Foreign companies likely to skip commercial coal block auctions

KOLKATA: Commercial coal block auctions are likely to receive a lukewarm response from foreign players as big companies are losing interest in a sector which has been widely seen as polluting and avoided by top banks and financial investors, experts said.

The Centre is in the process of inviting global players for commercial mining, following 100% foreign direct investment in the sector.

Mining major Rio Tinto sold off its last coal assets in Queensland, Australia in 2018, while BHP recently said it would exit coal if presented with opportunities. The company operates mines in Australia and Colombia.

Anglo American, a large British mining company, has decided to reduce coal production over the next two years. Australia’s largest miner Glencore said in a statement that it aims to limit coal output capacity broadly to current levels. Murray Energy Corporation (MEC), America’s largest underground coal mining company, has filed for bankruptcy.Partha Bhattacharyya, former chairman, Coal India, said large miners are facing pressure to quit coal and be more environment-friendly.

“Given the tremendous pressure they are facing from financial institutions and environmental pressure groups, their participation in the commercial coal mining in India is doubtful. Their investors would not want them to invest in new coal assets,” he said.

A senior Coal India executive said the company is finding it difficult to find bankers to assess foreign assets as they are shying away from the sector. “Early last year when Coal India invited global tenders, merchant bankers like Goldman Sachs and Merrill Lynch had already exited the dry fuel segment.”

Players like ANZ, BNP Paribas, JP Morgan joined this list later during the year,” the executive said.

Bhattacharyya said foreign companies would also find it difficult to find bankers they need for due diligence of blocks they may bid for.

An industry executive said the fall in storage cost of renewable energy puts a cloud on the future of thermal coal. “All these may indicate that fresh thermal coal based power generation may also be unviable in the near future, prompting foreign players to stay away.”

By the end of 2019, some 112 global financial institutions holding more than $10 billion worth of assets under management had already exited coal. Global insurers divested roughly $8.9 trillion of coal-based investments. Most of them now refuse to insure new coal mines and power plants.


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