UPDATE 3-Essar Energy gets provisional OK to clear forest for mine

Mon Jun 25, 2012 9:23pm IST

Related Topics

Stocks

   

* Regulatory hurdles continue to delay Indian power projects

* Company in advanced talks for new $1 bln debt facility

* Reports EBITDA of $737.1 mln for 15-month period through March 31

* Shares fall 7.7 pct (Adds comment on court appeal)

By Brenton Cordeiro

June 25 (Reuters) - Essar Energy said it received provisional approval to clear forests at its Mahan coal block in India's Madhya Pradesh state, but its shares fell as the news highlighted regulatory hurdles delaying its power projects in the country.

The company is facing twin setbacks in its key market for oil products and electricity due to delays in government approvals to mine coal to supply its power projects, and a ruling that ended a major tax break for an oil subsidiary.

Essar Energy, 77 percent-owned by privately held Indian conglomerate Essar Group said on Monday it was still awaiting final approval from the Indian Cabinet to clear forests at the Mahan site, where the company is building a power plant.

If Essar Energy is not in a position to supply coal from its own mines, it will have to buy more expensive coal from overseas or from domestic producers.

Deutsche Bank analyst Lucas Herrmann said sourcing fuel at market rates could also lead to "challenging economics" for Essar's Tori power plants in the state of Jharkhand, where the company is also awaiting approvals to start mining to supply power plants due to come on stream in 2014.

Essar shares fell as much as 7.7 percent.

The company will continue its dialogue with state and central governments to ensure the approval process does not lose momentum, Chief Executive Naresh Nayyar said in a statement.

Arden Partners analyst Adam Forsyth said the provisional approval for Mahan boded well for other projects.

Essar Energy also said it was negotiating with Indian lenders to arrange for a new debt facility of about $1 billion to meet a sales tax liability at Essar Oil Ltd, through which it operates its oil and gas business in India.

An Indian court recently ruled that Essar Oil could not defer payment of about $1.24 billion in sales tax. Essar said on Monday it planned to take appropriate legal action against a ruling that it could not pay the sum in instalments, including appealing the decision to the Supreme Court of India.

The company had deferred paying the tax under a tax benefit programme offered by the western state of Gujarat, where its Vadinar refinery is located.

Essar Energy, which recently changed its accounting period, recorded $737.1 million in core earnings for the 15 months through March. The company said this compared with analysts' average forecast of $713 million for earnings before interest, tax, depreciation and amortisation.

Thomson Reuters I/B/E/S did not compile forecasts for the company's earnings for the 15-month period.

The company's shares, which have lost nearly a third of their value since the beginning of the year, fell to a low of 116.1 pence. (Reporting by Brenton Cordeiro in Bangalore; Editing by Joyjeet Das)

FILED UNDER:
  • Most Popular
  • Most Shared

DEFENCE

REUTERS SHOWCASE

Power Theft

Power Theft

India to invest $4 billion to tackle power theft  Full Article 

Debt Funds

Debt Funds

India monitors foreign flows into debt funds, may tighten rules  Full Article 

Bulgari Back in India

Bulgari Back in India

CEO: we shouldn’t have left India so we’re back  Full Article 

 Hindu "Modi-fication"

Hindu "Modi-fication"

Fears grow about Hindu "Modi-fication" of education  Full Article 

Weak Credit

Weak Credit

Hard to hit tax revenue target, credit weak - Jaitley  Full Article 

China Rate Cut

China Rate Cut

China surprises with interest rate cut to spur growth  Full Article 

Gold Imports

Gold Imports

RBI cautious on response to gold import surge  Full Article 

Economic Corridor

Economic Corridor

China commits $45.6 billion for economic corridor with Pakistan  Full Article 

Overseas Funds

Overseas Funds

RBI says overseas borrowed funds can be parked with banks in India  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage