Lanco Infratech to acquire Australian coal mine; deal seen at $750 million

New Delhi: Lanco Infratech will acquire Australiabased Griffin Coal Mining and Carpenter Mine Management (Griffin Coal), continuing the trend of Indian power producers acquiring mines abroad to fuel their plants.

Lanco Infrastructure will acquire the coal mining asset through its subsidiary Lanco Resources Australia. The company did not disclose the deal size but a source directly involved in the matter said the deal was worth around $750 million. Hyderabad-based GVK group, the only rival bidder in the final round, had quoted between $600 and $700 million.

There will be at least five such transactions for overseas coal assets worth $500 to $1 billion by Indian companies next year, said a banker, who is working closely with at least two potential buyers. Power utilities , such as Tata Power and Reliance Power , which have already acquired coal assets abroad, and Lanco, which announced the deal on Wednesday, hope to secure fuel supplies with such acquisitions.

“This is an operating asset. It will help support our coal requirement, but even after this acquisition, a chunk of our coal requirement would be from domestic sources,” chief financial officer Suresh Kumar told ET.

The mine produces over 4 million tonnes a year. The output can be scaled up to over 15 million tones per year after the development of infrastructure.

The acquisition is a part of Lanco Infratech’s strategy to acquire coal assets and linkages for its power projects. The company plans to raise its power generation capacity to 15,000 megawatts (mw) by 2015 from 2,100 mw now, Mr Kumar said.

HSBC, which was Lanco’s financial advisor to this deal, has also promised funding support. An overseas unit of ICICI Bank has also committed funds to Lanco Resources Australia. Griffin was advised on the deal by UBS. The advisor to the GVK group was RBS.

Two other Indian companies from the power and infrastructure space had earlier approached Griffin, which owns the largest coal mines in western Australia. Those two companies backed out before the final round of bidding on valuation mismatch.

“There are only so many coal assets left in the world, mostly in Africa, US, Indonesia and Australia. At some point the buyers will have to step up and match the seller’s price. The price of these assets are unlikely to decline , “ said an investment banker, who represented one of the company’s that earlier backed out.