Coal news and updates

A terminal built to handle iron ore at the Kamarajar Port near Chennai in Tamil Nadu may be allowed to handle coal instead, the first instance of such a cargo change after a contract has been tendered and awarded. The terminal built by Sical Iron Ore Terminals Ltd, a joint venture of Sical Logistics Ltd and MMTC Ltd, is idle since it came up in 2011, thanks to the bar on iron ore exports. A 30 August board meeting of Kamarajar Port Ltd, which runs the Union government-owned port, cleared Sical Iron Ore’s proposal to match the terms of a coal terminal run by a rival company at the same port. The board recommended that Sical Iron Ore be allowed to handle coal, subject to mutually agreed conditions, at least two officials who attended the meeting said. Both declined to be named because the board decision requires ratification from the shipping ministry for implementation. If the proposal gets final approval, Sical Iron Ore could get to handle from February 2016. Sical Logistics has a 74% stake in the joint venture while the rest is held by MMTC. Sical Logistics is 57.08% owned by Tanglin Retail Realty Developments Pvt. Ltd, a unit of Bangalore-based Café Coffee Day Group promoted by V.G. Siddhartha. The JV was formed to develop and operate the iron ore terminal for 30 years. It had built the new terminal, which can load 12 million tonnes (mt) of iron ore a year, at an investment of Rs.500 crore. Once Sical is allowed to handle coal instead of iron ore, the contract terms would be on par with an 8 mt capacity coal terminal run by Chettinad International Coal Terminal Pvt. Ltd at Kamarajar Port since January 2011. Accordingly, Sical will have to match the revenue share of 52.524% quoted by Chettinad International Coal Terminal. Sical had offered a revenue share of 51.6% to win the iron ore deal. “This was the highest revenue share received by the port through a competitive bidding process for that type of cargo (coal),” one of the two officials mentioned earlier said. Port contracts at Union government-owned ports are decided on the basis of revenue share. The entity willing to share the most from its annual revenues will win the contract. The board of Kamarajar Port has also recommended that Sical should pay a minimum annual guaranteed revenue to the port on lines of the Chettinad contract. For the Chettinad facility, the minimum assured revenue starts from Rs.5 crore in the first year of operations to Rs.20.6 crore in the 30th year. The Sical coal terminal will have a different minimum assured revenue because its capacity will be higher than that of Chettinad. Unlike other private cargo terminals operating at Kamarajar port, the Sical iron ore handling contract did not assure any minimum annual revenue to the port. Kamarajar Port has built two coal berths with a combined capacity of 12 mt a year run by state power utility Tamil Nadu Generation and Distribution Corporation Ltd (Tangedco), the port’s biggest customer accounting for about 45% of its annual revenues. To meet Tangedco’s rising coal requirements, the port is constructing two more berths with its own investment for the captive use of the state-owned power utility. Sical will be allowed to handle only non-Tangedco coal and that too after February 2016 when a five-year exclusivity granted to Chettinad for handling non-Tangedco coal ends. Sical’s coal contract won’t have any exclusivity clause, implying Kamarajar Port is free to set up competing coal facilities any time. Sical will also have to spend money on converting the facility to handle coal but would be free to set its own rates. Sical could not be reached for comment while MMTC declined to comment. A spokesman for Kamarajar Port confirmed the decision. Kamarajar Port loaded 22.12 mt of coal in the year to March 2014 from 14.24 mt a year earlier. It has benefited the most from a Madras high court order directing nearby Chennai Port to stop handling dusty cargo such as coal and iron ore from 1 October 2011. The cargo change could set a precedent for similar cases arising from a change in law. “It shows the willingness of the NDA government to bail out stranded and stressed infrastructure assets arising from external factors and lack of regulatory clearances,” said a Mumbai-based port consultant. It also shows that Sical was ready to accept the stiff terms despite being at the receiving end to make the conversion work, he added. The permission to change cargo will help the project lenders prevent the asset from turning sticky. In March 2008, a consortium of banks led by Yes Bank Ltd had agreed to lend Rs.340 crore for constructing the terminal with Yes Bank alone contributing Rs.100 crore.

 

 

Source: http://www.livemint.com/