BL reported that after Adani Enterprises and Lanco Infratech, the GVK Group is the latest to buy coal mining assets abroad including a 79% stake in Australia's Alpha Coal and Alpha West Coal and a 100% stake in Kevin's Corner.

Though the acquisition is being routed through GVK Coal Developers Singapore Pte, the India listed GVK Power may have to assume liabilities for the debt to be raised for the ramp-up of the coal operations.

This may weigh on the company's prospects if the acquisition takes longer than expected to pay off, as the company already has a large portfolio of power and other infrastructure projects to execute.

The deal value is USD 1.26 billion and these projects have high quality coal resource base of 7.9 billion tonnes. Adani Enterprises last year bought 10.4 billion tonnes of coal assets for a value of USD 1.5 billion.

GVK's mines will begin operations from end-2014 with peak mining capacity expected to be as high as 89 million tonnes per annum.
Complex structure

However, the deal structure is quite complex. Initially, the listed GVK Power and Infrastructure will subscribe to a 10% stake in the Singapore company. Apart from the initial outlay to buy the assets, ramping up of operations at these mines may entail substantial capital expenditure of about USD 10 billion.

GVK Power has an option of purchasing 20 million tonnes a year from these mines to fuel 7,500 MW of thermal power capacity.

(Sourced from BL)