JSW Energy acquires 70% stake in Indian Ocean Mining with investments worth Rs.40,000 crore planned

In an announcement on Friday, Jindal South West Energy (JSWE) said it had agreed on a memorandum of understanding, (MoU), with Osho Venture FZCO, Dubai and Indian Ocean Mining (Pty) Ltd, South Africa (IOM) for the acquisition of a 70% venture in IOM from Osho.


IOM owns coal prospecting rights in the North-West region of South Africa. However, the company would not divulge the details of the investment deal, but, in a filing to the Bombay stock exchange, the company said the MoU was subject to its conducting due diligence study, execution of definitive agreements and compliance with regulatory requirements.


JSW Energy operates 995 Mw of capacity and is planning an expansion of the above to about 11,390 Mw by 2015. JSW Energy, a Sajjan Jindal owned company, has been in a bid to acquire overseas coal assets to help feed its power plants in India and meet the ever increasing demand for power in the country.


This investment with the other companies in South Africa is meant to enhance fuel security, a factor that has seen JSW Energy continuously evaluating various strategies and proposals to secure the long term imported coal linkages. Regardless of its secrecy over the cost of the investment, industry sources believe the company will be investing a few hundred crores in the project.


The company’s shares went up by 2.35% to close at Rs 121.70 on the Bombay stock exchange. The company has been seeking thermal coal linkages globally, marked by an investment worth $50 million for the acquisition of a majority stake in South African Coal Mining Holdings in April.


The company intends to invest about Rs 40,000 crore in the development of power projects of 8,000 Megawatts, and had raised about Rs 2,700 crore through an initial public offer (IPO) in December last year. Coal is a crucial raw material for the steel and power industry in India, making it one of the most sought after mineral commodity with various Indian companies investing in global prospecting rights or JVs for coal mining.


According to estimates, power, steel and cement companies lead in the acquisition of coal mines and assets from Australia, South Africa, Mozambique Zimbabwe and Indonesia. JSW Energy Ltd. (JSWEL) is a group company of Jindal South West (JSW) group headed by Mr.Sajjan Jindal. Other companies in JSW are JSW Steel Limited, Jindal South West Mining Limited, JSW Port, Jindal Praxair Oxygen Company Limited (JPOCL), and investment companies.


June 14, 2010.