Bloomberg News

JSW Said to Consider Bid for Australian Coal Miner New Hope

October 24, 2011

(Updates with comment from analyst in fourth paragraph.)

Oct. 24 (Bloomberg) -- JSW Steel Ltd., India’s third- largest producer, is considering a bid for New Hope Corp., the Australian coal producer valued at A$5 billion ($5.2 billion), two people familiar with the plans said.

The company is studying the assets and may make an offer, according to the people with knowledge of the plan, who asked not to be identified because the discussions are at an early stage. JSW will look at ways to raise money to fund the acquisition either on its own or through a venture, one of the people said, without giving details.

Buying New Hope, based in Ipswich, Queensland state, would give JSW thermal-coal mines and an export terminal. New Hope, which operates the Acland coal mine in Queensland, said on Oct. 5 that selected groups will be invited to submit offers in a process that is likely to take months.

“The New Hope asset is very big and will help the energy unit of JSW to secure raw material,” said Abhisar Jain, an analyst at Centrum Broking Pvt. in Mumbai. “It will be a huge task for someone like JSW to raise money for such an asset.”

JSW shares rose 1 percent to 586.25 rupees at the close in Mumbai. The stock has plunged 50 percent this year, compared with a 17 percent drop in the benchmark BSE India Sensitive Index. New Hope closed up 1.7 percent in Sydney trading, valuing the company at A$5 billion.

JSW needs coking coal for its steel operations and thermal coal to run its energy unit’s operational and upcoming power plants in India, the people said. Manish Kalghatgi, spokesman at JSW Steel, said there was no proposal at this stage.

Coal Prices

Globally, coal deals have reached $32.1 billion this year against $21.8 billion in the same period last year, according to data compiled by Bloomberg.

JSW, which imports almost all the coal it needs to fire its 2,330 megawatts plants, faced a doubling of raw-material costs in the year ended March as floods in Australia pushed up coal prices and fuel consumption increased with the addition of generation capacity. It plans to import 7 million to 8 million metric tons of coal this year, Lalit Kumar Gupta, chief executive officer of the energy unit, said in an interview in Mumbai on July 21.

JSW Energy Ltd. plans to have capacity of as much as 11,390 megawatts by 2015, according to its website.

Prices for thermal coal, used to produce electricity, are likely to rise over the next two years, supported by demand in Asia, Credit Suisse Group AG said in a note dated Oct. 4.

New Hope is 60 percent owned by Washington H. Soul Pattinson & Co. while Tokyo-based Mitsubishi Materials Corp. has an 11 percent stake, according to Bloomberg data.

--With assistance from George Smith Alexander in Mumbai and Rajesh Kumar Singh in New Delhi. Editors: John Chacko, Alex Devine

To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net


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