印度能源安全 - #1 煤气化：能源的颜色不再重要...

India Energy Security - #1 Coal Gasification: The color of energydoesn't matter anymore... In this report, we dive deeper into one of the 5 key themes we highlighted due to the M.Eastcrisis - Coal Gasification. On paper it looks the easiest answer to solve part of India’s biggas import bill, but despite a long history of discussions it has never really taken-off. Nowgiven the push of the war we see high chances of on ground progress with policy support-on supply side (e.g. capital support announced yesterday), and possibly even on demand side(long term off-take agreements, blending requirements). Nikhil Nigania+91 226 842 1414nikhil.nigania@bernsteinsg.com Aman Jain+91 226 842 1486aman.jain@bernsteinsg.com a) What is coal gasification and learning from global examples:Coal gasificationturns solid coal into synthetic gas (syngas - Hydrogen and CO) by subjecting coal to hightemperatures and pressures in the presence of steam. This syngas can be used furtherdownstream to make urea, methanol etc.South Africa-Sasol (not covered) built theworld’s largest coal-to-chemicals complex in 1980 using high-ash coal given oil embargoeson the country.Chinawith a similar resource mix as India has scaled coal gasification fromalmost nothing to ~340 MTPA through policy support, and today gets ~85% of its ammoniaand ~75% of its methanol from coal. Uma Menon+91 226 842 1490uma.menon@bernsteinsg.com b) Strategic imperative for India:India has ~401 Bn tonne of coal resources (one ofthe largest globally), and reserves not very far from China- but while China mines ~4.5BnTPA, India does just 1 BnTPA. India has just ~2 MTPA of coal gasification capacity. Hence,with India’s import dependence of 90% for methanol, 100% for ammonia, and 20% forUrea - maximizing coal gasification will drive-a) Energy security, b) Limits Forex outflow, c)Fertilizer subsidy of ~ Rs 1 Trn given by govt. stays within the country. c) Govt. support:In 2020, govt announced a plan to take coal gasification to 100 MTPA.Subsequently, a) VGF of Rs 85 Bn was announced, b) Regulated coal pricing allocated, c),Guaranteed ROE for specific govt. plants. Yesterday govt. further announced Rs 375 Bncapital subsidy - effectively 15% of capex expected to be mobilized towards the target. d) Commercials & Risks: Considering the announced capex of coal gasification plants inIndia (+ latest capex support), plant utilization of 80%, and forex at ~ 95 INR/USD, we geta break-even for making Urea via coal gasification at $11.7/MMBtu of LNG JKM price, vs~ $17/MMBTU currently and 3-year avg. LNG price of $12.6/MMBTU- refer Exhibit 17,Exhibit 19.Key risks:a) The biggest is the absence of a long term off-take agreement -given high upfront capex, b) High Ash Indian Coal- makes it challenging to gasify, on whichBHEL(not covered) is working, c) Competition from green NH3, whose economics aregetting better with time. e) Key players(Exhibit 23): The only big operational plant is owned by Jindal Steel & Powerand 8 projects worth ~₹880Bn are underway. Coal India, GAIL and BHEL are involvedin most projects as equity holders or as equipment/fuel/ infra providers. NTPC targetsto produce 5-10 MTPA of syngas by 2029 and L&T won the downstream constructionpackage for one of the plants. Thermax is in discussion with CIL & MoC, to be made anequipment provider for the planned projects. Please note we cover only L&T and NTPC. BERNSTEIN TICKER TABLE INVESTMENT IMPLICATIONS Within our coverage, we think L&T is the beneficiary of a push for coal gasification on equipment side. Other than L&T, PFC-RECcould see a new lending opportunity as it fits with their long term infra lending focus. On asset owners, NTPC’s plan to leverageits coal resources for gasification could get accelerated with latest capital support announcement. DETAILS 1. COAL GASIFICATION & LEARNINGS FROM OTHER MARKETS: WHAT IS COAL GASIFICATION? Gasification is a thermochemical process that subjects solid coal to high temperatures and pressures in the presence of steamand a controlled, limited amount of oxygen. Instead of simply burning the coal, this process breaks it down at a molecular levelto produce synthesis gas or “syngas”- a versatile gaseous mixture consisting primarily of carbon monoxide and hydrogen. Thissyngas acts as a foundational chemical building block that can be directly synthesized into high-value industrial products,including ammonia, urea, methanol or used as a clean reducing agent in steel production. A single coal feed produces methanol, acetic acid, hydrogen, and power simultaneously. Unlike an LNG terminal locked intonatural gas, a gasification complex can pivot between products as commodity economics shift. NITI Aayog's Methanol Economyprogram— highlights that the syngas producing ammonia can produce methanol for potential petrol blending. There are majorly 3 types of gasification technologies (or gasifiers): 3. Fluidized Bed Gasifier (Most suitable for low-grade & high-ash coal found in India) -