OREANDA-NEWS. September 23, 2011. Essar Energy plc [LSE: ESSR], the India-focused integrated energy company, today announced that it has been allocated a share of coal from the Amelia coal block by the Madhya Pradesh state government to supply fuel to its Mahan I power project.

The allocation of a share of coal from Amelia gives Essar Energy a second source of fuel to supply Mahan I, a 1,200 megawatt power project, in addition to Essar’s existing Mahan coal block. The addition of Amelia will significantly extend coal availability from Essar’s captive blocks for Mahan I from the current estimate of approximately 12 years. Both blocks are within very close proximity to the power project.

The Madhya Pradesh state government has formally notified Essar Energy and another company, DB Mining Power, that they will jointly be allocated 40% of the coal from Amelia, which has been allocated to and will be operated by the Madhya Pradesh State Mining Corporation (MPSMC).

Amelia is estimated to have around 214 million tonnes of coal reserves, according to the Ministry of Coal. The block still requires environmental and other approvals before mining operations can begin.

Essar Energy will be supplied with its entitlement of coal from Amelia by MPSMC under a long term linkage arrangement once a Fuel Supply Agreement has been signed. The FSA is expected to be signed once the required environmental and other approvals have been obtained. The coal will be supplied at prevailing Indian coal linkage prices.

Essar Energy still expects to secure a separate shorter term tapering coal linkage arrangement to secure fuel for Mahan I until the Mahan block is producing sufficient coal.

Separately, the Government of India’s Empowered Group of Ministers continues to hold meetings to discuss forest clearances for  Essar Energy’s three coal blocks at Mahan, Chakla and Ashok Karkata,. These clearances are necessary to allow mining operations to begin. The Mahan block will supply fuel to Mahan I, which is due to be completed by March 2012. The Chakla and Ashok Karkata coal blocks will serve the nearby Tori I and Tori II power projects, which are due to be completed before the end of  March 2014.