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Essar Port’s planned coal terminal in Mozambique sails into troubled waters

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Shri Vaibhavi Logistics

MUMBAI : Essar Port Ltd’s $275 million port project in Mozambique has sailed into rough weather as climate change and energy transition issues hold up the financial closure of the coal terminal at the port, close to five years after a deal was signed.

“The project now looks difficult as banks are not comfortable in lending… it does not fit into the environmental, social and governance (ESG) framework of lenders,” said a banking source briefed on the matter.

Rajiv Agarwal, Chairman of the Board and Managing Director, Essar Ports, confirmed that the financial closure for the project has been delayed, but added that the Mozambican government has neither “terminated” the concession agreement nor has Essar Ports “exited” the project.

“Talks are going on for the financial closure but there is no certainty that the fund tie-up will happen soon or will happen at all”, the banking source mentioned earlier said.

The port project no longer features on the website of Essar Ports.

The multi-user coal terminal was expected to give a big boost to Essar Port’s third-party cargo handling plans.

Essar Ports is one of the largest private sector port and terminal developers and operators in India by capacity and throughput. It has four operational terminals in India across Hazira and Salaya ports (in Gujarat) on the west coast, and one each in Visakhapatnam and  Paradip on the east coast. These ports and terminals have a capacity to handle 110 million tonnes of cargo a year.

In August 2017, Essar Ports signed a 30-year concession agreement with the Government of Mozambique to develop a new coal terminal at Beira Port, as part of a public private partnership (PPP) project.

The terminal is to be constructed through a subsidiary, New Coal Terminal Beira, SA (NCTB SA), a joint venture between Essar Ports with 70% stake and the Mozambican state port and rail authority, Portos e Caminhos de Ferro de Moçambique (CFM) with 30% stake.

The project was designed to raise the coal handling capacity of Mozambique by 20 million tonnes per annum (MTPA) in two phases of 10 MTPA each. Mozambique is estimated to have reserves of over 23 billion tonnes of coal, which makes the country a major coal exporter well placed to cater to the international steel and power industries, especially in India, China, Japan and Korea.

The NCTB has dedicated rail connectivity to Mozambique’s coal mining belt in the Tete region, which CFM enhanced to a capacity of 20 MTPA.

The first phase of the coal terminal will be developed at a cost of some $275 million and will entail developing dedicated berths, along with modern, mechanised and environment-friendly systems.

If and when constructed, the new terminal would more than double coal export capacity from Beira Port, where the Beira coal terminal established in 2012 by mining giants Vale and Rio Tinto has the potential to export up to 6 million tonnes of coal annually.

The multi-user coal terminal envisages unlocking the untapped potential of Mozambique’s coal exports through Beira port. The prime function of NCTB is to serve as the evacuation point for exporting coal from Tete / Maotize region of Mozambique to cater to the increasing coal demand, especially from the Indian markets, in view of the notably lower voyage costs as compared to Australia, South Africa or Indonesia.

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