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Tata Power today announced sale of its 30 per cent stake in Indonesian coal company PT Arutmin for $500 million (Rs 3,150 crore) to cut its debt.
The development comes in the wake of the company’s Mundra UMPP project facing under recovery challenges.
The company, however, does not see any fuel supply shortage after exiting Arutmin as it will continue to hold its interest in another Indonesian coal company Kaltim Prima Coal (KPC).
Tata Power through its wholly-owned subsidiary has signed an agreement to sell its 30 per cent stake in Arutmin and associated companies in coal trading and infrastructure to a Bakrie Group entity, a company statement said.
Tata Power had bought 30 per cent stake each in PT Arutmin and KPC for $1.1 billion in 2007.
“Tata Power is facing under recovery challenges at its Mundra UMPP operations and cash flow concerns and therefore decided to exit PT Arutmin Indonesia to get additional cash flows and reduce its consolidated debt,” it said.
“The aggregate consideration of Tata Power’s 30 per cent stake is $500 million (Rs 3,150 crore), subject to certain closing adjustments,” the statement added.
The current coal price scenario has presented a challenge to the entire coal mining sector and the proceeds from the sale of Arutmin will provide cash to meet the company’s current challenges, Tata Power MD Anil Sardana said.
“We do not expect any impact on coal supplies to our plants since we stay invested in KPC mines and our coal supply agreement continues as it is,” he added.
The statement said in the current price scenario Arutmin Indonesia has started posing production and cost viability challenges in its operations. The stake sale is subject to certain conditions and restructuring actions which its targets to complete in the next three months.
“Tata Power, however, continues to hold its equity stake in PT Kaltim Prima Coal which owns one of the largest thermal coal producing mines in the world,” it added.
KPC will also continue to be a part of the supply chain for Tata Power Group’s coal off—take requirements, it added.
Tata Power shares today closed 2.71 per cent up at Rs 73.95 on the BSE today.
The company’s 4,000 MW ultra mega power project at Mundra in Gujarat was facing trouble due to increase in the price of Indonesian coal.
Tata Power approached the electricity regulator CERC seeking a hike tariff for Mundra project.
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