India's ADAG charts $1.2 bn foray into shipping
The Anil Dhirubhai Ambani Group (ADAG) group has set its sights on the shipping sector. Having secured coal mines in Indonesia, group company Reliance Power is now planning to float a shipping subsidiary to cart the coal to India. It is looking at an investment of around $1.2 billion initially.
Reliance Power has won the rights to build and operate two ultra-mega power projects, one in Krishnapatnam in Andhra Pradesh and another one at Shahapur in Haryana, in the past six months.
For Reliance Power, this will be a backward integration move, as it will help the company in transportation of coal, the fuel for the two power projects.
The proposed shipping company will have an assured business of around 20 million tonne annually in the initial stage, which is equivalent to the coal required for Reliance Power’s Krishnapatnam and Shahapur plants.
Reliance Power has drawn up an ambitious strategy for its shipping business in the next three years. It plans to have a fleet size of almost 12 vessels, including five Capesize carriers, the largest ships in the world.
The company has also appointed international brokers like Clarkson to work out finer details, and the final orders are expected to be placed in about two months. Shipping yards in China, Japan and Korea are to be tapped for ship building.
Reliance Power plans to have four to five capesize vessels, having capacities of between 160,000 tonne and 200,000 tonne, and around five Panamax ships. As of now, GE Shipping is the only Indian company to own capesize vessels, which require a draft (depth) of almost 18 metres.
However, most Indian ports are at a disadvantage as they do not have the required depth. The upcoming Krishnapatnam port, which will be used for coal imports for Reliance’s ultra-mega power project, will be developed to cater to such ships.
The acquisition of a fleet of ships will help Reliance Power in its vertical integration as an energy major. Most global energy majors have taken up shipping as one of the key business verticals, as it helps them cut transportation costs.
This backward integration move by Reliance Power, too, will have a similar impact, the sources said. The company hopes to optimise its freight costs by managing transportation on its own. While ships plying from Indonesia will import coal, they will carry goods for the overseas markets on their way back.
Reliance Power has won the rights to build and operate two ultra-mega power projects, one in Krishnapatnam in Andhra Pradesh and another one at Shahapur in Haryana, in the past six months.
For Reliance Power, this will be a backward integration move, as it will help the company in transportation of coal, the fuel for the two power projects.
The proposed shipping company will have an assured business of around 20 million tonne annually in the initial stage, which is equivalent to the coal required for Reliance Power’s Krishnapatnam and Shahapur plants.
Reliance Power has drawn up an ambitious strategy for its shipping business in the next three years. It plans to have a fleet size of almost 12 vessels, including five Capesize carriers, the largest ships in the world.
The company has also appointed international brokers like Clarkson to work out finer details, and the final orders are expected to be placed in about two months. Shipping yards in China, Japan and Korea are to be tapped for ship building.
Reliance Power plans to have four to five capesize vessels, having capacities of between 160,000 tonne and 200,000 tonne, and around five Panamax ships. As of now, GE Shipping is the only Indian company to own capesize vessels, which require a draft (depth) of almost 18 metres.
However, most Indian ports are at a disadvantage as they do not have the required depth. The upcoming Krishnapatnam port, which will be used for coal imports for Reliance’s ultra-mega power project, will be developed to cater to such ships.
The acquisition of a fleet of ships will help Reliance Power in its vertical integration as an energy major. Most global energy majors have taken up shipping as one of the key business verticals, as it helps them cut transportation costs.
This backward integration move by Reliance Power, too, will have a similar impact, the sources said. The company hopes to optimise its freight costs by managing transportation on its own. While ships plying from Indonesia will import coal, they will carry goods for the overseas markets on their way back.