COMMERCIAL COAL MINING AUCTION PROCESS - SBI Capital Markets Ltd.
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COMMERCIAL COAL
MINING
AUCTION PROCESS
SBI Capital Markets Ltd.
June 2020
AGENDA
OVERVIEW
• Policy Initiatives
• Key Features
PRE-E-AUCTION ACTIVITIES
• Registration,
• Pre-bid, site visits etc.
AUCTION PROCESS
• Bid Parameters
• E-auction process
POST-AUCTION ACTIVITIES
• Payment & Guarantees
• Execution of CMDPA & issuance
of Vesting Order
OTHER KEY TERMS
• Flexibility in Coal Production
• Incentives, Miscellaneous
2OVERVIEW-POLICY INITIATIVES
Auction of Coal Mines for sale of coal under CM(SP) Act,
2015 and MMDR Act, 1957 approved by Cabinet
CM(SP) Act, 2015 and MMDR Act, 1957 amended
through Mineral Laws (Amendment) Act, 2020 for
– Auction of unexplored and partially explored coal blocks for
prospecting license-cum-mining lease.
– All auctions of coal mines will be for sale of coal only
– No restriction on utilisation of coal
Mineral Concession (Amendment) Rules, 2020, CM(SP)
Amendment Rules, 2020 and Coal Block Allocation
(Amendment) Rules, 2020 have been notified.
National Coal Index implemented to create a transparent
market based pricing mechanism.
Amendment in FDI policy to allow 100% FDI under
automatic route for coal mining activities, for sale of coal
3OVERVIEW-KEY FEATURES
01 02 03 04
NO RESTRICTION MIGRATION TO NO TECHNICAL IMPLEMENTATION
ON SALE/ PERCENTAGE AND FINANCIAL OF NATIONAL
UTILIZATION OF REVENUE SHARE ELIGIBILITY COAL INDEX
COAL FROM RS./TONNE CRITERIA
05 06 07 08
MINIMUM GREATER INCENTIVE FOR RELAXED PAYMENT
NUMBER OF FLEXIBILITY IN EARLY COAL STRUCTURE
BIDDERS COAL PRODUCTION
REQUIRED IN THE PRODUCTION AND UTILIZATION
1ST ATTEMPT IS SCHEDULE OF COAL IN COAL
REDUCED TO 2 GASIFICATION
INSTEAD OF 3 AND COAL
. LIQUEFACTION
4PRE-E-AUCTION ACTIVITIES
DOWNLOADING SITE VISITS PRE-BID
REGISTRATION
INFORMATION
• Registration at Two sets of Bidders Bidders
MSTC portal. documents downloading mine purchasing tender
• Documents available: specific documents can
required: SET 1 information may participate in pre-
1. Self attested (a)Standard conduct site visits bid conference
Income Tax PAN Tender prior to bid due
Card. Document; date. maximum of 3
2. Two passport size (b)Mine (three)
photographs of summaries Site visits to be representatives of
the Authorized free of cost co-ordinated by each Bidder shall
Signatory. download NA through be allowed
3. Letter of following mail id
SET 2
Authorization na.moc@nic.in
Mine Specific
4. Proof of Identity
documents.
of the Authorized The site visit to be
Signatory downloaded post at the cost and
5. Copy of the payment of a fee risk of the Bidders
confirmation of Rs 5,00,000/-
email. per coal mine 5AUCTION PROCESS
Method of Bidding – Ascending Forward Auction
2-Stage Online
Electronic Auction
Tender Document to be purchased
upon payment of fee
Technical Bid Financial Bid
Compliance with
Comprises of 2 rounds
Eligibility Conditions
Initial Offer Final Offer
To be submitted along To be submitted against
with Technical Bid Qualified Bids
6AUCTION PROCESS-BID PARAMETERS
. Bid Parameter shall be the percentage (%)
share of revenue
Floor price shall be 4% of the revenue share
Bids in multiple of 0.5% of revenue share till it
reaches 10% and thereafter in multiples of
0.25% of revenue share
A Bidder shall submit only 1 (one) bid for a
particular coal mine
No Affiliate of such Bidder shall submit bid for
the said coal mine otherwise bids submitted by
the Bidder and its Affiliate(s) will be rejected
7AUCTION PROCESS-TECHNICAL BID
BID ELIGIBILITY ADDITIONAL
SECURITY CRITERIA CONDITIONS
Bid Security in form of an – a Government company or In case bidder is a Prior
unconditional & irrevocable corporation or a joint Allottee
bank guarantee venture company formed by – must have paid the
For Fully Explored Mines such company or additional levy within
– equal to 20% of the corporation or between the the time period
Upfront Amount Central Government or the
State Government, as the – Should not be
For Partially Explored case may be, or any other convicted of an
Mines company incorporated in offence relating to
– Equal to 25% of the India; or coal block allocation
estimated exploration and not sentenced
expenses based on MWP – a company or a joint with imprisonment
venture company formed by for more than 3
Validity two or more companies.
– not less than 270 days (three) years
from the Bid Due Date
8AUCTION PROCESS
Technical Bid
is opened and
bidders
meeting all Ranking and
Initial Offer
eligibility elimination
of all the
conditions based on the
Technically
are declared Initial Offers
Qualified
as to determine
Bidders are
“Technically the
opened.
Qualified “Qualified
Bidders”. Bidders”.
DETERMINATION
TECHNICAL BID IPO OF QUALIFIED
OPENING OPENING BIDDERS
9AUCTION PROCESS-RANKING & ELIMINATION
Technically Qualified Bidders shall be ranked in a
descending order on the basis of the respective Initial
Offer.
The Technically Qualified Bidders who have submitted the
same Initial Offer, shall be assigned the same rank.
Determination of Qualified Bidders
– If 2 to 3 TQBs, all shall be considered as Qualified Bidders;
– If 4 to 6 TQBs, lowest ranked TQB shall be eliminated and
remaining are considered as Qualified Bidders;
– If there are 7 or more TQBs, 1/3rd of TQBs subject to
maximum of 3 shall be eliminated. If there are more than 3
TQBs at lowest rank, all such TQBs shall be eliminated and
remaining are considered as Qualified Bidders.
No TQBs shall be eliminated, if number of Qualified
Bidders after elimination is less than 3.
10DETERMINATION OF SUCCESSFUL BIDDER
1 2
The Applicable Floor Price for e- The Qualified Bidder
auction shall be the highest IPO submitting the highest final
of Qualified Bidders. offer shall be declared as the
“Preferred Bidder”
4 3
Coal Mine Development and Upon the direction of
Production Agreement Central Government,
(CMDPA) shall be executed Preferred Bidder will
with the Successful Bidder become the “Successful
Bidder”
5 6
Vesting Order shall be issued to Upon the execution of the Vesting
the Successful Bidder in Order, the Successful Bidder shall
accordance with applicable law be entitled to a prospecting
post payment of upfront amount licence or a mining lease, as
and submisison of performance applicable, by the concerned State
security Government 11PAYMENTS & GUARANTEES…..(1/3)
UPFRONT AMOUNT
– 0.25% of the value of estimated geological reserves of the coal
mine
capped at Rs. 100 crore for geological reserves up to 200MT; and
capped at Rs. 500 crore for Geological Reserves above 200 MT
– Value of estimated geological reserves shall be equal to the
product of
Geological reserves in the coal mine; and
Representative price of relevant grade of coal based on National
Coal Index
– Upfront Amount shall be adjusted in full against monthly
payments to the State Govt. Adjustments shall not exceed 50%
of aggregate Monthly payments for the year.
– Upfront Amount shall be payable by the Successful Bidder in
four equal instalments of 25% each 12PAYMENTS & GUARANTEES-UPFRONT AMOUNT
Instalment Schedule II of the Fully Explored Partially Explored Payable to
Coal Mines under Mines under MMDR Act
MMDR Act, and and CMSP Act
CMSP Act (other
than Schedule II)
First Within 40 business Within 40 business Within 40 business days Nominated
days of execution of days of execution of of in-principle approval Authority
the Agreement the Agreement the Mining Plan
Second Within 6 months Within 15 business Within 15 business days State
from the date of days of execution of of execution of the Government
issuance of [Vesting the Mining Lease or Mining Lease or order by
Order/ Allocation order by the Central the Central Govt under
Order] Govt under Section Section 11 (1) of the CBA
11 (1) of the CBA Act, 1957, as the case may
Act, 1957, as the be
case may be
Third Within 9 months Within 15 business Within 15 business days State
from issuance of days of grant of the of grant of the Coal Mine Government
[Vesting Order/ Coal Mine opening opening permission
Allocation Order] permission
Fourth Within 12 months Within 15 (business Within 15 business days State
from issuance of days of of commencement of coal Government
[Vesting Order/ commencement of production
13
Allocation Order] coal productionPAYMENTS & GUARANTEES…..(2/3)
FIXED AMOUNT PERFORMANCE SECURITY
— Successful Bidder shall pay — For Fully Explored mines,
the Fixed Amount prior to
issuance of Vesting Order. 65% of aggregate of (a) one
year royalty and (b) one year
— It shall include :- revenue computed on the
basis of peak rated capacity of
Value of land and mine the Coal Mine as per approved
infrastructure Mining Plan
Cost of clearances, consents — For Unexplored/ Partially
etc. Explored mines:
Cost of Geological Report before in-principle
approval of mining plan,
Cost incurred by CMPDIL
and other Government equal to 25% of estimated
agencies in deriving detailed exploration expenses.
geological boundary After in-principle approval
coordinates and in preparing of mining plan, same as
geological report, mine fully explored mines.
dossier along with applicable
taxes 14PAYMENTS & GUARANTEES…..(3/3)
Monthly payments -
– Shall be made on the basis of the Final Offer (% revenue share
quoted) and monthly revenue
– Revenue share for this purpose shall product of:
i. Final Offer
ii. Quantity of coal on which statutory royalty is payable during the
month
iii. Notional Price or Actual Price, whichever is higher, where
Notional Price is the price arrived at after adjusting the
Representative Price with sub-index of National Coal Index of the
relevant basket of coal grade(s) on the date on which royalty
becomes payable.
Representative Price shall be a product of:
a) weights of the Base year; and
b) Latest available prices of these components at the time of issuance of
the Tender Document
Actual Price shall mean the sale invoice value of coal, net of statutory
dues.
– Other Statutory dues including taxes, royalty contribution to NMET and
DMF etc. shall be payable as per Applicable law
15OTHER KEY TERMS
FLEXIBILITY IN COAL PRODUCTION RIGHT TO EXPLOIT CBM AND
01 SCHEDULE 02 MINOR MINERALS
– At least 65% of scheduled Exploitation of CBM and minor
production each year minerals present in the coal
– At least 75% of scheduled field allowed in accordance
production over block of 3 years with applicable policy
SALE AND/OR UTILISATION OF INCENTIVES
03 04
COAL – 50% rebate in revenue share
No restriction on the sale and/ or for early production
utilisation of coal from the coal – 20% rebate on quantity of
mine including coal consumed and/or sold
sale to affiliates and related for coal gasification provided
parties, captive consumption, coal at least 10% of scheduled
gasification, coal liquefaction and annual coal production is
export of coal etc. consumed and/or sold for
gasification and liquefaction
RELINQUISHMENT OF PARTIALLY FINANCING
05 06
EXPLORED MINE
– Security creation through
After completing the mortgage over the coal
prospecting operations as per mine has been allowed.
the mandatory work program – Change in control allowed.
. 16THANK YOU
SBI CAPITAL MARKETS LTD.
A wholly owned subsidiary of State Bank of India
CONTACT PERSON
Shubham Goel
Vice President
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