Indians take over Griffin's coalmines in $85m deal

ENERGY giant Lanco Infratech has made the biggest investment by an Indian company in Australia, spending $850 million to buy Griffin Coal.

Griffin Coal sold to Indian giant

ENERGY giant Lanco Infratech has made the biggest investment by an Indian company in Australia, spending $850 million to buy Griffin Coal.

As well as buying the coal assets of Ric Stowe's failed Griffin Group, Lanco unveiled plans to triple the export capacity of the mines.

The Hyderabad-based group may also enter the bidding -- along with Chinese, Japanese and American interests -- for Griffin's Bluewaters power stations in Western Australia, which have an asking price of $1.3 billion and will be sold off next year.

The higher-than-expected sale price for the Griffin coal assets near Collie in WA's southwest surprised observers yesterday, with some suggesting Lanco may have overpaid, given industrial problems at the mines and the need to invest millions on upgrading rail and port access.

But administrator Brian McMaster of KordaMentha last night rejected the speculation, saying that nobody outside KordaMentha, its advisers UBS and Macquarie Capital, and the successful bidder was fully aware of the details.

Mr McMaster said he expected Griffin's creditors would receive almost 100c in the dollar, assuming the planned sale of Griffin's power assets was successful next year.

The coal deal is the biggest Indian investment in Australia, eclipsing Adani Group's move in August to spend $500m on Linc Energy's Galilee coal tenements in Queensland.

Lanco spokesman Vibhu Agarwal said the company would export the thermal coal from Collie for use in its power stations in India, where it is developing projects with a total power output of more than 13,000 megawatts.

He said Lanco planned to expand the capacity of the Griffin mines from 4 million tonnes a year to 15 million tonnes a year "in the near term".

The coal initially will be exported from Kwinana, south of Perth, but Lanco will need to build a dedicated new facility in the regional centre of Bunbury to allow the major expansion of its exports.

Mr McMaster said he expected to sign a critical offtake deal within weeks with Indian-backed Perdaman Chemicals to supply up to 2.6 million tonnes of Griffin coal a year. The coal would be used in Perdaman's proposed $3.5bn coal-to-urea plant in Collie from 2013.

This is seen as crucial after Griffin lost a lucrative supply contract with state-owned Verve in June.

UBS managing director Jim McKnight said Griffin creditors were likely to approve the deal and he did not anticipate any problems in gaining clearance from the Foreign Investment Review Board.

He described the sale as a landmark for Indian foreign investment and said Griffin ranked as one of the most complex insolvencies ever done in Australia.

"Indian corporates do not have significant experience in bidding offshore," Mr McKnight said.

"Buying an insolvent asset in a foreign jurisdiction is virtually unheard of in India. This is a massive investment on any measure. The fact that it comes from India makes it all the more remarkable."

Mr McKnight said it was decided to sell the Griffin coalmines before the power assets to deliver greater certainty to the prospective buyers of the Bluewaters power stations.

The power stations are not in administration but had been expected to be sold as part of this year's auction process.

Griffin went into administration in January with debts of more than $700m, including more than $500m owned to US bondholders.

Lanco is a leading infrastructure player in India, with a major presence in power generation and infrastructure.

It is listed on the National Stock Exchange of India and the Bombay Stock Exchange and boasts a market capitalisation more than $US3bn.