Vattenfall Plans to Build New Coal Power Station in Poland
Energy giant Vattenfall has announced plans to build a coal-fired power station of at least 1,600 mw that should come online within the next seven years, the Warsaw Business Journal reported. The location for the plant has not yet been revealed. "We are still considering several locations in various parts of Poland," said Torbjörn Wahlborg, Vattenfall president. Environmental activists were outraged by the plans to build the coal powered plant, but Tomasz Chmal, an energy expert from the Sobieski Institute, was optimistic about the plan. He noted that investments in energy are needed and there is no viable alternative to coal at the moment. Currently, Vattenfall has a 10% share in the energy distribution market and a 4% share in the energy production market, but the firm wants to build up its share in the latter to some 15% over the next five years.
Indonesia Wants to Speed Up Power Plant Construction
Vice President Jusuf Kalla has renewed calls for state-owned power company PT Perusahaan Listrik Negara (PLN) to speed up construction of coal-fired power plants in a bid to swiftly resolve a power crisis plaguing Java. Kalla made the statement during a visit to the Suralaya coal-fired power plant in Cilegon, West Java. The 652-megawatt Suralaya project is scheduled for completion in 2010. However, since Java has frequently suffered power blackouts due to a lack of power capacity, the government has requested PLN wrap up several key power projects on the island before next year’s general election.
New World Resources Applies for Mining License in Poland
Czech coal producer New World Resources N.V has announced that it has filed an application for a mining license in the Debiensko 1 area of southern Poland with the Polish Ministry of Environment. The application was made by NWR's wholly-owned Polish subsidiary, Karbonia PL Sp. z.o.o. NWR’s growth strategy includes actively pursuing opportunities in Poland and the wider Central European region to expand its reserve base and long-term production capabilities. With indicated resources in excess of 100 million metric tons (mt) of coal located in southern Poland near to NWR’s existing operations in the Czech Republic, Debiensko 1 also represents a key opportunity for NWR to leverage economies of scale from integration with its existing operations over time.
The license application follows extensive preparation of the mining plan as well as discussions with the relevant constituencies including mining authorities and local municipalities. NWR’s mining concept, which is fully consistent with the local zoning plans, was accepted by the Polish Ministry of Environment in September 2007 and the relevant regional authority, the office of the Katowice governor, approved the Environmental Impact Assessment earlier this year.
"The Debiensko 1 license application follows our signing last October of a Letter of Intent with Jastrzebska Spółka Weglowa S.A., Poland’s largest coking coal mining company, to cooperate on the potential development of mining operations in the Morcinek coal field in southern Poland," said Mike Salamon, chairman, NWR. NWR’s mining consultant for the Debiensko 1 project is John T. Boyd, which is exploring various shaft sinking and engineering approaches from around the world that could help to minimize the development time necessary to commence mining at Debiensko 1.
Coalcorp Announces Agreement on Colombian Port Concession
Coalcorp Mining Inc. recently announced that it has completed its review of available port concessions in Barranquilla and has elected to partner with an existing concession holder to jointly develop a multi-purpose port, initially to be designed to handle 10 million metric tons of coal per year (mtpy) and ultimately 30 million mtpy. Preliminary design work is already underway and Sandwell Engineering has been retained for the detailed design and engineering for a state-of-the-art direct-loading port, fully in accordance with Colombian and international environmental requirements. This port will take advantage of the Magdalena River to provide export capacity in cape size ships for all coal producers and ultimately other cargoes.
A mining company in the process of developing a new coal mine near Stewart in British Columbia’s far northwest is looking at the cost of building a pipeline to get its coal to the nearest port. According to The Vancouver Sun, Fortune Minerals announced in late October that it hired an engineering firm to conduct an economic assessment of the cost of transporting coal products from its Mount Klappan site by pipeline. The idea, according to Robin Goad, Fortune Minerals president, is to assess whether alternative methods of conveying coal to the port of Stewart or Prince Rupert would mitigate the impacts of a stronger Canadian dollar and increasing fuel costs, and reduce the environmental impact with the use of existing transportation corridors. The pipeline assessment will look at possible production rates of between 1.5 million mt and 3 million mt of clean coal per year along three different route options from the mine site located 330 km northeast of the port of Prince Rupert.
Peabody Energy became the only non-Chinese equity partner in “GreenGen,” the first near-zero emissions coal-fueled power plant with carbon capture and storage which is under development in China. Peabody joined the initiative at a formal signing ceremony at the prestigious State Guest House in Beijing. The agreement was announced during the Sino-U.S. Joint Commission on Commerce and Trade meetings attended by U.S. and Chinese dignitaries, including U.S. Secretary of the Treasury Henry M. Paulson, Jr. and China’s Vice Premier Wu Yi.
The US$1 billion GreenGen project will use advanced coal-based technologies to generate electricity. It will be capable of hydrogen production and will advance carbon dioxide capture and storage, providing a clean energy prototype to address carbon dioxide concerns. Led by managing partner China Huaneng Group, the GreenGen Company will design, develop and operate an integrated gasification combined cycle power plant near Tianjin, southeast of Beijing. A 250-megawatt plant will be built in the initial phase, expanding to 650-megawatts in later phases. Project design and review is complete, a site has been selected at the Lingang Industrial Park, and construction is expected to commence in early 2008, with the first phase of the plant expected on line by 2009. The project includes multiple phases for additional generation and carbon capture.
Czech Republic’s New World Resources Announces Major Mining Equipment Purchase
New World Resources N.V. (NWR) has announced plans for a major capital investment program of approximately € 300 million at its wholly-owned subsidiary OKD a.s., the Czech Republic’s largest hard coal mining company. The capital investment program involves the acquisition of 10 new systems of longwall mining equipment and 12 new sets of gateroad development equipment for OKD’s mining operations and is expected to be purchased and rolled out in phases over the coming 24 months. A Letter of Intent to purchase the equipment has been signed with Bucyrus International. The new equipment purchased as part of the capital investment program is expected to increase operating efficiency and to enhance productivity and safety.
Mitsubishi Corp. has acquired a 0.2% stake in China Shenhua Energy Co., the world’s largest coal mining company in terms of production volume, to expand its natural resources business in China, The Nikkei reported. The major trading house annually imports into Japan about 2 million metric tons of coal produced by the mining firm and plans to boost the amount it handles under a business alliance it plans to make with the company. In addition to the development of coal mines inside and outside China, the two companies aim to broaden cooperation in the environmental business, including emissions credit trading, the treatment of wastewater from coal mines and the installation of energy efficient devices at mines. Mitsubishi, which has purchased about 30 million shares in the Chinese firm for about 15 billion yen ($135 million), does not plan to enter into a cross-shareholding arrangement with the mining company. In 2006, China Shenhua Energy produced 235 million mt of coal at mines in Inner Mongolia and other places, and also runs power generation stations using coal as fuel. It is a core firm of the Shenhua group, accounting for about 80% of group sales.
South Africa's Eskom Awards Deals to Hitachi, Alstom
In a key step toward the construction of Eskom’s first new coal-fired power plant, the power utility has awarded contracts for the construction of the boiler and turbine of the Medupi power plant in Lephalale to Hitachi of Japan and France’s Alstom, respectively. According to Business Day, the contracts, with a combined value of R33.5 billion—20.2 billion for the boiler and R13.2 billion for the turbine—are the largest in Eskom’s history. Eskom said work on the projects had started, with work on site to start in early 2009. And Eskom is already negotiating with Alstom and Hitachi to provide turbines and boilers for its next coal-fired power station, near Emalahleni.
Hill & Associates Forecasts Healthy World Seaborne Demand
Hill & Associates released its latest study titled “International Coal Trade–Supply, Demand and Prices to 2025” during October’s CoalTrans 2007 in Rome. The study identifies the major trends in the International Coal Trade (ICT) and looks at the outlook for coal demand and supply and coal prices out to 2025.
“Looking at the long term, from 2016 to 2025, we forecast that demand will outpace supply, leading to the markets tightening significantly which will drive prices up toward 2025,” said Daniel Walton, head of Coal Sales and Account Management for Hill & Associates. “We attribute this to undeveloped economic reserves becoming scarcer. This really is a wake up call for the industry to focus its attention on exploration and development of new projects. We forecast that world seaborne coal demand will reach 1 billion metric tons (mt) by 2025, from 770 million mt today. Therefore for supply to meet rising demand, new reserves are a must.”
Hill & Associates’ report looks at the major trends in the ICT and identifies two distinct periods. “In sharp contrast to the long term picture, between 2009 and 2015, we foresee that supply, across all coal types, will overcome demand. This is a supply-driven phenomenon which is a result of several existing constraints, at ports and on rail lines, being eliminated during this time, coupled with additional supply coming on-stream from committed and planned coal development projects,” said Walton.
The study also concludes that Asia will continue to be the main driver of seaborne coal trade for the next 20 years, particularly as industrial activity becomes focused on developing countries in the region.
“Asian metallurgical coal importers, led by India, China, Korea, and to a lesser extent Taiwan, will drive demand in this sector. We forecast Indian metallurgical coal imports to increase by almost 53 million mt and China by 24.8 million mt by 2025. Korea and Taiwan’s demand will grow through plant expansions and new coking capacity. On the supply side, the three majors–Australia, Indonesia, and Colombia will account for a remarkable 91% of growth in steam coal supply from now to 2025,” Walton said. “There are some interesting market dynamics at play–Chinese steam coal exports are forecast to continue to decline, placing a considerable strain on the expansion potential in Indonesia and Australia to supply Asia Pacific demand.” According to the Hill & Associates study, Colombia is expected to supply most of the required growth in steam coal exports in the Atlantic basin, with annual exports from Colombia and Venezuela increasing by 86 million mt.
Sasol Implements Second Phase of BEE in South Africa
Sasol Mining, the wholly-owned subsidiary of Sasol Ltd., announced the formation of a black-women controlled coal mining company called Ixia Coal (Pty) Ltd. In a transaction valued at almost R1.9 billion, Ixia Coal will acquire 20% of Sasol Mining’s shareholding through the issue of new shares. Ixia Coal is a venture with Women Investment Portfolio Holdings Ltd. (WIPHOLD) and Mining Women Investments (Pty) Ltd., a newly established company comprising women drawn from the areas where Sasol Mining has operations and coal reserves.
Heralding the second phase of Sasol Mining’s broad-based black economic empowerment (BEE) strategy, this transaction enables Sasol Mining to achieve compliance with the Mining Charter’s ownership requirements. The first phase of Sasol Mining’s BEE strategy was the creation of Igoda Coal (Pty) Ltd., a coal export venture with Eyesizwe Coal announced in March 2006. Now, with the formation of Ixia Coal, Sasol Mining’s BEE ownership component will increase to an estimated 26% (calculated on attributable units of production) well before the 2014 deadline.
“This transaction not only achieves compliance with the Mining Charter, but also promotes women in mining,” said Sasol Executive Director, South African Energy Businesses, Dr. Benny Mokaba. “We want to create lasting empowerment by providing opportunities for our country’s women to enter and benefit from the traditionally male-dominated mining industry. Our focus will be on developing relevant skills and building capacity among historically disadvantaged women.”
Sasol Mining will also benefit from the proposed 10% BEE transaction, which if approved by shareholders, will be implemented in 2008 and will take Sasol Mining beyond compliance with the Mining Charter’s ownership requirements. Sasol Mining Holdings will have a 49% ownership in Ixia Coal. The other 51% will be owned by WIPCoal Investments. WIPHOLD will be the majority shareholder in WIPCoal Investments, with 60% shareholding. The other 40% shares will be owned by Mining Women Investments. Ixia Coal will be independently controlled and separate from Sasol Mining.
Marubeni, Sojitz to Invest in Australia Coal Project
Two Japanese trading houses, Marubeni Corp. and Sojitz Corp., will invest ¥24.8 billion ($3.3 million) in a coal mining project in Australia, Dow Jones reported. They will partner with Queensland Coal Mine Management Pty and American Metals & Coal International Inc. for their Lake Vermont project in Queensland, the companies said in a joint statement. Production at the mine will start in 2009 with annual output of up to 4 million metric tons.
New World Resources Signs Agreement to Jointly Develop Polish Coal Deposits
New World Resources B.V. (NWR), the sole owner of OKD a.s., the Czech Republic’s largest hard coal mining company, and Jastrzębska Spółka Węglowa S.A. (JSW), Poland’s largest coking coal mining company, recently announced that they have signed a Letter of Intent to cooperate on the potential development of mining operations in the Morcinek coal field in the southern part of the Upper Silesian coal basin in southern Poland near the Czech-Polish border. Located in proximity to OKD’s ČSM mine, NWR and JSW plan initially to access the Morcinek coal deposits from the Czech Republic using NWR’s existing mine and surface facilities. There is also the potential to develop new mining facilities in the Morcinek region on the Polish side of the border.
Scharrig Mining (Schamin) and Jonah Capital had entered into a joint venture with an Australian company to explore coal properties in Botswana that could support a mine and power station, Business Day reported. The project is one of a number of ventures in the coalfields of Botswana and South Africa’s Waterberg to respond to the urgent demand for power in southern Africa. Jonah Capital, controlled by former AngloGold Ashanti president Sam Jonah, owns about 16% of Schamin. The plan is to establish a new company, Jonah Coal, to house all the companies’ future coal interests in Africa, excluding SA, and the current Nkomati anthracite project.
Czech state-run power producer CEZ plans to invest more than Kc100 billion to renew and build coal-fired power stations in six years, CTK reported. CEZ, 66% controlled by the state, has so far spent Kc5.2 billion to renew coal-fired plants. It wants to reconstruct up to 10 and build up to three coal-fired units. In early June, CEZ started to modernize its Tusimice 2 plant in northwestern Bohemia, seeking to renew four 200-megawatt brown-coal units by 2010. At end-2007, CEZ plans to launch the construction of a 660-megawatt source in Ledvice, northwestern Bohemia. CEZ wanted to cut carbon dioxide emissions by 15% through the reconstructions. The company is also contemplating the construction of new steam-gas units if it signs a long-term contract on gas supplies. CEZ, the largest Central European power producer, runs 13 coal-fired power stations in the Czech Republic, which make up almost two-thirds of the company’s total output.
Xstrata Buys Tahmoor & Anvil Hill in Australia (Oct 2007)
Xstrata Coal Pty Ltd. announced during September its intention to make an off-market takeover cash bid to acquire Austral Coal Ltd. for A$557 million ($501 million). Under Xstrata Coal’s proposal, Helios Australia Pty Ltd., a subsidiary of Xstrata Coal, will offer to acquire all of the shares in Austral. Xstrata Coal, Austral, and Helios have signed a bid implementation agreement under which standard exclusivity arrangements have been agreed. The offer is subject to limited conditions, including an 80% minimum acceptance condition and regulatory approval.
“The acquisition of Austral’s Tahmoor underground mine will increase Xstrata Coal’s exposure to hard coking coal at a time of significant growth within the market,” said Xstrata Chief Executive Peter Coates. “It will also facilitate the company’s entry into the southern coalfields and allow immediate access to an unconstrained port.” Austral’s Tahmoor mine is a longwall operation in the southern coalfields of New South Wales (NSW), producing approximately 2.3 million metric tons per year (ROM) in the last financial year. Tahmoor exports via Port Kembla, near Wollongong.
Xstrata Coal also recently announced its plans to purchase the Anvil Hill Project for A$425 million ($382 million) from Centennial Coal. The Anvil Hill coal project is located in the Upper Hunter Valley, NSW, with the mine plan envisaging production of up to 10.5 million mt of both domestic and export grade thermal coal annually over a 20 year period.
“Xstrata Coal is an industry leader with the business principles, experience and capacity to develop the Anvil Hill site in accordance with global environmental and safety standards,” Coates said. “We also have a proven commitment to working with the communities which neighbor our operations.”
South Africa’s Chamber of Miners Signs Wage Agreements (Oct 2007)
South African coal mining companies (Anglo Coal, Xstrata, Eyesizwe, Optimum Colliery, and Delmas Coal) recently signed the 2007/2009 wage agreement at the Chamber of Mines’ offices in Johannesburg with three trade unions negotiating on behalf of coal mining workers: the National Union of Mineworkers (NUM), UASA, and Solidarity.
In terms of the agreement, which becomes effective from July 1, 2007, the wage increment for the first year will range from between 7.5% and 8.5% for the highest category workers to 10% for the lowest category workers. From July 2008, the increment will be calculated on an average CPIX plus 1%, subject to a minimum of 8% for most companies. This is in addition to other items on which the employers and the unions had agreed.
“I am sure that all of us gathered here are delighted that we have been able to reach this stage without disruptions to production in the mines,” said Eric Nwedo, the Chamber of Mines negotiator for coal mining companies. “The process has been very difficult and all of us worked very hard to reach a solution workable for both the coal mining industry and its employees. Neither the employers nor the workers got everything they wanted, but we have managed to get this far by compromising for the common good. I would therefore like to thank the employers and the unions for their part in this process because without their vision and foresight, we would not be here today. From now, all of us have to start the process of implementing the terms of this agreement.”
Canadian Pacific Acquires DM&E Railroad (Oct 2007)
Canadian Pacific Railway Ltd. (CP) announced in early September that it has reached an agreement to acquire Dakota, Minnesota & Eastern Railroad Corp. (DM&E) and its subsidiaries for $1.48 billion. The transaction expands CP’s current network by approximately 2,500 miles and increases its access to U.S. Midwest markets. The deal consists of a $1.48 billion cash payment at closing and future contingent payments of up to approximately $1 billion. Future contingent payments of $350 million will become due if construction starts on the Powder River Basin (PRB) expansion project prior to December 31, 2025.
Future contingent payments of up to approximately $700 million will become due upon the movement of specified volumes of coal from the PRB over the PRB extension prior to December 31, 2025.
“The DM&E is an excellent fit for Canadian Pacific making this a strategic end-to-end addition to our network,” said Fred Green, president and CEO of CP. “The DM&E is a high-quality, growing regional railroad that complements our existing franchise. This investment presents the opportunity for future growth through further expansion of our network and is accretive to our EPS in 2008.”
The DM&E has been pursuing a strategy to become the third rail carrier in Wyoming’s PRB. “Canadian Pacific is excited about the prospect for growth in the coal-rich Powder River Basin,” Green said. “The DM&E’s favorable geographic position provides a unique ability to create an efficient and competitive additional link to midwestern and eastern utilities. We have created a disciplined plan aimed at facilitating a decision on the expansion and ensuring the investment provides returns that exceed our thresholds. Our purchase agreement has been structured to share further upside as the benefits of the expansion are realized.”
