Mumbai, Maharashtra India (PressExposure) May 30, 2011 -- Anil Ambani led Reliance Power in the race for Wesfarmers' Premier coalmine in Western Australia which could be worth of $400 bn Wesfarmers boss Richard Goyder put the asset on the block in March after being approached by a number of interested parties indicative bids for Premier were submitted about a week and a half ago and Wesfarmers and its advisers at Gresham and UBS started the second stage of the process this week. The auction was expected to be dominated by Indian and Asian players seeking coal for energy. Aside from Reliance, India's GVK Infrastructure -- which is negotiating with Gina Rinehart's Hancock Prospecting over two prospective coalmines in the Galilee Basin -- and Lanco were others linked to Premier. It's understood Reliance had been interested in Griffin at a very early stage of that process.
On UBS estimates, India's coal imports are set to jump almost 70 per cent in the next five years.
Reliance is a part of the sprawling conglomerate run by Anil Dhirubhai Ambani, with interests ranging from telecommunications to finance. Reliance Power aims to generate 35,000 megawatts of power by 2017, of which 5000MW is expected in the next two years, and its coal subsidiary agreed to tip in $US5bn into two Indonesian coal projects earlier this year.
Premier has reserves of more than 100 million tonnes of sub-bituminous thermal coal used for power generation.
Earnings before interest and tax from the mine have been estimated at just $30m-$35m -- about 5 per cent of the company's total resources income. While Wesfarmers would love a sale at similar prices to Griffin, analysts have estimated the value of the asset at $400m-plus.
One difference between Griffin and Premier is that most of Griffin's coal will be exported to Lanco's power stations in India, whereas Premier's annual output of 4 million tonnes is sold mainly to state-owned electricity generator Verve Energy.
However, a foreign buyer is expected to look to expand production and divert more coal to the export market.