The Essar Group is close to buying Trinity Coal, one of the top 10 coal producers in the US, in a deal worth $550-600 million (Rs 2,500-2,735 crore). Trinity is owned by private equity investment firm Denham Capital Management.
Sources with knowledge of the developments said Essar's first major coal mine acquisition abroad would provide coking coal and thermal coal linkages for its steel mills in the US and for a power project under construction in India.
Trinity has mines in Kentucky and West Virginia in the US, with reserves of 200 million tonnes and an annual output of about 7 million tonnes.
Sources said negotiations were at an advanced stage and the deal was likely to be closed within two weeks. An Essar Group spokesperson declined to comment.
Essar has a steel plant at Algoma in Canada, acquired in 2007 for $1.63 billion. It also has a steel mill in Minnesota in the US. Essar is expanding capacity at Minnesota Steel in two phases, with a 4.1 million tonnes per annum (mtpa) pellet plant and another 1.5 mtpa steel plant, which is expected to be completed by 2012 and 2015, respectively. It is also planning to expand capacity of Algoma Steel to 5 mtpa from 4 mtpa, said sources.
Essar Power, which is implementing close to 4,650 Mw of power projects, has a 1,200-Mw power project coming up in Gujarat, dependent on imported coal. It is setting up a Rs 4,800-crore (Rs 48 billion) power project at Salaya near Jamnagar in Gujarat and the imported coal-based project is slated for completion by 2011.
All major power producers are scouting for coal mines abroad, mainly in Indonesia, South Africa, Australia and even in the distant US market.
Leading power sector companies such as Tata Power, Reliance Power and GMR Energy have already acquired coal mines in Indonesia.
In August 2007, Tata Power acquired a 30 per cent stake in Indonesian energy giant PT Bumi Resources by paying close to $1.3 billion. Anil Dhirubhai Ambani Group firm Reliance Power also acquired three coal mines in Indonesia, with plans to spend over $650 million (over Rs 3,000 crore) to develop these.
GMR Energy also acquired 100 per cent ownership interest of Barasentosa Lestari coal mine in Indonesia by investing Rs 400 crore (Rs 4 billion).
In the last two years, almost all power project developers like state-owned National Thermal Power Corporation (NTPC), Essar Power, Adani Power, JSW Energy, Indiabulls Power and Lanco Infratech have been searching for coal mines in Indonesia, to fuel some of their proposed power projects.
The Sajjan Jindal promoted JSW Energy is also planning to invest over Rs 4,500 crore (Rs 45 billion) to acquire coal mines abroad.
In the past, the Essar Group had acquired Dhabi Group's telecom businesses in Uganda and Congo, Warid Telecom Uganda and Warid Congo. It also acquired a 50 per cent stake in Kenya Petroleum Refineries (KPRL) from Shell, BP and Chevron for an undisclosed sum.
