Coal Insights, December 2022

16 Seaborne thermal coal offers remain volatile in December 18 Seaborne coking coal offers rise in December 19 India’s November coal imports up 18.8% y-o-y 20 CIL’s coal production up 13% in November 21 SCCL’s coal production up 8% in November 26 Country’s coal imports up 23% in H1

Commercial mines coming into stream

Coal India joins World Coal Association

Ministry decentralises Jharia Master Plan ops 34 No power capacity addition in October 36 November sponge iron production up 11.3% 37 Coal handled by major ports up 28% till November 38 Indian Railways’ coal handling up 5% in November 44 Britain approves first met coal project in 30 years 45 Coal production to decline by 9% in 2023: EIA 46 Coal India awards 7 projects to MDOs

JSW forays into wind power project

NTPC, GE Power to reduce carbon intensity from coal-fired units

Corporate update

Government update

data

6 | COVER STORY

Abating energy catastrophe Looking back at all the global developments of 2022

22 | FEATURE

Foreign FIs lent `50,367 crore to thermal power plants Japan Bank for International Coop, China Development Bank emerge largest lenders

24 | FEATURE

G20 Presidential role focuses on sustainability, transition Development Working Group meets in Mumbai

40 | INTERVIEW

“India’s cement sector has still room for growth”

Interview of Jayakumar Krishnaswamy, MD, Nuvoco Vistas Corp.

42 | INTERNATIONAL

Australia caps domestic coal prices in select areas

Coal price capped at A$125 a ton.

Abating energy catastrophe Looking back at 2022

Sumit Maitra

The global economy is fast losing its patience with high energy inflation, which, in effect, has started depressing prices due to falling spending and consumption.

The world, it now appears, has been spared an impending energy catastrophe.

While the global economy is projected to expand at a sluggish pace of around 1.6 percent in 2023 as financial conditions tighten, the winter aggravates China’s Covid policy and Europe’s natural gas problems persist, the global economy is not at imminent risk of sliding into recession, says global investment banker JP Morgan.

While energy commodity prices have declined, they generally remain above levels reached just prior to the Russian invasion of Ukraine.

In any case, markets have become less concerned about a drop in exports of gas, coal and oil by Russia, one of the world’s largest energy exporters, believes the Chief Economist of Australian Industry Ministry.

“Northern Hemisphere nations have been successful in building up energy stockpiles for winter. Weak Chinese energy demand (largely due to Covid lockdowns) has made it easier for Western European countries to fill gas storage,” says the Office of the Chief Economist of Australia’s Department of Industry, Science and Resources in the ministry’s Resources and Energy Quarterly.

“We do see inflation cooling as spending patterns normalise and energy prices relent – but we see it persisting above policy targets in coming years,” said BlackRock, world’s largest and most influential private investment group, in its 2023 Global Outlook report.

High energy prices continue to inflict pain forcing nations like Australia take aggressive policy measures to limit fossil fuel prices.

Australia’s Parliament has capped its domestic gas prices and some states’ coal prices by passing a law in the Parliament. The law caps the domestic gas price at 12 Australian dollars (A$) a gigajoule. It also limits domestic coal prices to A$125 Australian dollars a ton – or about $8 per

ton - in the states of New South Wales and Queensland. Following the announcement, NSW baseload electricity contract prices for 2023 dropped by around 45 percent compared with 2 months.

Global energy trade reshuffles

Global resource and energy commodity trade continues to re-organise, as Western sanctions imposed on Russia ramp up further.

“Russia is the third largest coal exporter in the world and the sanctions have as a result given rise to a reshuffling of global trade flows as buyers, especially in Europe, seek alternative supplies,” says International Energy Agency (IEA).

Realignment of trading partners for energy deals and steps to become selfsufficient in stable energy sources have started overshadowing the over-arching need to reduce emissions.

The gap left by Russian coal supplies in Europe has been largely filled by South Africa, Colombia and other smaller producers such as Tanzania and Botswana.

“Western sanctions have triggered a pursuit of economic self-sufficiency. Energy security is now a priority: As Europe weans itself off Russian oil and gas, we’ve seen energy shortages and higher prices. In the US, we see a push to favor trading partners when sourcing the metals and materials needed in the net-zero transition,” BlackRock said in its outlook.

“Events of the past year have fundamentally altered Russia’s position in global energy markets, and the shape of those markets. New alliances are being built and old ones consolidated. Russia is shifting its lost European exports east to Asia, mainly China and India,” says Simone Tagliapietra, senior fellow at think tank Bruegel, and Andreas Goldthau, research group lead at the Institute for Advanced Sustainability Studies.

“East Asian countries will want to reduce their dependency on expensive liquefied natural gas and turn to cheaper coal. Globally, whether investments shift from gas infrastructure to coal or renewables will have

deep consequences for carbon budgets,” they said in a research paper.

China, India and Turkey are taking Russian cargoes (at heavy price discounts) shunned by the West. As a result, China and India are now buying fewer cargoes of nonRussian commodities. Starting on December 5, some Western nations have applied price caps to Russian oil exports, with a price cap on oil products due to start on February 5, 2023.

Unless Russia chooses to stop exporting to nations who enforce the price cap, oil prices should fall: the replacement of bans with price caps cuts the likelihood of some Russian oil output being stranded. Capacity constraints on Russian coal exports to the East will likely limit world supply, holding coal prices higher than otherwise.

The turning off of Russian gas taps has sent Europe into the arms of coal. Since

“Northern Hemisphere nations have been successful in building up energy stockpiles for winter. Weak Chinese energy demand (largely due to Covid lockdowns) has made it easier for Western European countries to fill gas storage.”

Office of the Chief Economist, Department of Industry, Science and Resources, Australia

Foreign FIs lent `50,367 crore to thermal power plants

Coal Insights Bureau

Atotal of 22 international financial institutions have lent `50,366.89 crore to domestic thermal power project between the period 2005-2022.

And, out of the total, `30,005.83 crore have been extended to privately-held thermal power plants, and the rest, `20,361 crore, to publicly-owned ones, a report, The Coal Tail: Tracking Investments in Coal fired Thermal Power Plants in India by the Centre for Financial Accountability, says.

Japan Bank for International Cooperation, China Development Bank, Standard Chartered have given the highest amount of loans to various projects.

JBIC has given the bulk of the loans, `6,859 crore, sanctioned to 6 publicly-held plants.

China Development Bank, on the other hand, has given the entire amount to 3 privately-held plants and Standard Chartered to 4 privately-held plants.

A good share of the loans coming from IFIs are located in the Asia continent –Japan and China dominate the share in loans coming to the coal sector in India.

In terms of states, the highest loans have been accorded to Madhya Pradesh, `16,819 crore, with a major share going to privatelyheld plants, followed by Gujarat, entirely going to private plants, and Andhra Pradesh, where the entire amount has been extended to publicly-held plants.

Lending by Indian private banks

Private sector banks have lent `27,804.65 crore to coal-fired thermal power plants within the country.

Out of these, ICICI Bank has lent the highest amount, `7,366 crore, followed by Axis Bank, `7,119 crore, and HDFC, `6,157 crore. The amount of loan lent by ICICI and Axis Bank individually is higher than the cumulative amount lent out by all the other banks, excluding HDFC.

The top 3 Banks, ICICI, Axis and

HDFC, account for 74.23 percent of the total private banks’ loans to the coal sector.

Additionally, all loans given by Axis Bank have gone to privately-held plants. Similarly, ICICI has lent 82.2 percent of total loans to privately-held plants. On the contrary, HDFC has extended 78 percent of its loans to thermal plants, which are publicly owned.

Lending by state-owned banks

In total, 29 public sector banks have lent to thermal power plants (before mergers), providing a sum of `2,18,125.77 crore.

Out of the total, State Bank of India accounts for 35.21 percent of the loans, which amounts to `76,814.42 crore given to 55 thermal power plants across the country, followed by Punjab National Bank to 44 thermal power plants and Bank of India to 27 plants.

National FIs lent `7.12 lakh crores to TPPs

Loans amounting to `7.62 lakh crore have been provided by 84 lenders, both national and international, to thermal power projects in India, with a capacity of 1000 MW and above between 2005-2022.

This report comes at the heels of COP27, which concluded on November 20 at Sharm-El-Sheikh, Egypt, where India announced its Long-Term Low Emissions and Development Strategies.

Moreover, India has recently assumed the presidency of the G20 Summit on the first of December, which will have some focus on energy transition.

The report analysed data for 140 thermal power plants (TPPs) between 2005-2022 of which 122 were commissioned and 18 were in the construction phase and spread across 16 states/UTs. The 122 plants account for almost 196 GW of the 204 GW total commissioned capacity during this timeframe, with 122 GW publicly held whereas 73 GW is privately-owned.

“Information about financing is indispensable to any scrutiny of project feasibility not only in terms of efficiency and requirement but also the environmental and social impacts that accompany such projects.

Institution-wise foreign lending to thermal power plants

G20 Presidential role focuses on sustainability, transition

India’s Presidential role for the G20 group began in December with a focus on sustainability and just transition.

During the G20 Development Working Group meeting held in Mumbai from December 13-16, Amitabh Kant, India’s Sherpa for the G20 initiative outlined India’s priorities as:

(i) Green Development including climate action and financing, just energy transitions and LiFE (LifeStyle for Environment)

(ii) Accelerating implementation of SDGs

(iii) Digital Public Goods/Data for Development.

“Challenges the world faces today can only be solved by working together. Our priorities reflect not only the aspirations of G20 members, but also of the Global South. India is pursuing an inclusive, ambitious, decisive and action-oriented approach,” the release by G20 said.

The three-day meeting focussed on G20 collective actions for accelerating progress on the SDGs, support to developing countries

in dealing with immediate concerns relating to food and energy security and debt distress, and a 2023 G20 New Delhi Update on SDGs.

Several sessions were held on Lifestyle for Environment, a central priority for India’s G20 Presidency and on ‘Accelerating Progress on the Sustainable Development Goals’ while presentations were made by Organisation for Economic Cooperation and Development (OECD) and International Labour Organization (ILO) on gender discrimination, Just Green Transitions and digital transformation. G20 delegates held discussions on existing bottlenecks for accessing sustainable finance, and the need to strengthen efforts to achieve gender equality.

“Our G20 Presidency is taking place at a very critical moment in international affairs. Over the last three years, we have seen the economic and social devastation caused by the Covid pandemic, quite apart from its human toll. It has aggravated the financial situation of developing countries, undermined the pursuit of sustainable development goals, and created a health divide between the developed and the developing. To this was added the knock-on effects of the Ukraine

conflict, especially the difficulties in the availability and affordability of fuel, of food, of fertilizers. There are then the longer term trends like extreme climate, whose events are now unfolding with greater frequency and more impact,” S. Jaishankar, External Affairs Minister, said during one of the G20 connect events.

Countries of Asia, Africa and Latin America share the apprehension that sustainable development, climate action and climate justice could be side-tracked due to more dominant issues, Jaishankar said adding that India has to take the lead in pushing for collective action at G20.

Efforts towards Just Transition in mining

Ministry of Coal has taken various steps to mitigate adverse impacts of coal mining and has aligned itself to the sustainable environment-friendly practices for the areas affected by various coal mining activities, ministry has said.

“One such aspect is dealing with the mine closure cases of abandoned/closed/legacy mines or mines to be closed in near future based on the principle of Just Transition,” it said.

Coal Insights Bureau

“India’s cement sector has still room for growth”

With a focus to cement its position in the northern and western market, Nuvoco Vistas Corp is investing in grinding unit, clinker debottlenecking projects and setting up Alternative Fuel Material handling facilities at its plants. Further, the cement maker is cashing in on infrastructure activities, centre’s National Infrastructure Pipeline (NIP) investment and is well placed to ride the long-term growth trajectory with cement demand estimated to grow at a CAGR of around 6 percent by FY27, says Jayakumar Krishnaswamy, MD, Nuvoco Vistas Corp to Ritwik Sinha of Coal Insights.

What is the size of the cement sector in India? What are the opportunities ahead for the sector and for Novoco?

India is the second largest cement producer in the world. The country ranks second behind China with over 7 percent of the global cement market. There is still room for growth.

In India, per capita consumption is 242 kg, compared to 500 kg globally. Cement production at Nuvoco was at 17.8 mt in FY22.

Cement demand in India is expected to reach 419.92 million tons (mt) by 2026-27 (FY27). India has a large and high-quality limestone deposit throughout the country, promising huge growth opportunities.

In the Union Budget 2022-23, 7.5 lakh crore will be allocated for capital expenditure (35.4 percent more than the previous year), and the National Infrastructure Pipeline (NIP) investment will benefit Nuvoco by 2025.

The Indian cement industry is likely to add around 80 mt capacity by FY24, the highest in the last 10 years, driven by increasing spending on housing and infrastructure activities.

Of late most cement makers have been on an expansion drive with a number of brownfield and greenfield projects in the pipeline.

Kindly elaborate on your upcoming projects and investments. What is the present capacity at your plant-wise production capacity?

Nuvoco Vistas Corp is the fifth-largest cement group in India in terms of capacity. Presently Nuvoco has a 23.82 million tons per annum (mtpa) capacity across 11 cement plants. Additionally, the company also operates 50+ ready-mix concrete plants on a

Australia caps domestic coal prices in select areas

Australia’s Parliament has capped its domestic gas prices and some states’ coal prices by passing a law in the Parliament.

The law caps the domestic gas price at 12 Australian dollars (A$) a gigajoule. It also limits domestic coal prices to A$125 a ton – or about $8 per ton - in the states of New South Wales and Queensland, which have the largest share of the nation’s total identified coal resources.

The caps are effective for 12 months following which the government will then have the power to set a “reasonable price” for energy after factoring in an “appropriate return on capital” for coal and gas producers.

The law passed in the Parliament also includes measures to issue A$1.5 billion in power subsidies to households and small businesses.

The government will transfer A$1.5 billion to the states and territories to cut energy bills for eligible households and small businesses.

The direct benefits are expected to flow to households and businesses by the June quarter of 2023.

“It is brilliant to see that the federal government, having struck an agreement with the Greens and crossbench, has secured the passage through Parliament of its energy price relief plan. This includes caps on wholesale coal and gas prices, A$1.5 billion for energy bill rebates to support Australian households and businesses, and a mandatory code of conduct to ensure permanent reasonable gas pricing – an entirely necessary market intervention to counter the fossil fuel bill shock inflicted by the fossil fuel industry on Australians,” Tim Buckley, Director, Climate Energy Finance said.

The announced package comes with a commitment from the Federal Government to support homes and businesses to electrify everything, and cut reliance on the extortionate, polluting methane gas industry, whilst curbing energy costs. These measures will be funded by Budgetary provisions.

Energy Consumers Australia welcomed the energy bill relief measures saying they would help to curtail further price increases while shielding consumers from the immediate impact of high energy bills.

Its CEO Lynne Gallagher said the package of measures would protect households and small businesses from excessive bill shock as big picture reforms to drive down prices are delivered.

“The decision to offer direct assistance as a reduction of bills is an effective way of making sure relief is delivered to all Australians who need it and that this relief does not inadvertently contribute to inflation, which is already inflicting pain on Australian consumers,” Gallagher said.

Impact of announcement

As the capping proposal was being discussed and debated over several months, forward pricing of wholesale electricity for NSW and Queensland in the first quarter of 2023 halved in November.

“This pre-emptive move by the market is a staggering real-time endorsement of the government’s efforts – it had already priced in victory, and a massive reduction in the hyperinflation that was set to smash households and industry in 2023,” Buckley said.

The Federal Government anticipates that the energy price relief plan will prevent a A$230 electricity price increase for the

average Australian household – such that bills will rise by 13 percent rather than the expected 36 percent in 2023-24.

Following the announcement of the energy price relief plan, NSW baseload electricity contract prices for 2023 dropped by around 45 percent compared with 2 months ago, reflecting that the market expects the measures to work to bring down wholesale electricity prices.

“The coal price cap of A$125/ton is likely to reduce coal prices for a few coal generators, in particular for those needing to purchase coal outside of their existing long term (and usually lower cost) contracts,” Institute for Energy Economics and Financial Analysis said.

As per reports, power producers like Origin’s Eraring power plant might have been buying coal at prices above A$125.

Coal Insights Bureau

“The decision to offer direct assistance as a reduction of bills is an effective way of making sure relief is delivered to all Australians who need it and that this relief does not inadvertently contribute to inflation, which is already inflicting pain on Australian consumers,”

Lynne Gallagher, CEO, Energy Consumers Australia

NTPC, GE Power to reduce carbon intensity from coalfired units

In a major step towards coal fleet decarbonisation in the country, NTPC Ltd and GE Power India Ltd will partner to reduce carbon intensity at NTPC’s coal fired units.

This partnership aims to demonstrate technologies for firing higher percentage of Torrefied Biomass in NTPC’s coal fired unit, methanol and ammonia firing.

“Carbon reduction from coal power plants is a key challenge and co-firing of low carbon fuel will facilitate the transition towards a low carbon energy economy and subsequent it to Net Zero emission,” a joint release by the entities said.

In its efforts to adopt advanced powering technology to decarbonize power generation in India, NTPC, country’s largest power generating utility, and GE Power India, a listed company of GE Steam Power in India has signed a Memorandum of Understanding (MoU) for feasibility to demonstrate technologies to reduce the carbon footprint of NTPC’s existing coal fired power plants.

The first-of-a-kind MoU aims at partnering on research, development and engineering of technologies that will enable NTPC to reduce the amount of coal fired in their units and gradually replace it by co-firing of ‘alternate fuel’ in boiler - both carboneous (methanol, Carbon neutral fuel- agri-waste, biomass, etc) and non-carboneous (such as ammonia).

“This will make use of huge existing infrastructure and less new investment will not be required as compared to other decarbonisation options. Further, as in India coal is the only option for base load so it will help to reduce carbon footprint from source of reliable power, for decades in future,” it said.

As a primary goal, the collaboration is to support NTPC in co-firing of biomass pellets beyond 20 percent and up to 100 percent, as well as enabling the co-firing of methanol. It will also explore the possibility of introducing ammonia as a co-firing fuel, and also develop, test and demonstrate technologies that allow a total co-firing with lower carbon fuels in coal fired power plants.

Ujjwal Kanti Bhattacharya, Director

Projects, NTPC, said, “We are looking forward to working with GE Power India Limited as NTPC intends to minimise the carbon footprint of our 57+ GW coalbased units. We aim to decrease carbon footprint from our coal fired power plants by co-firing of alternative fuel such as carbon neutral fuel, Green Methanol and Green Ammonia. It will support our goal of reducing carbon emissions from our coalbased power generation, as part of NTPC’s The Brighter Plan 2032 that aims at setting new benchmarks in sustainability along the entire energy value chain in India.”

Prashant Jain, MD GE Power India said, “This MoU is in line with our country’s efforts to adopt advanced powering technology to decarbonize power generation. We are excited to partner with NTPC Limited on finding solutions to address carbon emissions, while ensuring efficient, reliable and affordable power generation. This is a huge stride in India’s energy transition journey as the country looks ahead to achieve its net-zero targets.”

Coal Insights Bureau

The first-of-a-kind MoU aims at partnering on research, development and engineering of technologies that will enable NTPC to reduce the amount of coal fired in their units and gradually replace it by co-firing of ‘alternate fuel’ in boiler - both carboneous and noncarboneous.