India Coal Blending Review 2000-2001

June 2001 "A Market Synopsis"“Market Synopsis &

Logistics Review” 1

India Coal Blending Project –

“Market Synopsis & Logistics Review”

Presented by Richard Kane



Market Review Objectives

To develop a general market knowledge

Do the Utilities require a service?

Are they prepared to contract?

What is the current supply situation?

To understand Archean’s role & commitment to the project.



India – “The Country”

Over 1 billion people! - (2nd only to China)

The world’s most densely populated country

4 x the population of USA in 1/3 land mass

11 x the population density of USA (288 people per sq km “v” 27 per sq km in USA)

Population to increase by 80m before 2006

GDP forecast to grow by 25% before 2006



“The Indian Coal Market”

Composed of:-

Power Utility Consumption = 230 m tonnes

Cement Industry = 80 m tonnes

Steel Industry = 10 m tonnes

Total Market Requirement = 320 m tonnes

Projected increased requirement for indigenous coal

is 55%, + 175 mt to a total of 495 mt by 2006



Indian Coal Market Supply



Indian Coal Market Supply

Coking Coal Imports (Steel) 10 mt

Cement Industry Imports 6 mt

Utilities Imports 4 mt

Total estimated imports 20 mt

Indigenous Coal India supply 300 mt

Total supply (Year 2000) 320 mt

All Estimations (including previous) based on utility management

approximations & financial news reports



“The Rail Freight Factor”



“The Rail Freight Factor”

Coal accounts for 50% of India’s railfreight

Coal subsidises passenger freight by 30%

Railfreight has increased 13% annualised in the last 8 years versus 9% for coal x pit

1981-99 railfreight has increased from 43% to 54% of delivered coal cost (over 750km)

Minister has no desire to change pattern!



Archean Group of Companies



Archean Group Profile Continued

Archean Granites Ltd. Established 1985 to challenge Portuguese monopoly. Provider to:-

George Bush Presidential Library, USA

Disney World, USA

Oslo Town Hall Plaza, Norway

Cornell University, USA

Sony Centre, Berlin

Wellbrines Chemicals Ltd. Pioneered iodised salt production in India

Refinery in Gujarat with an annual capacity of 100,000 tonnes

Currently developing 6000 acre site and port facility in Gujarat

JV with Ssangyong Corp. of South Korea a 70% customer.

WBC and Ssangyong Corp. JV public limited company company is named Bharat Ssangyong Salt Corporation Ltd.

Continued



Archean Group Profile continued

Bharat Salt Refineries Ltd. Dedicated to salt field development on both East and West Coast

Exports to Africa & other Asian countries plus domestic supply

Site developments & leases in place working in excess of 31000 acres

Goodearth Maritime Ltd. In house shipping dept currently handling:-

100,000 tones plus of Cobblestones in handysize vessels plus

100,000 tonnes of salt from Gujarat to East Coast

Salt movements West to East is forecast to treble within 3 years presenting a synergy with intent to reduce coal freight cost to West

Continued




Key Personnel

Mr. P.B. Anandam – Chairman & Founder - 62 years old. Commerce Graduate formerly manager of a British shipping Co in UAE.

Pioneered the Baryte mineral trade from India during 1970’s

Developed Iron Ore fines as a coating material for sea bed piping

Mr. S. Madhan – Executive Director - 45 years old Bachelor of Law. Previously member of London Baltic Exchange

Established shipping division for India Cements Ltd.

Currently responsible for the group’s shipping and commercial development business.

Complete Company Profile Available.




Right to left;

Mr.Anandam, Chairman,

Mr. Madhan, Exec. Dir.

Mr. Kane,

C.R.L.



Gujarat Electricity Board

13 mt annual consumption

Present:-

Mr. J.N. Singh, CEO recently appointed

Mr. Kandarp Patel, CAO Fuel Dept

Plus 5 other station & fuel supply managers

continued



Gujarat Electricity Board

Admitted inconsistent blending problems

Wished to maintain sourcing independence

Invited to present formal proposals for 2 sites:-

1.) Wanakbori Station, 1470 mw, 7mt p.a.

2.)Gandhinagar Station, 870 mw, 3.5mt p.a.

Full access to both sites authorized by Mr. Singh

SGS Analysis using approved sampling methods

Mr. Patel, Dy CAO, open with costs

(see cost comparison chart)



Gujarat Electricity Board continued

Right to left;

GEB Station Managers,

Mr. Singh, CEO

Mr. Kane,

C.R.L.



Gujarat Electricity Board continued

Left to right;

Mr. Patel,

Dy CAO, Fuel Dept.

Mr. Kane,

C.R.L.



Maharashtra State Electricity Board

Present:-

Mr. P.K. Kukde, Technical Director

Mr. A.B. Chapalge, Dy. Chief Engineer Gen.

Mr. S.O. Deshpande, Sup. Engineer, Procur.

28 mt annual consumption via 7 stations




Confirmed market split & UHV formula

Mr. Kukde chairs Govt. panel on coal issues

Attempting to get industry NCV recognition

Has offer from Coal India of 250 Rup for 400k/cal upgrade via washing/blending

Suggested speaking with Coal India to pledge our support to protect C.I. Coal

continued




Coal India is currently “in discussion” with a Chennai blending Co.

“Recognises that our shareholders will require a considerable contractual commitment to invest in India..MSEB would consider up to a 20mt long term contract if our proposal is well received”...Unquote

Enthusiastically invited to present a formal proposal based on 3 stations, being Nasik, 910 mw, 4 mt, Koradi, 1080mw, 5mt & Chandrapur, 2340mw, 11mt

Presentation must clearly illustrate technical benefits

& a consistent higher CV achievement.



Maharashtra State Electricity Board Right to left;

Mr. Madhan, Archean

Mr.Kukde, Tech. Dir.

Mr. Kane, C.R.L.,

Mr. Deshpande,

Sup Eng. MSEB

Mr. Chapalge,

Ch. Eng



“What is UHV?”

Useful Heat Value or UHV is the heat valuation method by which all coal supplies to Indian Power Utilities are currently valued for payment purposes.

UHV is calculated as follows:-

8900 – 138 ( Ash% + Moisture%) = UHV or

8900 – UHV /138 = Ash% + Moisture%

Coal Valuation Grading as follows:- Grading Table provided by GEB & formula confirmed by MSEB



Coal Valuation Table per UHV

Coal Grade UHV Kcal/kg Ash+Mois% GCV kcal/kg

A > 6200 20% max > 6401

B 5601 - 6200 24 – 20% 5801 - 6400

C 4941 - 5600 29 –24 % 5401 - 5800

D 4201 - 4940 34 – 29% 4801 - 5400

E 3361 - 4200 40 – 34% 4201 - 4800

F 2401 - 3360 47 – 40% 3601 - 4200

G 1301 - 2400 55 – 47% 3201 - 3600

1 price only is paid for all coal falling within the grade limits.

I.e. Grade “F” Coal at 2401 UHV is worth the same as 3360 UHV



“Import Duty”

Confirmed by G.E.B. currently at 30%

Including Basic duty @ 25% plus

Special additional duty @ 4% on 125%

I.e. Aprox 30% total duty

Currently increasing pressure on Government to reduce duty, to help reduce ash and aid generally with utility efficiencies.

Duty rate reconfirmed by Archean



“Indigenous versus Import”

South African F.O.B. $ 33.00 usd

Freight 14.00

CIF $ 47.00

30% duty 14.10

Discharge 8.00

Railage to Power Station 6.00

Delivered Cost $75.10

South African UHV = 8900 – 138 x

(a 14%+ m 8%) = 5864 UHV @ $75.10 pt.

In comparison to Coal India product……..ctd.



“Indigenous v Import” continued

Eg. Station Grade Rupe Cost

USD cost @ 46.7R/$

Min. UHV

Pro Rata @ 5864 UHV

+/(-) Import @ $75.10 pt.

1. Sika D 2100 44.97 4201 $62.77 ($12.33)

2. Wanakbori F 1490 31.91 2401 $77.93 +$ 2.83

3. Gandhinagar F 1710 36.61 2401 $89.41 +$14.31

4. Ukai F 1370 29.34 2401 $71.66 ($ 3.44)

5. Nasik G 1370 29.34 1301 $132.24 +$57.14

6. Koradi G 867 18.57 1301 $83.70 +$ 8.60

“Indications” only. No 1 - 4 supplied by GEB & No. 5 – 6 by MSEB To be confirmed during Logistics Review.



“The Power Utility Dilemma” Meeting current demand & reducing

pilferage

Meeting future demand – 25% growth in GDP forecast by 2006

A railway monopoly on fuel supply

High rail costs to the Western sites

High handling costs of low CV coal

High handling costs of ash

Unfamiliar with International Coal markets

continued



“The Utility Dilemma” continued

Suspicious of international coal traders

Stations mainly designed for max 5000 GCV

Poor blending techniques are creating major peaks and troughs in boiler output.

How to achieve a homogeneous blend?

Maximum 34% ash legislation threatened

Other operating cost implications as a consequence of accepting low grade coal in an inconsistent and non homogeneous feed. (to be determined by a technical consultant)



India Coal Blending Project –

“Logistics Review”

Presented by Richard Kane



Logistics Review Objectives

Site inspections at 5 stations to determine:-

Boiler design parameters (CV, Ash, Vols) ?

Coal Handling capability?

Storage availability ?

Grade & cost of current coal deliveries?

Import viability?

Existing blending arrangements?



Import Option – see example overleaf - continued

Unit Nos. x mw 4 x120 ABB Alstom 74/76

1x 200 BHEL Indian 78

2x210 BHEL Indian 78/83

Boiler CV Design 4600 GCV operating at average 3600 GCV (78%)

Current Coal Grades (%) F &G via MCL 35% E via SECL 45% C via K’Rewa 20%

Rup. Coal Cost ([email protected]) 1065 R ($22.80) 1500 R($32.12) 1100 R ($23.56)

Coal Handling & Crushing S’piler reclaimer, coal crushed to stock & hand picking.

Stock & Storage capacity 400kt Max. currently in stock. 50kt s/r yard capacity.

Comments:-

Dumping ground for Coal India. No advance notice of quality arriving. Chaotic coal handling & storage as station has been developed in stages through time. Ash averaging 40-45%. Weight loss on receipt 5-10% paid by receiver. 47oC temperature in stock yard.

(10 miles North of Nagpur, Central India)

Koradi P.S. (M.S.E.B.) 1080 mw – 5 mt p.a.



“Koradi - Indigenous v Import”


Freight 14.00

CIF $ 47.00

30% duty 14.10

Discharge at Vizag 3.00



South African UHV = 8900 – 138 x (a 14%+ m 8%)

= 5864 UHV @ $79.10 pt. “versus”

Grade “G” MCL coal 1301 UHV@ 1065R @ 46.7$/R= $22.80 or $102.76 basis 5864 UHV (35% x 5mt p.a. = 1.75mt)

A difference of $23.66 p.t. x 500kt = $11.8m usd




Unit Nos. x mw 2 x 210 ABB Alstom 83/84

2 x 210 BHEL Indian 85/86

3 x 500 BHEL Indian 90/93 & 97

Boiler CV Design 4450 GCV Max operating at average 3200 GCV (72%)

Current Coal Grades (%) 100% WCL Ranging from grade “D” to below “G”

Rup. Coal Cost ([email protected]) “Indicated” 950 R ($20.34) as an average price?

Coal Handling & Crushing 3 x s,piler/reclaimers. Crushed to stock, well organised.

Stock & Storage capacity 400kt Max. with 200kt only currently in stock.

Comments:-

A more modern and organised station. Employs 3500 based in purpose built town. Supplies 30% of MSEB power. Analysis is average of loading. Lowest grade coal cost TBC but noted GCV as low as 1500 GCV ? Analysis results arrive 2 days after coal receipt. Quality ranges with ash 34-50%, UHV 1470 – 3000, mois 12%- 16%.

(80 miles South of Nagpur, Central India)

Chandrapur P.S. (M.S.E.B.) 2340mw – 11 mt p.a.



“Chandrapur - Indigenous v Import”


Freight 14.00

CIF $ 47.00

30% duty 14.10

Discharge at Vizag 3.00




= 5864 UHV @ $79.10 pt. “versus”

Grade “G” WCL coal 1301 UHV@ “say” 900R @ 46.7$/R= $19.27 or $86.86 basis 5864 UHV (30% x 11mt p.a. = 3.3mt)





Unit Nos. x mw 2 x140mw (1970)

5900 GCV max

3 x 210 mw

4700 GCV max


Current Coal Grades (%) “B” Korearewa 33% “D” Umbrey33% “G” Mazi 33%

Rup. Coal Cost ([email protected]) 2000 R ($42.82) 2300 R($49.25) 1400 R ($29.98)

Coal Handling & Crushing CH1 & 2 yards s,piler/ reclaimer. Ch3 Stockpiler only

Stock & Storage capacity 400kt Max. with 200 kt currently in stock.

Comments:-

Experimented with imports 1997/98 & pushed production up from 110 to 140 mw. C.I. Korearewa product has deterred imports but is always used 1st 100% - then heat drops when unavailable. Adjusting coal feed & spraying steam to maintain constant heat. Demurrage incurred when “mixing” attempted x rail/stock to bunkers.

(90 miles North East of Bombay, Western India)

Nashik P.S. (M.S.E.B.) 910 mw – 4 mt p.a.



“Nashik - Indigenous v Import”


Freight 14.00

CIF $ 47.00

30% duty 14.10

Discharge at Magdalla 8.00




= 5864 UHV @ $75.10 pt. “versus”

Grade “G” Mazi coal 1301 UHV@ 1400R @ 46.7$/R= $29.98 or $135.13 basis 5864 UHV (33% x 4mt p.a. = 1.32mt)

A difference of $ 60.03p.t. x 500kt = $30m usd




Unit Nos. x mw 3 x 210 mw (3000-4200 GCV) 2 x 120mw (5400 GCV)


Current Coal Grades (%) B & C Korearewa 33% F via SECL 66%

Rup. Coal Cost ([email protected]) 1900 R ($40.69) TBC 1710 R ($36.62)

Coal Handling & Crushing 1 X S’piler/reclaimer serving 300kt yard. Crushed to stock

Stock & Storage capacity 400kt Max. with 300kt currently in stock. Dozers also.

Comments:-

Recently started experimenting with Aus. Imports of 6648 GCV, 14 ash. Ash reduction main concern here due to drought. Landed cost of import quoted as $74.95 Sept 2000. Mixing very aprox with dozers and demurrage incurred during x wagon/stock blending. U.B carbon in ash most recent analysis 3.8% Sept 2000.

(10 miles North of Ahmadabad, North Western India)

Gandhinagar P.S. (G.E.B.) 870 mw – 3.5 mt p.a.



“Gandhinagar - Indigenous v Import”


Freight 14.00

CIF $ 47.00

30% duty 14.10

Discharge at Navlakhi 8.00




= 5864 UHV @ $75.10 pt. “versus”

Grade “F” SECL coal 2401 UHV@ 1710R @ 46.7$/R= $36.62 or $89.44 basis 5864 UHV (66% x 3.5mt p.a. = 2.31mt)




Gandhinagar P.S. (G.E.B.) 870 mw – 3.5 mt p.a.




Unit Nos. x mw 7 x 210 mw units consuming aprox 20kt of coal per day.


Current Coal Grades (%) B & C Korearewa 50% F &G (Mauline?) via SECL 50%

Rup. Coal Cost ([email protected]) 1900 R ($40.69) TBC 1490 R ($31.91)

Coal Handling & Crushing 5 Tipplers, s,piler/reclaimers @ 2kt in /1.5kt out. Crushed

Stock & Storage capacity 600kt Max. with 300kt currently in stock due to sponcom.

Comments:-

Also experimenting with Aus. Imports at 17-20% ash, 24% vol & 5508 GCV. 60kt received since April 2001. Mixing @ 25-30%. Spraying steam to maintain consistency. Boiler manufacturers to confirm operating parameters. Oil fired guns used to maintain consistent ignition.

(10 miles South of Ahmadabad, North Western India)

Wanakbori P.S. (G.E.B.) 1470 mw – 7 mt p.a.



“Wanakbori - Indigenous v Import”


Freight 14.00

CIF $ 47.00

30% duty 14.10

Discharge at Navlakhi 8.00




= 5864 UHV @ $75.10 pt. “versus”

Grade “G” SECL coal 1301 UHV@ 1400R @ 46.7$/R= $29.98 or $135.13 basis 5864 UHV (66% x 3.5mt p.a. = 2.31mt)

A difference of $60.03 p.t. x 500kt = $30m usd



“In Summary…..” A professional coal blending and processing operation will work to achieve multiple

benefits for Indian West Coast Power stations in particular, :-

Provide a reliable & consistent homogenous product to assist boiler control.

An overall reduction in fuel cost per UHV or CV basis, subject to import costs.

Reduce coal-handling costs via a reduction in total coal tonnage per CV.

Improve overall station efficiency in terms of generation capability & availability

Reduce ash handling costs via reduced ash production.

Reduce emissions via a more efficient coal consumption.

Improve overall fuel combustion properties. i.e. Via high ash reduction

Broaden station import & blending options.

Improve “other” boiler and operational efficiencies per technical consultants report

For “further” benefits ref. IEA Coal Research Report July 1995

India Coal Blending Review 2000-2001

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Transcript of India Coal Blending Review 2000-2001