Key highlights from Coal India Ltd (COALINDIA) Q2 FY24 Earnings Concall
- MCL Coal Production
- MCL’s coal production has remained flat YTD due to land acquisition issues that halted mining operations for almost a month.
- The company is confident of achieving its target of 204 million tons for the year as operations have resumed and MCL is now on a growth trajectory.
- BCCL Coal Production Target
- BCCL has shown strong growth over the past 2 years and is on track to achieve its production target of 41 million tons this year with 11% growth.
- BCCL is steadily growing month-on-month and expected to meet its goals for production, coal dispatches, and overburden removal.
- Coal Demand Outlook
- Coal-based power generation grew 33% in October indicating continued strong demand.
- Demand is expected to remain robust until the end of the monsoon season.
- Regular monitoring is being done to ensure adequate coal supplies to power sector.
- Confident of domestic coal demand until 2030 based on projections.
- Believes COALINDIA can sell all the coal it can mine over the next 6-7 years at least.
- Target is to reach 1 billion tons production by 2025-26.
- Efficiency Improvements
- Efficiency gains are due to factors besides lower employee costs like improved mining operations and digitization.
- Manpower has decreased slightly and cost per ton of production has declined by 1% as volumes increased.
- Coal stock levels have also improved in recent months.
- Solar Power Investments
- Subsidiaries to invest INR16,500 crores in solar power to reach 3,000 MW capacity by 2030.
- In current year 250 MW solar capacity addition is targeted. Projects planned across multiple states.
- Equity contribution expected to be around INR5,000-6,000 crores over next 4-5 years for the 3,000 MW solar target.
- Increased Coal Production
- Coal production target for next fiscal is 840 million tons.
- Share of e-auctions expected to increase from 15-20% currently to 20% or more with increased production.
- Focus also on scaling underground mining from 25 to 100 million tons by 2030.
- Production target for current year is 780 million tons, dispatch target also same.
- Achieved 12% production growth and 9% dispatch growth till now.
- Targeting to build coal stocks at power plants and own sites to enable higher dispatches.
- Aiming for 5-6% volume growth based on monthly run-rate needed to meet targets.
- Employee Cost Savings
- Renegotiated employee contracts to lower costs.
- Guiding for 40% reduction in employee costs to around INR46,000 crores this year.
- Resolving pending issues between officer and non-officer staff.
- Connectivity Investments and Evacuation Infrastructure
- Investing INR24,700 crores in first mile projects for pit-head to rail connectivity.
- Expect 6-7 years payback period based on cost savings so far.
- Reducing road transportation resulting in lower costs, higher safety and lower emissions.
- MCL and SCCL require major evacuation capacity expansion for next year’s target.
- Adding 25-30 million tons capacity in MCL areas and 50-60 million for SCCL.
- New rail lines, silos, belt conveyors being constructed to enable this.
- MDO Operations
- 1 MDO project has started production so far out of 15 planned.
- 2 more MDOs expected to start in next 8-10 months.
- MDO production target is 20-25 million tons in FY24-25 and 55-60 million tons in FY25-26.
- MDOs will help reduce employee costs at subsidiaries with higher manpower.
- MCL and NCL have lower employee costs and higher productivity due to younger mines.
- Capex Spending Allocation
- Out of INR16,500 crores capex, land acquisition is INR2,500 crores.
- Equipment purchase is around INR2,000 crores..
- Looking for international partner for operations of new ship repair facilities.
- Coal Washing Investments
- Adding 10 million tons coking washing capacity in next 2 years.
- Around 20-30% increase in cooking coal washing capacity over next 2-3 years.
- Will boost volumes and quality through these investments.