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India Utilities
New MoEF Policy Stresses
Environmental Clearance for
Coal Sources
In our view, this is a positive move: As per a
notification from the Ministry of Environment and Forests
(MoEF) dated November 1, the ministry has ordered that
environmental clearances for coal-based projects
(power and metallurgical projects) will be granted only
after a firm linkage is available and when the linked mine
or coal block has obtained environmental clearance. For
projects based on imported coal, it is important to show
a firm MoU between the coal supplier and developer.
We cite the following general benefits…
• The commissioning of projects and coal mining
projects will be synchronized. The possibility of
projects idling due to non-availability of
environmental clearance for the coal linkage/block
will decrease.
• Project developers will have increased visibility on
execution. Hence management of resources will
gain efficiency.
• Projects with MoEF clearance would indicate that
the coal source is also environmentally cleared.
This makes it easier for banks and funding
institutions to financially close projects.
• We believe this will enhance the attractiveness of
projects based on foreign coal. All the company
needs to show in such projects is a MoU with the
coal supplier.
…plus benefits for Adani Enterprises: Our analyst,
Akshay Soni, points out the following benefits that this
policy has for the company:
• Coal ownership: AEL has forged ahead of other Indian
groups in obtaining coal assets outside India: 50 mtpa in
Australia from the Galilee acquisition and 30 mtpa in
Indonesia (9 mtpa from its captive mines in Bunyu and 21
mtpa from its agreement with PTBA). We believe that its
coal will now have more customers, which could translate
into an increase in profitability (mainly on the captive
assets)
• Adani Power: Its parent's access to these coal reserves
will serve as a competitive advantage for Adani Power,
enhancing its value. With 70.25% of the ownership
vested in Adani Enterprises, it will be beneficial for the
company.
• Coal trading: AEL is the biggest coal trader in the country,
with 50% market share in coal imports. Since the move is
likely to give impetus to coal imports (volumes), AEL's
trading business revenues might grow faster than our
current estimates.
• Mundra port: Mundra port is in a position to expand
capacity and the major ports in India are currently
suffering from extremely high capacity utilizations.
Mundra is this best placed to benefit from any impetus to
coal imports. With AEL owning 77.5% of Mundra, it is
again a significant beneficiary of the value enhancement.
Adani Enterprises is rated Overweight by Akshay Soni
(Rs765.25 closing price as of November 2).
Adani Power is rated Overweight by Parag Gupta (Rs132.7
closing price as of November 2).
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