MOIL set to diversify into power sector

MOIL, India’s largest manganese ore producer, is planning a foray into the power sector as it searches diversification and growth opportunities and battles flat revenues from its core operations.

The state-owned firm has floated an expression of interest (EoI) seeking a tie-up with private mine developers for jointly securing, exploring, mining and commercially exploiting coal blocks allotted under government dispensation route.

GP Kundargi, director, production and planning at MOIL, said the EoI is meant for searching private power or mining companies having expertise in developing coal blocks. Depending on the response, MOIL will decide on signing one or more memoranda of understanding with a provision for ultimately converting them into special purpose vehicles (SPVs) and joint ventures, he said.

By second week of April, MOIL would invite companies that respond to the EoI for presentations after which the MOIL board would pick up partners with best offers, he said.

Under the plan, the coal mined from the block would be used to fuel a power plant set up by the MOIL and its partner.
Kundargi said MOIL is following other PSU giants such as SAIL and NMDC which have either formed SPVs or floated EoIs after getting coal blocks under the government dispensation route.

“Before floating the EoI we studied the SAIL model and are following the NMDC evaluation matrix for selecting SPV partners,” he said.

Kundargi said that participation of private companies would bring mining expertise as well as equity investment on table.
“Very few public sector companies had done well in coal mining on their own. Public-private partnership model is the best way to take forward such initiatives,” he said.

The company is in talks with the Madhya Pradesh government for land to set up a power plant in the state.
“Once we get coal block, all the other issues like land, water and investment will be sorted out,” he said.
Justifying MOIL’s move of entering coal mining and power generation, Kundargi said those initiatives would deliver result in long run.

“How you will chase growth by limiting yourself to only manganese mining? Diversification is must for the long-term growth of the company,” he said.

An analyst of a domestic brokerage firm, however, criticised MOIL’s move.

“A mining company should restrict itself to mining. Moreover, exploration and mining of coal blocks and setting up of power plant is a 6-7 year affair. Nobody knows what would be the power cost or energy market then. So entering into such a long-term project with huge capital expenditure is not a good move,” he said.