coal- energy
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COAL- ENERGY. AUGUST 2013. Energy Sector 2013- C0al. By: B.M.VERMA Advisor- Essar Power (M.P.) Ltd. Ex- Chairman Jharkhand State Electricity Board Ex Chairman / Jharbihar Collier Ltd. Ex Chairman/ Karanpura Energy Ltd. Ex- CMD/ Uttarakhand Power Corporation Limited - PowerPoint PPT PresentationTRANSCRIPT
AUGUST 2013
By:B.M.VERMAAdvisor- Essar Power (M.P.) Ltd.Ex- Chairman Jharkhand State Electricity BoardEx Chairman / Jharbihar Collier Ltd.Ex Chairman/ Karanpura Energy Ltd.Ex- CMD/ Uttarakhand Power Corporation
LimitedContact: +91- 9810588500/9899337132Email: [email protected]
Power Cut
Unrestricted Demand
Hydro Gen.
Net Import from Grid
Time in Hrs.
Demand Met
(Total Availability)
POWER CUT
Date: 06-04-06 & 07-04-06
HydroGasTapiIranBangladeshNuclearSolarWindShale Gas
India has fifth largest coal reserves in the world with power sector consuming ~70% of domestic coal produced in the country. Coal accounts for 69% of total power generated in the country
India’s coal demand increased at CAGR of 8.5% in the 11th plan. Compared to this, CIL’s domestic production during this period increased at a CAGR 4.6% onlyXI FYP
(MT)
XII FYP (MT Projected)
XIII FYP (MT Projected)
Demand 696.03 980.50 1373
Supply 554 715 950
Gap 142.03 265.5 423
Particulars
Capacity at January 31, 2013
(MW) (A)
Capacity addition@ for balance XIIth plan
(MW) (B)
Capacity at March 31, 2017
(MW) (A+B)
Coal GasTotal Coal Gas Total Coal Gas Total
Installed Capacity
122,900 18,900 141,800 71,000* 7,500 78,500 193,900 26,400 220,300
Affected Capacity
53,000 18,900 71,900 71,000 7,500 78,500 124,000 26,400 150,400
Stranded Capacity
8,800 8,500 17,300 35,500 7,500 43,000 44,300 16,000 60,300
It is estimated that investments of about Rs 340,000 crores are impacted on account of current Affected Capacity of 71,900 MW
Limited availability of coal has impacted new power plants and also existing ones. Shortage in domestic coal production estimated at 64 MPTA for 2012.
Stranded Capacity is derived from Affected Capacity and refers to the actual shortfall in generation due to non-availability of adequate coal and gas. Current Stranded Capacity is estimated at 17,300 MW.
Generation loss on account of this is estimated at about Rs 42,000 crores (120 billion units @ Rs 3.50 per unit) which works out to about 0.45% of Gross Domestic Product (GDP)
Total Resources ~ 285.90 Bt; Proved ~ 114 Bt
Total Production in FY11 ~ 532 Mt, largely non coking (~93%)Power sector is single largest coal consumer, approx 64 % supplied to the sector
Indian coal is generally high ash, low sulphur
Average heat value ~ 4400 kcal/kg
Coal Reserves in India
Coal present in 10 out of 28 states
Power sector remains the largest consumer of coal at about 401.0 million tonnes per annum (MTPA) for FY2012 accounting for ~ 75% of total coal consumption
Challenges for enhancing domestic coal production – Coal India
– Land Acquisition is the biggest bottleneck in coal mining operations
– CIL faced prolonged delays in implementation of its projects leading to loss of production
– Even after acquisition, possession of land presents another problem to the company
Land Acquisition
Environment & Forestry Clearance
- Delay in conducting Public Consultations
- SPCB takes considerable time to issue Consent to Establish and Consent to Operate
- Environment Clearance given up only to a certain capacity (projected peak production) for specific project. Further capacity expansion requires new clearance which again a prolonged process
- Forestry clearance takes much longer time and even being denied.
Evacuation Infrastructure
- The progress of new railway line projects related to coal evacuation have not achieved the desired progress in the last few years (Tori-Shivpur-Hazaribagh, Angul-Kalinga, Gopalpur-Manoharpur,
• Non-availability of sufficient number of railway rakes CCL , MCL & BCCL particularly facing the problems in
dispatch of coal and increasing coal inventory levels 18
WEST COAST # of Ports
Gujarat 40 Maharashtra 53 Goa 5 Daman & Diu Port 2 Karnataka 10 Kerala 13 Lakshadweep Islands 10
EAST COAST # of PortsTamilnadu 15Pondicherry 1Andhra Pradesh 12Orissa 2West Bengal 1Andaman & Nicobar Islands 23
Port Logistics
25
China – May ban import of High Ash and High Sulphur Thermal coal with GCV (ARB) below 4,800 Kcal/Kg.
US / Canada / Colombia – Attractive Ocean Freight s will result into supplies into Pacific Markets including India.
246
BT
15 BT
32 BT
50 BT
59 BT
115
BT
20 BT
76 BT
147
BT
248
Asia Pacific Now dominant in Global Coal production and supply
68
993
101
674
260
589
325
416
3520
335
Asia / Pacific
65%
Europe :
42 Million T
SA Exports 2007
India : 9.22 MMTChina: 20 MMTRest Asia: 8.6 MMT
Europe : 14.6 Million T
India : 22.98 MMTChina: 12.8 MMTRest Asia: 13.83 MMTSA Exports
2012
World Sea borne Trade 2010
Factors : - Ocean Transportation cost(s) Voyage Availability & Domestic consumptionRegulatory issues Economy including currencyCoal Cost(s)
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Local Issues,
Mining & Labour costs
Availability and cost of shale Gas, Oil prices for mining
costs
M & A i.e. Glencore -Xstrata
Demand
Drivers
Change in Coal prices (Import &
Export) due to appreciation / depreciation
Australian Tax for mining
coal, Indian Clean
Energy cess
Index linked spot / term contracts, Cost plus
basis, Dividend
Low / High
CV, S, TM, VM
30
INDIA Imported ~ 107 Million
Tonnes of Thermal Coal in 2012
SOUTH AFRICAIndia’s Thermal
Coal Imports ~ 17 Million tonnes
INDONESIAIndia’s Thermal Coal Imports ~
83.4 Million tonnes
AUSTRALIAIndia’s
Thermal Coal Imports ~ 2.1 Million tonnes
Other Countries : ~ 4.3 Million
Tonnes
31
* ARGUS FOB Prices ( 90 Days Forward)
- 10%+ 8%
- 7% + 6%
- 34%
- 30%
- 27.5% - 41.3%
- 37.5%
32
The HBA is the minimum price used for the calculation of taxes for producers pay for all future exports and domestic coal sales. It is calculated using a basket of indices, including the price is a monthly average of the Indonesia Coal price Index (ICI-1), Platts-1, Newcastle Export Index and the globalCOAL Index from the previous month.
+ 101.4%
- 39.6%
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Coal imports up 30% in Q1
Coal generation up 4%
Q1 7.7% GDP growth exceeds government targets
Urbanization expected to send 15 to 20 million people to cities each year
~250 GW of new coal generation by 2017
Coal imports up 25% in Q1
Coal generation up 9%
Domestic coal production below targets; Minister of Coal calling for increased imports
New port projects underway to enable greater imports
~70 GW of new coal generation by 2017
34
35
36
Demand Growth 7 -8% (5 year CAGR) as against ~ 5% production growth
In overall terms, GAP between projected demand of 980.50 MT and the projected domestic availability of 715 MT works out to be 265.5 MT in year 2016-17. (235 MT Thermal Coal and 30.5 MT Coking Coal)
38
INDIA: Fastest Growing Coal Importer
Long – term coal use could quadruple to 2 billion TPA.
Heavy reliance on imported coal.
Bridge between Atlantic and Pacific markets.
Segmented between public & private sector.
CHINA : Largest & Fastest Growing Coal Market
Tight supply – demand balance.
Production costs increasing
Small mine closures continuing.
Transportation & taxes encourages imports.
39
Thermal coal prices face downside risk. Thermal coal prices to drift lower in the coming months. Supply remains strong overall. However, Atlantic demand is thinning, while Pacific demand is not robust enough to absorb market excesses.
Atlantic demand is fading as summer approaches, and demand from
China is lower on potentially strong hydropower generation and, above all, strong overall supply.
China’s hydropower generation, up 15% y/y in March, looks set to outperform again this summer as reservoirs remain at above-average levels; this will be a drag on thermal coal demand.
Coal inventory restocking in China is unlikely to see a corresponding increase in seaborne coal prices.
Standard Chartered has lowered their 2013 Newcastle price forecast to USD 89/tonne (t) (from USD 94/t previously) and their 2014 forecast to USD 91/t (from USD 96/t) to reflect current market sentiment.
40
Tough times ahead for producers – near/mid term buyers market.
Indonesian and Australia face competition from each other and the wider market.
Demand will be there and continue to grow, however, market [prices] will recover when demand over takes supply again.
China being largely a spot market means business is increasingly
being pushed towards the prompt.
Indian will buy when the price works, which should be ok for the near term, especially as freight is relatively cheap.
Whilst prices may remain relatively soft in the near term, they will become increasingly volatile in the prompt.
Indonesia maintains almost monopoly on sub-bituminous and low rank exports,
ideally situated between the growth markets of India and China.
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Affect of Currency Depreciation
Current Account Deficit
Queries to Be Answered.
42
43
45
47
Coal futures contracts are not yet liquid and it is risky to lock price for long term.
There is no depth in futures markets as very low participation of Speculators.
Most of coal future contracts are cash settled (financial settlement) and delivery happens for few U.S. Coal contracts and API 2 (CIF ARA) on CME.
On intraday basis, there is not much volatility which stops speculators to enter the markets as they look at an opportunity with change in intra day prices.
Coal prices depends upon logistics / ocean transportation, customer base, local issues i.e. regulatory, economy, weather, demand - supply etc. and it is not necessary that increase in Indonesian coal price will lead to increase in SA and / or Australian and / or U.S. coal(s) too.
Coal forward prices are mostly determined by financial institutions and brokers as trade happens through OTC. Coal end-users hardly participate to mitigate price risks.
52
THANK YOU
India has fifth largest coal reserves in the world with power sector consuming ~70% of domestic coal produced in the country. Coal accounts for 69% of total power generated in the country
India’s coal demand increased at CAGR of 8.5% in the 11th plan. Compared to this, CIL’s domestic production during this period increased at a CAGR 4.6% onlyXI FYP
(MT)
XII FYP (MT Projected)
XIII FYP (MT Projected)
Demand 696.03 980.50 1373
Supply 554 715 950
Gap 142.03 265.5 423
Most of the Indian Power Sectors are now looking for imported Coal
India’s coal imports have more than doubled over the last five years
There is a huge price difference between domestic and imported coal
In addition the dynamism in the regulations of the countries from where coal is being imported pose further hurdles by way of political risks.
The Indonesian government implemented the Indonesian Coal Price Regulation, which requires prices for all transactions to be benchmarked against a set of international and domestic indices and all sale contracts to be modified retrospectively by September. Several developers have already entered into long term PPA’s with distribution utilities based on fuel tied up from Indonesian mines which have now been covered under the new law posing uncertainty over the operational viability of the affected plants
ReservesProven 91 billion Tons Indicated 116 billion Tons Inferred 37 billion TonsTOTAL 245 billion Tons
Coal reserves: > 250 years at present levels of consumption
Concentrated in Eastern India
Madhya Pradesh
7%
Others13%
Jharkhand29%
Chattisgarh16%
West Bengal11%
Orissa24%
ULTRA MEGA POWER
PROJECT