Nalco eyes up to 30% in Indonesia coal supplier firm

National Aluminium Company (Nalco) is planning to acquire up to 30 per cent stake in a coal supplier in Indonesia. Two companies — West Asia-based MEC Coal and Bumi Muara Prasada — are bidding for the contract to supply coal to Nalco’s Rs 18,000 crore east Indonesia based-Kalimantan aluminium cum power project.

“These two companies are bidding for supplying coal to our aluminium and power project in Indonesia. Our team has gone to Jakarta for doing the due diligence and the bids will be finalised by June-end,” BL Bagra, chairman of Nalco, told Financial Chronicle.

Bagra said the mining companies are not ready to offer majority stake. “To secure long-term supply of coal, it is essential to have at least a minority stake in the company which supplies us coal.”

“The valuations are being worked out,” he said.

Sanjay Jain, an analyst at Motilal Oswal, said buying stake is always better so that the mining company cannot cancel the contract mid-way. “Nalco will have a better say if they own some stake. Also, it will help them in backward integration and the company can hedge prices if it has its own supply of coal,” said Jain.

PT Bumi Resources is the world’s largest coal producer and Indonesia is the world’s largest exporter of the black gold. MEC is a member of the Trimex group of companies, a global minerals and metals conglomerate.

Nalco intends to import about one million tonne of alumina annually from its facilities in India to feed the aluminium smelter. The coal for the captive power plant will be procured locally.

Nalco needs 8-10 mtpa of thermal grade coal, 4-5 mtpa of which is for its east Kalimantan project and rest for its energy requirement elsewhere, Bagra said.

MEC Coal, through its Indonesian subsidiaries, is developing coal concessions in Indonesia, along with an integrated heavy-haul rail transportation system and ship-loading jetty.

Nalco has already selected UAE-based RAK Minerals as its joint venture partner to set 0.5 mt aluminium smelter and 1,250 mw captive thermal power plant in East Kalimantan, Indonesia, as part of its ongoing Rs 58,000 crore capacity expansion plan.