1. The Changing Economics of Coal Case Study: Tata Mundra Justin Guay, World Bank Annual Meetings September 21 st, 2011

2. - Structural Drivers of Rising Coal Prices: oil prices, demand, and supply constraints - Coal Price Behaviour in Key Markets: Surging and volatile -The Fallout: Economically unviable power plants (Tata Mundra, Krishnapatnam) Overview

3. - Emerging Market Demand - Supply constraints - Oil Prices Why Coal Prices Are Rising

4. Source: IEA Coal Statistics 2011 Coal Consumption Growth 2000-2009 Strong Coal Demand in Emerging Asian Markets

5. Stagnating Coal Production Source: Heinberg and Fridley, Nature 2010Source: IEA World Energy Outlook 2010

6. Spot Prices During 2008 Oil Price Shocks Source: US EIA The Price of Coal is Volatile

7. - In Key markets the price of coal rose saw 13% CAGR over the past decade - Chinese prices rose 15% CAGR - Export prices doubled from 2006-2011 Coal Prices Are Rising in all Major Markets

8. Coal is Expensive The Price of Coal rose at a 13% CAGR 2001-2008 Source: EIA http://www.eia.gov/emeu/international/stmforelec.htmlhttp://www.eia.gov/emeu/international/stmforelec.html Selected Steam Coal Prices 2001-2008 Average CAGR 13%

9. Chinese Coal Prices The Price of Coal rose at a ~ 15% CAGR from 2001-2008

10. Newcastle Benchmark Coal Prices 2006-2011 Internationally Traded Coal Doubled in Price from 2006-20011

11. Coal Production in Asian Marine Markets A 25% shortfall Provides Enormous Rent Seeking Opportunities

12. - Indian Import Vulnerability - Tata Electricity Impacts - Unviable Coastal Coal Plants The Fallout

13. Indian Vulnerability to Import Price Surges Source: Government of India Planning Commission

14. Source: EIA http://www.eia.gov/emeu/international/stmforelec.htmlhttp://www.eia.gov/emeu/international/stmforelec.html Indian Steam Coal Prices 2001-2011 CAGR 4% Imported Coal Cost Premium CAGR 35% Indian Vulnerability to Import Price Surges

15. Tata Plant Economics Coal Price Impact on Electricity Prices 20-60% Rise in Electricity Prices O&M Fuel Costs

16. Unviable Coastal Coal Plants 4 GW Tata Mundra UMPP: - Faces losses of 270% - Forced to double rates charged to consumers - Even with requested price revision project unviable for at least the next five years. - Tata CEO on whether Mundra is viable at the moment: “ No. At this moment, we have tremendous impact due to imported coal on Mundra because the price of coal has increased multi- fold….Indonesia will not change its stance for Tata Power or for any other company…In fact, all the three countries exporting coal have changed rules in recent times. South Africa, Australia and Indonesia are in sync as far as exporting coal is concerned.” 4 GW Krishnapatnam UMPP: Construction halted immediately after Indonesian price revision. $30 billion exposure to coal projects for Indian Banking Industry. Of this - 14 GW of projects face imported coal risk

17. Thank you Justin Guay, World Bank Annual Meetings September 21 st, 2011