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Coal India Limited
Energy Security, Growth & Sustainable Development
“Coal is the main source of energy in the country…..A new Coal Distribution Policy has been put in place…to make coal accessible to all…Coal India has been conferred Navaratna Status1 for speedy project implementation…”
Excerpts of Address by the President of India to the Joint Session of Parliament, 12th February 2009
Introduction
1Navaratna was the title originally given to the nine most prestigious Public Sector Enterprises identified by the GoI, giving them greater autonomy to compete globally. This has been raised to 18, with CIL being the most recent addition 2
Agenda
Coal Sector Overview
Coal India Limited – Company Overview
Sustainable Strategic Initiatives
3
Coal Sector Overview
Asia’s Most Important FuelCoal remains a key source of energy in the world– Provides ~29% of global primary energy needs– Generates ~41% of world’s electricity
Primarily used for power generation and metallurgyCheapest source of energy on a heat adjusted basisLong term secular factors to drive global growth in coal demand– Growth driven by China and India ~50% of
global demand– Global demand driven by steel and power
industries and higher cost of competing fuels – Asian growth driven primarily by power
generation needsInfrastructure bottlenecks and regulatory constraints restricting supply
Energy Consumption1 (2008)
Oil34.8%
Coal29.2%
Natural Gas
24.1%
Hydro electric6.4%
Nuclear Energy5.5%
World 11,295 Mtoe
Asia 3,982 Mtoe
Coal51.0%Oil
29.7%
Natural Gas
11.0%
Hydro electric5.3%
Nuclear Energy3.0%
Source: BP World Energy Report 20091Mtoe = Million tonnes of oil equivalent = 1.5 metric tonnes of hard coal 5
Coking6.8%
Non Coking93.2%
Coal Industry in IndiaTotal resources– ~267bn tonnes: 106bn proved,
161bn indicated/inferred88% of production from opencast mines; 12% from underground minesCoal present in 14 out of 28 statesIndian coal is generally high ash, ~4500 GCV, low sulfurNo longer a regulated industry
Coal Production and Imports Types of Coal Produced in India
Coal Reserves in India
India
ChinaPakistan
Myanmar
Nepal Bhutan
Sri Lanka
Coalfields
India
ChinaPakistan
Myanmar
Nepal Bhutan
Sri Lanka
Coalfields
323.5 343.4 360.9 379.5 403.759.1
63.6 69.977.6
89.329.0
38.643.1
49.859.0
411.6445.6
473.9506.9
552.0
200
300
400
500
600
2004-05 2005-06 2006-07 2007-08 2008-09
Coa
l Pro
duct
ion
/ Im
port
s (M
T)
CIL Others Imports
6
Indian Coal Industry in Context
Annual Electricity Consumption per Capita
Source: International Energy Outlook, Planning Commission, BP World Energy Report 2009
Annual Per Capita Electricity Consumption Growth in India (units per capita)
Global Coal Reserves by Country
Global Coal Production by Country
238
157
115 10676
34 31 30
0
50
100
150
200
250
300
US
A
Rus
sia
Chi
na
Indi
a
Aus
tralia
Ukr
aine
Kaz
akhs
tan
Sou
thA
frica
Bill
ion
Tonn
es
504
631
2,024
2,444
7,493
10,347
13,515
Indonesia
India
Brazil
China
France
Australia
US (2007)
(2007)
(2007)
(2007)
(2007)
(2006)
(2007)
1,455
993 1,063
358512
342 402256 327220 250
2,782
0
500
1,000
1,500
2,000
2,500
3,000
2002 2008
Mill
ion
Tonn
es /
year
China USA India Australia Russia South Africa18
35
84
131
238
408
582
631
1,000
1950
1960
1970
1980
1990
2001
2004
2006
2012
Estimated 58% Growth in
XIth Plan
7
Company Overview
1
2
4
5
7
9
10
83
6
Vast Scale and OperationsLargest coal company in the world
– Produced over 403mn tonnes in FYE Mar 2009
– 82% market share in India– Over 400,000 employees
Access to vast untapped coal reserves – Reserve base ~ 70bn tonnes
CIL alone meets 45% of India’s primary commercial energy requirementNet Revenues of over $8bnEstimated PBT before pay revision ~$2.3bn, PBT as reported ~$1.2bn for FYE March 2009100% owned by the Government of India (GoI)Awarded Mini-Ratna in Mar ’ 2007, Nav-Ratna in Oct ’ 2008 & SCOPE Excellence Award in 2009
Coal India Limited Subsidiaries
Planning & Design InstitutePlanning & Design Institute
Central Mine Planning & Central Mine Planning & Design Institute (CMPDIL)Design Institute (CMPDIL)
1
2
3
4
5
6
7
8
9
10
Eastern Coalfields Ltd. (ECL)Eastern Coalfields Ltd. (ECL)
Bharat Coking Coal Ltd. (BCCL)Bharat Coking Coal Ltd. (BCCL)
Central Coalfields Ltd. (CCL)Central Coalfields Ltd. (CCL)
Northern Coalfields Ltd. (NCL)Northern Coalfields Ltd. (NCL)
Western Coalfields Ltd. (WCL)Western Coalfields Ltd. (WCL)
South Eastern Coalfields Ltd. South Eastern Coalfields Ltd. (SECL)(SECL)
Mahanadi Coalfields Ltd. (MCL)Mahanadi Coalfields Ltd. (MCL)
North Eastern Coalfields (NEC)North Eastern Coalfields (NEC)(A Unit Under CIL (HQ))(A Unit Under CIL (HQ))
Coal India Limited Coal India Limited SubsidiariesSubsidiaries
Singareni Collieries Co. Ltd. Singareni Collieries Co. Ltd. (SCCL)(SCCL)
Neyveli Lignite Corporation Neyveli Lignite Corporation (NLC(NLC))
Exchange rate of 48.39 INR/USD9
Completing a Major Transformation
Sector grew <2%Low returnsLow investments“Born Sick”
COAL AT ANY COST
NationalisationMassive public investmentAchieved target growth of 5% CAGRBalance sheet weakness
1975 1991 1997 2002 2007 and Beyond
CONSOLIDATION
Consolidated financial positionSlow growth in demandForeign funding
TAKE OFF
Plans to grow to 520.5MT of annual production by 2012International growth plans by acquiring coal fields abroad
Phase out budgetary supportEnforcing financial disciplineProfitable from 1991/1992Accessed financial markets
Highest production growth – 5.2 % CAGR over IXth planImprovement in capacity utilisationReduced manpower by over 81,000Improved productivity by 37 %Funded investment from internal resourcesDebt/Total capital reduced from 60 to 10%
PRE-NATIONALISATION PRAGMATISM LAUNCHING PAD
10
Presence Through the Value Chain
EXPLORATION
COAL MINING
BENEFICIATION
473 mines owned:– 279 UG – 163 OC – 31 Mixed
Production in 2008-09 was 359MT from OC and 44MT from UGSCCL and TISCO are the other main players in coal mining~200 blocks allotted to private operators for captive mining
Operates 17 washeries (11 coking and 6 non–coking) Decision taken to supply beneficiated coal to all consumers, other than those located at pitheads19 new washeries (105.6MTy total capacity) being taken up for construction as a Public-Private-Partnership (PPP) initiative
Carried out in two stages: Regional and DetailedIn 2008-09, 0.27mn meters of drilling has been achievedAction initiated to enhance drilling capacity to 1mn meters annually
11
Strong Track Record of Growth
Leads to Growth in Net Revenues… ... And Growth in Profitability
Growth in Coal Production… … While Improving Productivity1
1 OMS: Output per man shift is obtained by dividing output of saleable coal obtained by total number of man-shifts worked2 08-09 PBT numbers reflect add back of one time charges of ~$1.1bn related to the most recent wage revision act. This includes ~$0.6 in charges related to pension liability, ~$0.2 in charges related to 06-07, ~$0.3 in charges related to 07-08Exchange rate of 48.39 INR/USD
587562
542520
501485 468 452 439 426 412
375
425
475
525
575
625
98-99
99-00
00-01
01-02
02-03
03-04
04-05
05-06
06-07
07-08
08-09
Man
pow
er (0
00's
)
0.0
1.0
2.0
3.0
4.0
5.0 Output per M
anshift
Manpower (000's of employees) OMS (Tonnes/Manshift)
$ 0.7$ 1.1 $ 1.0
$ 1.8 $ 1.8$ 1.2
$ 1.8
17%
30%29%
26%28%
19%
24%
0.0
1.0
2.0
3.0
4.0
02-03 03-04 04-05 05-06 06-07 07-08 08-09
PBT
($ b
n)
10%
15%
20%
25%
30%
35%PBT Margin %
$2.32
280291
306324
343361
380404
250270290310330350370390410430
01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09
Coa
l Pro
duct
ion
(MTy
)
CAGR: 5%
CAGR: 6%
$4.2 $4.6$5.4
$6.0 $6.2$6.8
$8.1
0
2
4
6
8
10
02-03 03-04 04-05 05-06 06-07 07-08 08-09
Net
Rev
enue
s ($
bn) CAGR: 11%
12
Average Annual Net Cash Flow from CIL to GoI
Strong Cash Generation
Exchange rate of 48.39 INR/USD 13
Unmatched Strategic Relevance The Indian economy is expected to grow at 7.5% p.a. over the next 5 years
– Access to electricity is a core element to achieving this growthEnergy demand is growing at 7% per year in India – GoI has planned for an additional 79 GW1 to be build in the current 5-year plan –
of which 72% will be coal-fired– Over 50% of Indians currently do not have access to electricity
CIL meets 45% of country’s primary commercial energy requirements– Coal contributes ~54% of commercial energy in India– CIL provides fuel for 76 out of 78 operational coal-based thermal power stations
in India
Growth in GW in IndiaCoal Consumption as % of Energy
Consumption in India2
Coal53%Oil
31%
Natural Gas9%
Hydro Electric6% Nuclear Energy
1%
Total = 433.3 Mtoe
Source: External Research, Ministry of Coal, Planning Commission of India1Excludes Wind and Renewable Energy2Mtoe = Million tonnes of oil equivalent = 1.5 metric tonnes of hard coal
69 85 105132
211
050
100150200250
1992 1997 2002 2007 2012EInst
alle
d C
apac
ity (G
W)
CAGR: 6%
14
Sustainable Strategic Initiatives
Key Strategic Initiatives
Enhancing Availability of Resources
Ensuring Accessibility of Resources
Increasing Acceptability of Mining Practices
Improving Profitability and Efficiency
Key Initiatives Targeting
Sustainable Development
Growth
Profitability
Efficiency
16
Enhancing Availability of Resources
EXPLORATION
Drilling targets increased 4x— Aiming to convert ‘inferred’ and ‘indicated’ category of
reserves to ‘proved’ categoryDetailed drilling and projectisation of coal blocks allocated tocaptive block owners being carried outSystematic exploration being carried out in order to arrive at reliable estimate of coal reservesApplication of information technology to create geo database
NEW PROJECTS
FOREIGN ACQUISITIONS
Process of acquiring coal resources abroad through equity stake in working or green field projects
— Acquired 2 virgin coal blocks in Mozambique Global Expression of Interest (EoI) floated for selection of strategic partners for overseas operations
134 new projects for ultimate capacity of 309 MTy identified— 34 UG and 100 OC
Setting up 19 washeries with a capacity of 105.6 MTy
17
Ensuring Accessibility of Resources
OPENCAST MINING
UNDERGROUND MINING
Computer-aided mine planning for deeper OC minesDeploying high capacity equipment to achieve economies of scaleOITDS1 for efficient fleet managementState-of-the-Art mass production technology being used
Tapping large reserves below 300m depth7 UG Greenfield properties being developed 18 abandoned mines with estimated reserves over 1600 MT identified for development
HIGHWALL MININGMining of good quality thin seamsRecovery of good quality coal in OC mines beyond economic stripping ratio limit
CBM/UCG
Recovery and commercial utilization of CBM from deep seated seamsUnderground coal gasification of deep seated seams
1 OITDS: Operator Independent Truck Dispatch System 18
Improving Profitability and Efficiency
Economic
Organization
Ensuring competitive delivered energy cost vis a vis imported coalStrategic cost reduction across operation value chainReviving non-performing/loss making unitsMoving progressively to market driven pricing
Improving corporate governance metricsIntroduction of ‘Integrity Pact’ and transparency initiativesWeb based business process via e-auction, e-procurement introduced for speeding up purchase of vital inputs
19
Increasing Acceptability of Mining Practices
SOCIAL
“Mining with a human face” through socially sustainable inclusive developmentInclusive model of all-round growth for Project Affected Peoples (PAPs) Providing employment and cash compensation to land losers
Setting up 19 washeries with a capacity of 105.6 MTyStarted satellite surveillance for land reclamation and restoration of OC minesPlanted ~70mn trees with survival rate of over 75%
ENVIRONMENTAL
Plantations and Greenery over OB Dumps1
1 Left Picture: Plantation over OB Dump, MCL. Right Picture: Greeneries over OB Dump, Umrer, WCL
Highest priority given to safetyFramed distinct ‘Safety Policy’ in every subsidiaryFormed multidisciplinary ‘Internal Safety Organization’ (ISO) in every subsidiary
SAFETY
20
Land Use/Cover Map of Jayant OCP, NCL
2007 2008
Satellite Surveillance
21
Outlook
Potential upside from coal price converging to international prices post washing in future
Scope for further reduction in manpower despite projected growth in coal production
Demand unlikely to constrain production growth in the foreseeable future
Coal Production in India
Coal Consumption / Demand in India
265 335533
835
105
92
185
352465
732
1,125
69
303857
130
0
300
600
900
1,200
IX Plan(97-02)
X Plan(02-07)
XI Plan(07-12)
XII Plan(12-17)
Ave
rage
Ann
ual
Con
sum
ptio
n/D
eman
d (M
T)
Power Steel Others
Actual Consumption Forecasted Demand
280361
521
664
31 38 41 4517 32120
346
0100200300400500600700
IX Plan(97-02)
X Plan(02-07)
XI Plan(07-12)
XII Plan(12-17)
Ann
ual A
vera
geC
oal P
rodu
ctio
n (M
T)
CIL S.C.C.LTD Others
Actual Production Forecasted Production
22
Thank You!