India’s Essar Group Buys Aries Mines in Indonesia

Jakarta Globe, Dinakar Sethuraman, March 26, 2010

India’s Essar Group has agreed to buy the Aries coal mines in Indonesia to secure supplies for its power plants.

The mines, which hold as much as 100 million metric tons of power-station coal, are in the Kutai region of East Kalimantan.

The transaction is expected to be finalised in April and production could start within a year, Essar said in an e-mailed statement, without giving a value for the purchase.

Essar joins Indian utilities including Tata Power and Reliance Power in securing coal assets overseas to supply surging power consumption in the world’s second-fastest growing major economy. More than half of India’s electricity generation is coal-fired, according to the power ministry’s Web site.

“This acquisition adds another 100 million tons to our existing thermal coal resource base of about 275 million tons in India,” Anshuman Ruia, the group’s director, said in the statement.

Extractable reserves from the Aries mines were 64 million tons, the company said.

Essar Power Ltd. is building six power projects in India and will increase generation capacity to 6,100 megawatts by 2012 from 1,220 megawatts.

India’s thermal coal imports almost doubled last year to about 60 million tons from 2008, the Macquarie Group has said.

The Essar Group bought West Virginia-based Trinity Coal Corp. for $600 million to help lock in raw materials for steel plants, adding 200 million tons of coal reserves to Essar’s portfolio, chief executive officer Prashant Ruia said on March 6.

Essar, which is owned by Indian billionaires Shashi and Ravi Ruia, plans to raise $3 billion overseas to fund acquisitions, two people familiar with the matter said this month.

Tata Power, India’s largest non-state electricity generator, agreed to pay $1.3 billion in March 2007 to buy a 30 percent stake in two Indonesian coal mines owned by PT Bumi Resources. Reliance Power, controlled by billionaire Anil Ambani, bought three coal mines in Indonesia in 2008.

GMR Group bought Indonesia coal mining company PT Barasentosa Lestari last year.