X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Power companies: Rushing for black gold - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Power companies: Rushing for black gold

Jun 3, 2010

First it was Tata Power, and now it is NTPC. Companies in the Indian power sector are joining the rush to buy global commodity assets. It is coal, also known as 'black gold', for these companies. Tata Power had announced a couple of days back its plans of buying more coal assets in Indonesia and South Africa. Now, NTPC has already gone ahead and made an acquisition. The company is set to buy controlling stake in a coal field in Australia. The deal is said to be valued at US$ 1-1.5 bn. These plans and actions talk a lot about the urgency with which Indian power companies are eyeing coal assets abroad. While some of these companies have also won tenders for mining coal in India, execution here is pretty slow. And the lure of buying an operational coal mine is any day brighter.

As per Tata Power's management, the company's coal imports are expected to surge to 22 m tonnes per annum (MTPA) by 2014. These stand at 5 MTPA currently. The company already owns a 30% stake in coal mines owned by Bumi Resources. Most of the coal supplies for the company's upcoming projects will come from these mines. Anyways, it is also looking for mines in Australia, South Africa and South-East Asia to ensure fuel security for future projects.

We see these international coal assets as having big importance for companies like Tata Power and NTPC. Not only is this considering these companies' expansion plans. But it also stems from the shortfall in coal supplies they are facing from domestic coal suppliers like Coal India Ltd.

Anyways, buying global mining assets has its risks as well. Improper calculation of reserves is one. As buyers have seen in the past, actual reserves have turned out to be a fraction of the stated or promised deposits. This also casts doubts on the valuations paid for such assets.

Another major risk is that of international regulations. Mines are government properties and buyers pay royalty on mining the commodities. Any adverse regulation can completely change the dynamics that were present at the time of buying the assets.


Equitymaster requests your view! Post a comment on "Power companies: Rushing for black gold". Click here!

1 Responses to "Power companies: Rushing for black gold"

RAMCHANDRA VARMA

Jun 11, 2010

its a right time time to buy "BIACK GOLD" As INDIA AT RECENT TIME IS IN POSITON TO PRODUCE 50 TO 55% Demand of energy.There are lot of energy demands are likely to come from agricultural sector,IT Sector, Manufacturing sector,Capital goods sector etc.

Like 
  
Equitymaster requests your view! Post a comment on "Power companies: Rushing for black gold". Click here!

More Views on News

ADANI POWER Surges by 5%; BSE POWER Index Up 2.5% (Market Updates)

May 27, 2019 | Updated on May 27, 2019

ADANI POWER share price has surged by 5% and its current market price is Rs 50. The BSE POWER is up by 2.5%. The top gainers in the BSE POWER Index are ADANI POWER (up 5.2%) and ABB INDIA (up 7.3%). The top losers are RELIANCE INFRA (down 0.1%) and CG POWER & INDUSTRIAL (down 2.9%).

NTPC Surges by 5%; BSE POWER Index Up 2.4% (Market Updates)

May 27, 2019 | Updated on May 27, 2019

NTPC share price has surged by 5% and its current market price is Rs 136. The BSE POWER is up by 2.4%. The top gainers in the BSE POWER Index is NTPC (up 5.0%). The top losers is THERMAX (down 0.4%).

The BSE POWER Index has hit an all-time high at 2,011 (up 2.4%) (Market Updates)

May 27, 2019 | Updated on May 27, 2019

The BSE POWER Index has hit an all-time high at 2,011 (up 2.4%). Among the top gainers in the BSE POWER Index today are NTPC and KEC INTERNATIONAL. Meanwhile, the BSE Sensex has surged 0.3% to 39,569.

More Views on News

Most Popular

My Top 7 Stocks to Profit from Sensex 100,000(The 5 Minute Wrapup)

May 16, 2019

Tanushree Banerjee explains everything you need to know about the Rebirth of India and Sensex 100,000.

3 Stocks to Bet on to Become a 'Dividend Millionaire'(Profit Hunter)

May 14, 2019

As markets continue to rattle amid earning season, upcoming elections, volatile crude price and US China trade war, it's a great idea to add some stability to your portfolio by adding dividend stocks.

Indian Steel: The Perfect Multibagger Opportunity(Profit Hunter)

May 17, 2019

A structurally strong Indian Steel Industry will help India achieve 8%+ GDP growth in the coming years.

My Top 7 Stocks to Buy as Modi Returns to Power(The 5 Minute Wrapup)

May 23, 2019

The Modi government is all set to come back to power. With a stable government at the centre, how should you play the stock market?

What Makes TVS Srichakra and CCL Products a Cut Above the Rest?(The 5 Minute Wrapup)

May 17, 2019

Despite the commodity nature of their businesses, these two stocks have rewarded shareholders well.

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE POWER


May 27, 2019 02:25 PM

S&P BSE POWER 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS