Mumbai: JSW
Steel Ltd, led by Sajjan Jindal, has secured financing from Japan's MUFG Group
for its acquisition of a coking coal mining company in Australia, Moneycontrol
reported.
This move
is significant as major global banks have reduced their exposure to fossil fuel
assets due to mounting climate change concerns, making it increasingly
challenging for companies to secure funding for such acquisitions.
On August
12, JSW Steel's board approved the acquisition of up to a 66.67% economic
interest in Australian mining firm M Res NSW HCC Pty Ltd (M Res NSW) for $120
million.
The investment will be made through
its wholly owned subsidiary, JSW Steel (Netherlands) B.V., by purchasing
non-voting Class B shares in M Res NSW.
As part of
the deal, JSW Steel also agreed to invest an additional $50 million by 2030 to
meet the company's deferred payment obligations, the report said.
The sources further revealed that JSW
Steel has obtained the full acquisition financing from MUFG at an interest rate
close to 12% per annum for a three-year term, after which the company plans to
refinance the loan with foreign currency bonds.
“As per our bank's policy, we do
not discuss matters pertaining to our clients, and, as such, will decline any
comment on this matter,” said a spokesperson for MUFG in an email response to
Moneycontrol’s query.
The funding
for the acquisition of the coking coal asset comes at a time when major global banks
are reducing or eliminating their exposure to fossil fuel assets in an effort
to achieve their ambitious net-zero emission goals, according to the report.
In contrast, two Japanese banks,
MUFG and Mizuho, were among the top five fossil fuel financiers worldwide in
2023, the report said, citing the Banking on Climate Chaos 2024 report.
This
underscores the increasing role of Japanese lenders in fossil fuel financing as
Western banks retreat from the sector.
Last year,
MUFG was the third-largest financier of companies engaged in fossil fuel
expansion, providing $15.4 billion in funding, while Mizuho ranked second, with
$18.8 billion in financing, the report added.
The
Australian company in which JSW Steel is acquiring a 66% stake owns a 30% share
in Golden M NSW Pty Ltd (Golden M), said the report.
Golden M is
set to acquire Illawarra Coal Holdings Pty Ltd (Illawarra Metallurgical Coal),
which operates the Appin and Dendrobium coking coal mines in New South Wales,
Australia, according to the report.
These mines
contain approximately 99 million tonnes of high-quality coking coal, a crucial
component in steel production.
"A secure supply of this
high-quality coking coal allows for superior blast furnace operations and
provides JSW Steel with coal-blending options. Given the limited visibility of
additional capacity premium hard coking coal assets, this acquisition is an
important step in securing raw material for JSW Steel," the company said.
Indian
steel mills rely on coking coal imports from Australia, Russia, and the United
States, making them vulnerable to price surges and operational difficulties if
there are disruptions in the supply chain.
In May, JSW
Steel announced the acquisition of the Mozambique-based mining company Minas de
Revuboe to tap into its 800 million tonnes of premium hard coking coal
reserves.