NEWS ANALYSIS
RAJESH DESAI
METALS & MINING
Coal Ministry to sign fuel supply pact with private power producers
· In a major relief to the power sector, the Ministry of Coal has agreed to sign fuel supply agreements (FSAs) with power producers having medium-term power purchase agreements (PPAs) in place. The move will accord a major respite to several corporates like the Vedanta Group (Balco), Reliance Power and Abhijeet Group, among other private producers.
· Earlier, Coal India had been directed to only sign FSAs with producers having long-term PPAs of around 20-25 years. Many projects were stalled as a consequence of the directive. Now, with the acceptance of PPAs of 3-5 years, these projects stand to benefit immediately. In a meeting on October 10, the Prime Minister’s Office (PMO) has directed the Ministry of Coal to go by the advice of the Ministry of Power on medium-term PPAs.
· Corporates to benefit: The move will prove to be a welcome respite for major corporates in the private power sector. These include Reliance Power which is developing a 600 MW plant at Butibori in Nagpur, the Abhijeet Group which is developing 225 MW in Nagpur, and the Vedanta Group (BALCO) which is developing 500 MW, mostly captive, across several areas.
· Long-term bids for power sale have been few and far between resulting in large power capacities being left without an assurance of fuel supply. The move will lead to a much healthier and competitive medium term market in the country, with States coming up with more medium-term competitive bids. The move will also allow power developers to get loans from banks against the letters of assurance (LoA) for coal linkage. At a meeting convened to sort out the issues impeding the signing of FSA between Coal India and power producers, it was decided that power companies should sign FSAs with Coal India by November-end.
JSW Steel dips as top officials face bribery charges
· JSW Steel shares dipped 2.75 per cent to Rs 726.5 on Wednesday on the BSE following filing of bribery charges against top company officials. The stock touched an intra-day low of Rs 719.15.
· The Central Bureau of Investigation on Tuesday filed a chargesheet against Sajjan Jindal, Chairman of JSW Steel, and two senior executives, Vinod Nowal and Vikas Sharma, for bribing the Karnataka Government to acquire iron ore from illegal mining. The CBI has also filed charges against former State Chief Minister B. S. Yeddyurappa and some of his family members.
· Denying any wrong doing, the company claims the conclusions drawn by the CBI are “without basis.” JSW Steel claimed that during investigations, the company had co-operated with the “investigating authorities and provided all the details in connection with the alleged transactions.’’
JSPL to begin production from Mozambique coal mine by year-end
· Jindal Steel and Power (JSPL) plans to begin production from its coal mines in Mozambique by year-end, a development which will ensure supply of inputs for the existing and upcoming projects. The company would source coal from the Mozambique mine to feed its projects here in the country.
· The Mozambique mine is strategically important for the Naveen Jindal-led firm as it contains both coking and thermal coal. The company, which has plans to produce 10 million tonnes per annum (MTPA) coal from the mine at peak level, is also looking to set up a 2,640 MW thermal power plant in the African nation.
· The company has earlier said that it is also planning to set up a coal washery in Mozambique by the fiscal-end, to reduce the high ash content at the mine there. JSPL, which currently has a steel making capacity of 3 million tonnes per year (MTPA) and power generation capacity of nearly 2,500 MW, is aiming at having 20 MTPA steel making capacity by 2020 and power generation capacity of over 21,000 MW (together with its subsidiary Jindal Power).
· Recently, it had acquired Canada's CIC Energy, which has 2.6 billion tonne of high quality thermal coal mines in Botswana, for over Rs 600 crore as part of its aim to ensure fuel security. Besides Mozambique and Botswana, the company also has coal mines in Australia, Indonesia and South Africa.
Tata Steel Europe to invest 1.5 billion pound till 2015-16
· Tata Steel will invest in excess of 1.5 billion pound (nearly Rs 13,000 crore) in its European operations till 2015-16 to spruce up its existing equipment and bring out new products, among others.
· It has given idea that over the five-year framework, it wants to invest some two billion pounds in European unit. Last year, the company invested 450 million pound. The investment would go into sprucing up the equipment, gaining efficiency and getting into development of new products.
· The steel major, had earlier this month, said it plans to invest 400 million pound in the European operation during the current financial year to improve the performance of the unit and in areas which can provide quick returns. The investments, coupled with a series of other measures including lay offs and production cut, is aimed at making Tata Steel Europe an "all-weather company", fit to sustain and withstand a much worse condition than the current one.
BANKING
SBI halves processing fee on home, auto loans
State Bank of India (SBI) reduced the processing fee on home and auto loans by 50 per cent to cash in on festive season demand. This offer is applicable on loans availed from October 17 to December 31.
For home loans up to Rs 25 lakh, the processing charge has become 0.125 per cent of the loan amount from 0.25 per cent. In case of loans between Rs 25 lakh and Rs 75 lakh, the processing fee would be Rs 3,250 as against Rs 6,500 while loans above Rs 75 lakh, it would be flat Rs 5,000 as compared to Rs 10,000 per application earlier. With regard to auto loan, the processing charge has been slashed to 0.255 per cent of the loan amount as against 0.51 per cent. Last month.
SBI reduced its base rate or minimum lending rate by 0.25 per cent to 9.75 per cent following RBI’s monetary policy action. SBI now offers loans up to Rs 30 lakh at 10 per cent and loans above Rs 30 lakh at 10.15 per cent.
Xpress Money plans to offer more cash transfer channels
Xpress Money, a global money transfer brand which currently operates in the cash-to-cash remittances market, plans to get into other channels for money transfer. The company is looking to offer remittance facility through channels such as cash-to-account and cash-to-mobile on getting requisite approvals from the Reserve Bank of India.
The entry into other channels will help the company grow its business and tap in a big way the markets of, among others, North America, Europe and Australia which largely operate through the cash-to-account channel. The average ticket size in this channel is nearly four-to-five times higher than by way of cash remittances.
In 2011, India received remittances worth $66.13 billion. Of this, nearly $15 billion was through the cash route. The company holds a 10 per cent share in the cash-to-cash market.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
CA. Rajesh Desai