Tata Power in ₹1,500-cr pact to sell Indonesian mine

Tata Power said on Friday that it has signed an option deal to sell a 5 per cent stake in Indonesian coal company PT Kaltim Prima Coal (KPC) to a subsidiary of Indonesia’s Bakrie group for about $250 million (₹1,500 crore).

The agreement also includes an option to sell its 30 per cent stake in related power infrastructure firms to the same entity. The Bakrie group has interests in infrastructure, telecommunications and plantations.

Tata Power had bought a 30 per cent stake in the two thermal coal companies — Kaltim Prima Coal and PT Arutmin Indonesia — for about $1.1 billion in an effort to arrange coal supplies for its power plants in India. It had also signed an agreement with Kaltim Prima Coal to buy about 10 million tonnes of coal a year.

In a communication to the stock exchanges, the company said it was “facing under-recovery and cash flow challenges due to its Mundra UMPP (Ultra Mega Power Project) operations”. The stake sale will help the company get additional cash flows and reduce its consolidated debt.

At the end of the last financial year, Tata Power’s consolidated net debt was about ₹38,600 crore. In the quarter ended March 31, the company reported a consolidated loss of ₹145 crore.

The communication said Tata Power would continue to hold 25 per cent equity in Kaltim Prima Coal if the option were to be exercised. Kaltim Prima Coal will continue to be a part of the supply chain for Tata Power’s coal requirements.

“If the option is exercised, there will be no impact on the coal supplies to our plants since we will stay invested in KPC mines to the extent of 25 per cent and our coal supply agreement will continue as it is,” the communication quoted Anil Sardana, Tata Power’s Managing Director, as saying.

In January, the company signed a deal with the Bakrie group to sell its stake in PT Arutmin Indonesia for about $500 million to get additional cash flow and reduce its consolidated debt.

In June 2010, Tata Power had said it would raise $300 million by offering shares with differential rights to Olympus Capital Holdings in two special purpose vehicles through which it held a stake in the two Indonesian coal mines.

It had also bagged the 4,000 MW Mundra UMPP by quoting a levelised tariff of ₹2.26 a kWh, for which the company would use imported coal, including Indonesian coal.

However, after Indonesia changed its laws relating to sourcing and pricing of coal, the tariff quoted by Tata Power for the Mundra project became unviable, forcing the company to seek an increase in the tariff.

In August 2013, the Central Electricity Regulatory Commission allowed Tata Power a compensatory tariff of ₹329 crore for the Mundra project.

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