Coal news and updates

The Madhya Pradesh government has asked the Centre to allow Reliance Power to mortgage mining leases of two coal blocks attached to the company's Sasan ultra mega power project in favour of the plant's lenders including banks from the US, China and Singapore. 

 

The Union government had earlier shot down the company's proposal to mortgage the two assets saying there was no precedence and such a proposal should come from the state government hosting the coal blocks. 

 

Reliance Power says lenders require this. "It's a standard condition of compliance by all the lenders," a company spokesman said in response to ET's query. 

 

The mining department of Madhya Pradesh endorsed the company's request of mortgaging mining leases of Moher and Moher Amlohri Extension coal blocks in a letter to the coal ministry. The mining leases were executed between the state and Reliance Power in September 2011. 

 

"The mining department of Madhya Pradesh has written to the coal ministry that they have received representation from Reliance Power. The company has told the state mining department that the mortgage was required as per its financing agreement with lenders for the mega power project," a senior coal ministry official said. 

 

The move to mortgage mining lease is unprecedented as no company has till date approached the government though Rule 37 of Mineral Concession Rules, 1960, which provides for such mortgage in favour of some scheduled banks. However, the rule is unclear on whether the blocks can stand guarantee to an attached enduse project and is silent on impact of the mortgage on the blocks, the ministry official said. 

 

The Madhya Pradesh mining department has also suggested ways to carry the mortgage and has guaranteed strict monitoring of their implementation. "The main issue to be resolved is who will own the mining leases, if not state government and the captive coal block owner," he said. 

 

According to Reliance Power's website, a consortium of 14 banks led by State Bank of India had, in April 2009, agreed to finance 75% of the.`19,400-crore Sasan project. The lenders including IIFCL, Power Finance Corp, Rural ElectrificationBSE 0.31 % Corp, Punjab National BankBSE 0.75 %, LIC, Axis BankBSE 1.23 %, IDBI BankBSE -0.36 %, Andhra BankBSE -0.38 %, Bank of BarodaBSE -0.54 % and Union Bank of IndiaBSE 0.20 % sanctioned the funds on merit of the project - known as project financing. 

 

US Exim, Bank of China, China Development Bank and The Export Import Bank of China along with Standard Chartered Bank have refinanced part of this loan. 

 

Reliance Power had, in November 2011, sought coal ministry's approval to assign mining lease of Moher and Moher Amlohri Extension coal blocks as security to lenders of Sasan project. The company has not sought mortgage of the third coal block - Chhatrasal - attached to Sasan project. 

 

The ultra mega power project and the coal blocks have begun operations. 

 

 

 

Source: ET