It is reported that Indian energy giant Lanco Infratech has formally withdrawn a threat to stop supplying coal from its Griffin Coal mines to the Bluewaters power stations in Western Australia.
Lanco's decision to move to a commercial negotiation and to keep delivering half of the state's coal supplies offers a glimmer of hope that the AUD 1.2 billion sale of the Bluewaters power assets to two Japanese companies can proceed by September 2011.
But sources close to the talks said that the price of coal under the Griffin Bluewaters contract remains a big stumbling block and the target date to finalise the sale by late September may need to be extended further. It added that "Nothing is resolved, but this is an important step."
The withdrawal of the threat follows talks in Perth last week between West Australian Premier Mr Colin Barnett and Lanco's billionaire chairman Mr Madhusudhan Rao.
Mr Barnett said after the meeting that Lanco should honor its contracts and play by the rules of Australian corporate life. He said that the controversy had damaged the reputation of Indian business in Australia.
Mr Barnett has the power to reject Lanco's bid for an export licence or to block the infrastructure approvals it needs to expand its production capacity at the Griffin mine.
Griffin's contract to supply coal to Bluewaters is critical because the power stations generate about 10% of WA's electricity supply.
Lanco bought Griffin Coal in December 2010 for more than AUD 800 million, in what was the biggest Indian investment in Australia. But the Indian company quickly realized it had bought a loss making asset and in May it attempted to double the price at which it supplied coal to Bluewaters.
Both Griffin Coal and Bluewaters were formerly owned by fallen tycoon Ric Stowe. The administrator of Mr Stowe's group of companies, KordaMentha, announced in April 2011 that Japanese power utility Kansai Electric Power and conglomerate Sumitomo had agreed to buy the Bluewaters stations.
The AUD 1.2 billion sale was meant to have been settled by late May 2011 but was thrown into doubt by Lanco's attempts to renegotiate its coal supply contracts and threat to cancel supplies.
Lanco's bid to renegotiate its contracts has also threatened the viability of Perdaman Chemicals' proposed AUD 3.5 billion coal to urea plant near Collie. Perdaman is suing Lanco in the WA Supreme Court alleging breach of contract.
(Sourced from www.theaustralian.com.au)
