. We understand that it will be difficult to commission the entire
111mt by FY17.
Production target for FY12 remains at 452mt although it missed Q1
production target by 2.5%. It plans to sell 477mt of coal in FY12 (by
liquidating 25mt of inventory).
— We believe it will be difficult for CIL to sell 477mt of coal given logistics
issues, namely railways wagon availability.
— CIL would need to get c200 freight trains/rakes/day to achieve 477mt of
sales. Even to sell 452mt of coal, it would need 175-180 rakes/day—it
received 178/161/161/167 rakes in April/May/June/July MTD.
Railway wagons—Railways added 11,000 wagons last year. We understand
from wagon manufactures that Indian Railways will order 18,000 wagons by
end-September. We believe this is not sufficient as CIL needs c200 rakes/day
to achieve 477mt of coal sales. CIL got 162 wagons/day in FY11.
Wage negotiations due in July 2011 have not begun yet (the previous wage
negotiation took 2.5 years). Our interactions indicate that it will be difficult
for CIL to introduce any meaningful prices hike in the next 6-12 months.
Mining Bill—impact on CIL’s earnings is not likely to be significant as:
— 26% profit share is on mining profits (not on interest income—
Interest/other income for CIL was c30% of PBT in FY11). Tax is on PAT
(not PBT).
— Although there is no provision in the current bill to allow a setoff of CSR
expenses against the 26% profit sharing clause, CIL can reduce its CSR
spend (c20% of PAT) if it wants to, if it is asked to pay a 26% mining
profit share.
— There could be changes in the Bill (royalty instead of 26% profit share) as
it will debated by the Parliamentary Standing Committee, which would
include various stakeholders (state governments, bureaucrats, etc).
Our view on CIL
YTD CIL has been one of the best performers on the MSCI India/S&P CNX
Nifty (outperformance of c30%).
We recently downgraded our rating from Buy to Neutral (after 25%
outperformance YTD) and lowered our price target to Rs400 (from Rs435)
as we believe it will be difficult for CIL to: 1) exceed its volume guidance;
and 2) raise prices before completing wage negotiations (the previous wage
negotiation took 2.5 years).
Although we believe in the long-term attractiveness and the structural story
of the stock, we believe near-term execution (production/despatch) and
logistics (railways) risks would remain an overhang on the stock.
Detailed Findings
Coal washeries—going nowhere, at least for now
Coal produced by CIL has high ash and sulphur content. Hence, coal
washing is a very important aspect in the value chain. Apart from the
apparent benefit of higher realisations on washed coal, other benefits include:
a) significantly less harm to the environment compared with unwashed coal;
and b) freight cost savings (washed coal is lighter).
Earlier, CIL expected c300mt of washeries by FY17 i.e. 111mt new
washeries and all new mines with more than 2.5mt mine capacity would have
an inbuilt washery.
However, progress is slow as only one washery out of the 20 (111mt
capacity) has been contracted—two are in process. CIL is calling a rebid of
the washeries—CIL had asked for bank guarantees for 10 years after the
recent tender was closed—most bidders did not have bank guarantee (for 10
years) and their bidding did not include the cost of bank guarantees; so CIL
is now asking for a retender.
Currently, CIL is targeting setting up new washeries of 111mt by FY17. Post
interactions with the various stakeholders, we understand that it will be
difficult for CIL to commission all of the 111mt of washery capacity by 2017.
— We do not doubt the intent of CIL to expand the washery capacity, but its
ability to execute is what concerns us. Further, the organisational
structure of CIL inhibits quick implementation—CIL is merely a holding
company with coal produced by its subsidiaries: a) each subsidiary is
headed by a different CMD; and b) subsidiaries have own boards
— Tendering is slow—Vigilance and criticism is causing delays in decision
making. After a spate of recent allegations of scandals in various sectors
(telecom, mining in Karnataka, etc), the tendering process for new
projects has slowed down.
One of the large washery manufacturers we met said that it has not received
any washery order from CIL in the past six months. However, it has
observed a trend where the end users are setting up washeries i.e. steel,
power, and cement companies.
Will FY12 production/despatch target be achieved?
Production: CIL has set for itself a production target of 452mt for FY12.
— In Q1 FY12, the company missed the production target by 2.5% at 96mt
due to excessive rains and unfavourable weather conditions.
— We believe CIL would at best achieve the FY12 production target—the
chances of missing the target are high given the inefficiencies in
operations and organisational structure. If CIL misses the FY12
production target, the stock is likely to derate given FY11 production also
disappointed (flat growth vs FY10 at 431mt).
— According to CIL, earlier the FY17 production target was 647mt; CIL
now believes c566mt to be a realistic production target for FY17.
Despatches: In addition to the production target of 452mt, CIL plans to
liquidate 25mt of pithead inventory this year, implying total sales volume of
477mt. However, availability of rakes from the Indian Railways continues to
pose a challenge and remains a key bottleneck.
— To achieve even 452mt of sales, wagon supply would have to increase
9% YoY (175-180 rakes/day), which we believe is a stretch.
— CIL got 178/162/161/167 rakes in April/May/June/MTD July this year.
— Railways increased wagon supply to CIL by only 3% in FY11 to 162
rakes/day (from 157) vs. the requirement of 190 rakes/day.
— To achieve 477mt of despatches, CIL would need to get c200 rakes.
— We estimate c452mt/472mt (raw coal) of sales volume in FY12/FY13.
Wagon availability has been a key constraint
CIL has complained about insufficient rake availability time and again. The
percentage of wagon requirement satisfied by the Indian Railways has been
declining over the years, leading to inventory pile-ups at various mines. We note
that April being one of the busiest months, wagon availability during the period
is normally higher than the annual average.
Takeaways from meeting with wagon manufacturers
Railway orders for wagons for FY12 seem to be delayed—the Railways will
tender 15,975 wagons to the private sector on 8 August 2011 out of the total
order of 18,000 wagons (the remaining 2,025 wagons will be ordered to the
PSU companies). Expects ordering by end-September.
Assuming an average of 58 wagons per rake, this would mean an addition of
310 new rakes by end-FY12 (assuming all 18,000 wagons are delivered in
FY12). However, given ordering would be done by end-September, the
average increase in rakes this year from the above orders will not be
meaningful.
Railways added 11,000 wagons in FY11 out of which ~50% would be open
wagons (used for coal/iron ore), implying an increase of 95 open box rakes
(5,500/58) in FY12 over FY11. Assuming an average turnaround time for
freight train of 5 days (average for Indian Railways in FY09), this would
imply an increase of 19 rakes (on a per day basis) in FY12. We believe it will
be difficult to CIL to get all of the incremental rakes.
— CIL last year got 162 rakes. To sell 452mt/477mt, it would need
c180/c200 rakes per day. Hence, we believe it will be difficult to CIL to
meet its despatch guidance for FY12.
Key issues:
— Timely placement of orders by the Indian Railways;
— Inadequate analysis of wagon requirements;
— Shortage of wheel sets
(1) Private wagon manufacturers cannot buy wheel sets. Wheel sets are
supplied by railways. Wheel sets are manufactured by the Railway
Wheel Factory of India, which has a capacity of c60,000 wheel sets.
Around 20-25,000 wheel sets need to be imported, which the
Railways has admitted for the first time.
(2) This is a big bottleneck for wagon manufacturers
Open wagon stock increases have been much more than half of total wagon
increases in recent years, suggesting either higher procurement or less
replacement of open wagons.
Coal price increase unlikely
Wage negotiations due in July 2011 have not even started. The previous
wage negotiation took 2.5 years to complete and CIL raised coal prices only
after the completion of wage negotiations. Hence, based on our interactions
with company officials, top bureaucrats, traders and consumers, we believe it
would be a difficult task for CIL to pass on another meaningful price hike
this year.
We are not estimating any further price increase in fuel supply agreements
(FSAs) for FY12/13.
One of the large e-auction traders we met mentioned that the government's
focus should be on 'getting the coal out' and not increasing coal prices—he
mentioned that the customer should not bear the cost of CIL's/Railway’s
inefficiency (i.e. despatch ramp-ups). CIL is a monopoly—if the government
wants market-based pricing in the sector, it should open up the sector to the
private sector rather than just allow CIL to increase prices (and keep
disappointing/under-delivering on despatches).
Recent e-auction prices higher than import parity
Our channel checks suggest that most of the recent e-auction sales have been
higher than the landed import parity costs. A key reason is that over the past
two to three months, large institutional buyers such as large power, steel,
cement companies are buying 60-70% of coal offered in most of the auctions,
which is bumping up the auction price. His view is that this is not sustainable.
Impact of Draft Mining Bill
As we had pointed out in our note ‘GoM approves draft mining bill’ dated 11
July 2011, pure miners could be adversely affected the most if the bill is
implemented in its current form. However, there was a lot of uncertainty on
the provisions of the Bill. We have tried to find out more about the impact of
the mining bill during this trip. In our earnings estimates for CIL, we have
not factored in any downside due to the proposed Mining Tax Bill.
Our key findings from the trip after interacting with various stakeholders are:
(a) The 26% profit share clause is only on mining profits (and not on
interest income), over and above all taxes paid by CIL. CIL’s ‘Other
Income’ (largely interest income) was Rs48bn vs. PBT of Rs165bn
(29% of PBT) in FY11. In addition, the profit share will be computed
on the PAT and not PBT.
(b) Although there is no provision in the current bill to allow a setoff of
CSR expenses against the 26% profit-sharing clause, CIL can reduce
its CSR spend (~20% of PAT) if it wants to, if it is asked to pay a 26%
mining profit share.
(c) CIL spent cRs22bn on social overheads in FY11, of which Rs16bn
was directly spent on social welfare expenditure on the community,
while the balance was spent indirectly on hiring people/equipment to
implement this social spending.
(d) There could be changes in the Bill as it will be debated in
Parliamentary Standing Committee.
(e) Timeline—unlikely to be implemented in the near term.
There is a possibility that instead of a 26% profit share clause, a higher
royalty is implemented. In case of a higher royalty, CIL’s earnings will not
be impacted as royalty is borne by the customers.
— A profit-sharing clause leaves scope for firms to manipulate profits.
— For companies with captive coal blocks (such as steel, power companies,
etc), there would be additional complications of:
(1) Determining the transfer pricing of coal;
(2) Determining which expenses will be allowed to be charged against
mining income to determine the profits i.e. lease of mining
equipments, overburden removal, employee expenses, depreciation,
etc.
(3) Increase in the government’s monitoring and collection costs.
Based on our meetings and the above findings, we believe that the final
impact on CIL’s earnings is not likely to be significant.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Asia on the Ground: India Coal Sector
W hat’s happening on the execution side
Drove to Raniganj to visit Eastern Coalfields (ECL); met stakeholders
Last week we drove from Kolkata to Raniganj to visit the Sonepur Bazari mines
(ECL—subsidiary of Coal India (CIL)). We met officials from ECL and CIL. We also
met high-level officials in the Ministry of Coal in Delhi, washery and railway wagon
manufacturers, and coal traders in Kolkata.
We wanted an update on progress on expansions, wagon availabilty
We wanted to get a perspective on the key issues impacting CIL’s earnings and stock
price performance i.e. 1) progress on coal washeries; 2) progress on wagon production;
3) production/despatch outlook; 4) coal pricing outlook; and 5) impact of proposed
mining tax bill (26% share of profit).
Our findings: washery progress slow; sales volume contingent on wagons
Our findings: 1) Washeries: progress is slow as only one out of 20 washeries has been
contracted. 2) Production/despatch target of 452mt /477mt for FY12 could disappoint
due to execution/wagon availability issues. 3) Railway wagon ordering is delayed—
Budget 2012 had targeted 18,000 new wagons in FY12—however, the tender will open
in August. 4) Wage negotiations have not started (due in July). We do not expect CIL
to be able to take meaningful price hikes in the next 6-12 months. 5) We do not expect
significant downside to CIL’s profits from the proposed mining bill (details below).
UBS view and action: we maintain Neutral on CIL with PT of Rs400
We believe CIL needs to outperform its volume guidance for a further rerating given no
visible price hikes in the next 6-12 months. We value CIL on 15x FY13E EPS.
Trip Findings—Summary
Last week, we drove from Kolkata to Raniganj to visit the Sonepur Bazari mines
(ECL). We met officials from ECL and from CIL. We also met high-level
officials in the Ministry of Coal in Delhi, washery and railway wagon
manufacturers, and coal traders in Kolkata. Our key findings from the trip are:
Washeries—Progress is slow as only one out of the 20 washeries (111mt
capacity) has been awarded a contract. CIL is calling for a rebid of the
washeries. We understand that it will be difficult to commission the entire
111mt by FY17.
Production target for FY12 remains at 452mt although it missed Q1
production target by 2.5%. It plans to sell 477mt of coal in FY12 (by
liquidating 25mt of inventory).
— We believe it will be difficult for CIL to sell 477mt of coal given logistics
issues, namely railways wagon availability.
— CIL would need to get c200 freight trains/rakes/day to achieve 477mt of
sales. Even to sell 452mt of coal, it would need 175-180 rakes/day—it
received 178/161/161/167 rakes in April/May/June/July MTD.
Railway wagons—Railways added 11,000 wagons last year. We understand
from wagon manufactures that Indian Railways will order 18,000 wagons by
end-September. We believe this is not sufficient as CIL needs c200 rakes/day
to achieve 477mt of coal sales. CIL got 162 wagons/day in FY11.
Wage negotiations due in July 2011 have not begun yet (the previous wage
negotiation took 2.5 years). Our interactions indicate that it will be difficult
for CIL to introduce any meaningful prices hike in the next 6-12 months.
Mining Bill—impact on CIL’s earnings is not likely to be significant as:
— 26% profit share is on mining profits (not on interest income—
Interest/other income for CIL was c30% of PBT in FY11). Tax is on PAT
(not PBT).
— Although there is no provision in the current bill to allow a setoff of CSR
expenses against the 26% profit sharing clause, CIL can reduce its CSR
spend (c20% of PAT) if it wants to, if it is asked to pay a 26% mining
profit share.
— There could be changes in the Bill (royalty instead of 26% profit share) as
it will debated by the Parliamentary Standing Committee, which would
include various stakeholders (state governments, bureaucrats, etc).
Our view on CIL
YTD CIL has been one of the best performers on the MSCI India/S&P CNX
Nifty (outperformance of c30%).
We recently downgraded our rating from Buy to Neutral (after 25%
outperformance YTD) and lowered our price target to Rs400 (from Rs435)
as we believe it will be difficult for CIL to: 1) exceed its volume guidance;
and 2) raise prices before completing wage negotiations (the previous wage
negotiation took 2.5 years).
Although we believe in the long-term attractiveness and the structural story
of the stock, we believe near-term execution (production/despatch) and
logistics (railways) risks would remain an overhang on the stock.
Detailed Findings
Coal washeries—going nowhere, at least for now
Coal produced by CIL has high ash and sulphur content. Hence, coal
washing is a very important aspect in the value chain. Apart from the
apparent benefit of higher realisations on washed coal, other benefits include:
a) significantly less harm to the environment compared with unwashed coal;
and b) freight cost savings (washed coal is lighter).
Earlier, CIL expected c300mt of washeries by FY17 i.e. 111mt new
washeries and all new mines with more than 2.5mt mine capacity would have
an inbuilt washery.
However, progress is slow as only one washery out of the 20 (111mt
capacity) has been contracted—two are in process. CIL is calling a rebid of
the washeries—CIL had asked for bank guarantees for 10 years after the
recent tender was closed—most bidders did not have bank guarantee (for 10
years) and their bidding did not include the cost of bank guarantees; so CIL
is now asking for a retender.
Currently, CIL is targeting setting up new washeries of 111mt by FY17. Post
interactions with the various stakeholders, we understand that it will be
difficult for CIL to commission all of the 111mt of washery capacity by 2017.
— We do not doubt the intent of CIL to expand the washery capacity, but its
ability to execute is what concerns us. Further, the organisational
structure of CIL inhibits quick implementation—CIL is merely a holding
company with coal produced by its subsidiaries: a) each subsidiary is
headed by a different CMD; and b) subsidiaries have own boards
— Tendering is slow—Vigilance and criticism is causing delays in decision
making. After a spate of recent allegations of scandals in various sectors
(telecom, mining in Karnataka, etc), the tendering process for new
projects has slowed down.
One of the large washery manufacturers we met said that it has not received
any washery order from CIL in the past six months. However, it has
observed a trend where the end users are setting up washeries i.e. steel,
power, and cement companies.
Will FY12 production/despatch target be achieved?
Production: CIL has set for itself a production target of 452mt for FY12.
— In Q1 FY12, the company missed the production target by 2.5% at 96mt
due to excessive rains and unfavourable weather conditions.
— We believe CIL would at best achieve the FY12 production target—the
chances of missing the target are high given the inefficiencies in
operations and organisational structure. If CIL misses the FY12
production target, the stock is likely to derate given FY11 production also
disappointed (flat growth vs FY10 at 431mt).
— According to CIL, earlier the FY17 production target was 647mt; CIL
now believes c566mt to be a realistic production target for FY17.
Despatches: In addition to the production target of 452mt, CIL plans to
liquidate 25mt of pithead inventory this year, implying total sales volume of
477mt. However, availability of rakes from the Indian Railways continues to
pose a challenge and remains a key bottleneck.
— To achieve even 452mt of sales, wagon supply would have to increase
9% YoY (175-180 rakes/day), which we believe is a stretch.
— CIL got 178/162/161/167 rakes in April/May/June/MTD July this year.
— Railways increased wagon supply to CIL by only 3% in FY11 to 162
rakes/day (from 157) vs. the requirement of 190 rakes/day.
— To achieve 477mt of despatches, CIL would need to get c200 rakes.
— We estimate c452mt/472mt (raw coal) of sales volume in FY12/FY13.
Wagon availability has been a key constraint
CIL has complained about insufficient rake availability time and again. The
percentage of wagon requirement satisfied by the Indian Railways has been
declining over the years, leading to inventory pile-ups at various mines. We note
that April being one of the busiest months, wagon availability during the period
is normally higher than the annual average.
Takeaways from meeting with wagon manufacturers
Railway orders for wagons for FY12 seem to be delayed—the Railways will
tender 15,975 wagons to the private sector on 8 August 2011 out of the total
order of 18,000 wagons (the remaining 2,025 wagons will be ordered to the
PSU companies). Expects ordering by end-September.
Assuming an average of 58 wagons per rake, this would mean an addition of
310 new rakes by end-FY12 (assuming all 18,000 wagons are delivered in
FY12). However, given ordering would be done by end-September, the
average increase in rakes this year from the above orders will not be
meaningful.
Railways added 11,000 wagons in FY11 out of which ~50% would be open
wagons (used for coal/iron ore), implying an increase of 95 open box rakes
(5,500/58) in FY12 over FY11. Assuming an average turnaround time for
freight train of 5 days (average for Indian Railways in FY09), this would
imply an increase of 19 rakes (on a per day basis) in FY12. We believe it will
be difficult to CIL to get all of the incremental rakes.
— CIL last year got 162 rakes. To sell 452mt/477mt, it would need
c180/c200 rakes per day. Hence, we believe it will be difficult to CIL to
meet its despatch guidance for FY12.
Key issues:
— Timely placement of orders by the Indian Railways;
— Inadequate analysis of wagon requirements;
— Shortage of wheel sets
(1) Private wagon manufacturers cannot buy wheel sets. Wheel sets are
supplied by railways. Wheel sets are manufactured by the Railway
Wheel Factory of India, which has a capacity of c60,000 wheel sets.
Around 20-25,000 wheel sets need to be imported, which the
Railways has admitted for the first time.
(2) This is a big bottleneck for wagon manufacturers
Open wagon stock increases have been much more than half of total wagon
increases in recent years, suggesting either higher procurement or less
replacement of open wagons.
Coal price increase unlikely
Wage negotiations due in July 2011 have not even started. The previous
wage negotiation took 2.5 years to complete and CIL raised coal prices only
after the completion of wage negotiations. Hence, based on our interactions
with company officials, top bureaucrats, traders and consumers, we believe it
would be a difficult task for CIL to pass on another meaningful price hike
this year.
We are not estimating any further price increase in fuel supply agreements
(FSAs) for FY12/13.
One of the large e-auction traders we met mentioned that the government's
focus should be on 'getting the coal out' and not increasing coal prices—he
mentioned that the customer should not bear the cost of CIL's/Railway’s
inefficiency (i.e. despatch ramp-ups). CIL is a monopoly—if the government
wants market-based pricing in the sector, it should open up the sector to the
private sector rather than just allow CIL to increase prices (and keep
disappointing/under-delivering on despatches).
Recent e-auction prices higher than import parity
Our channel checks suggest that most of the recent e-auction sales have been
higher than the landed import parity costs. A key reason is that over the past
two to three months, large institutional buyers such as large power, steel,
cement companies are buying 60-70% of coal offered in most of the auctions,
which is bumping up the auction price. His view is that this is not sustainable.
Impact of Draft Mining Bill
As we had pointed out in our note ‘GoM approves draft mining bill’ dated 11
July 2011, pure miners could be adversely affected the most if the bill is
implemented in its current form. However, there was a lot of uncertainty on
the provisions of the Bill. We have tried to find out more about the impact of
the mining bill during this trip. In our earnings estimates for CIL, we have
not factored in any downside due to the proposed Mining Tax Bill.
Our key findings from the trip after interacting with various stakeholders are:
(a) The 26% profit share clause is only on mining profits (and not on
interest income), over and above all taxes paid by CIL. CIL’s ‘Other
Income’ (largely interest income) was Rs48bn vs. PBT of Rs165bn
(29% of PBT) in FY11. In addition, the profit share will be computed
on the PAT and not PBT.
(b) Although there is no provision in the current bill to allow a setoff of
CSR expenses against the 26% profit-sharing clause, CIL can reduce
its CSR spend (~20% of PAT) if it wants to, if it is asked to pay a 26%
mining profit share.
(c) CIL spent cRs22bn on social overheads in FY11, of which Rs16bn
was directly spent on social welfare expenditure on the community,
while the balance was spent indirectly on hiring people/equipment to
implement this social spending.
(d) There could be changes in the Bill as it will be debated in
Parliamentary Standing Committee.
(e) Timeline—unlikely to be implemented in the near term.
There is a possibility that instead of a 26% profit share clause, a higher
royalty is implemented. In case of a higher royalty, CIL’s earnings will not
be impacted as royalty is borne by the customers.
— A profit-sharing clause leaves scope for firms to manipulate profits.
— For companies with captive coal blocks (such as steel, power companies,
etc), there would be additional complications of:
(1) Determining the transfer pricing of coal;
(2) Determining which expenses will be allowed to be charged against
mining income to determine the profits i.e. lease of mining
equipments, overburden removal, employee expenses, depreciation,
etc.
(3) Increase in the government’s monitoring and collection costs.
Based on our meetings and the above findings, we believe that the final
impact on CIL’s earnings is not likely to be significant.
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