— FILE PHOTO

ENSURING ENERGY: Control room of Tata Power Company's Jojobera plant near Jamshedpur.

MUMBAI: Tata Power Company, India's largest private power utility, announced on Saturday that it has signed definitive agreements to purchase 30 per cent equity stakes in two major Indonesian thermal coal producers, PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia (Arutmin), and a related trading company owned by PT Bumi Resources Tbk (Bumi).

As part of the purchase, Tata Power has signed an Offtake Agreement with KPC which entitles it to purchase about 10 million tonnes of coal per annum, stated a press release issued here by Tata Power.

Tata Power will be paying a consideration of $1.1 billion for this purchase prior to working capital and other adjustments.

The acquisition will be made through an offshore Special Purpose Vehicle (SPV) to be formed. Funding will be done through a combination of debt in the SPV and internal accruals and borrowing from Tata Power.

This purchase supports Tata Power's upcoming power projects on the west coast of India comprising 7,000 MW to be developed over the next five years. These projects will require 21 million tonnes of imported coal which Tata Power intends to secure through a combination of purchasing equity stakes in coal mines and entering into offtake contracts.

The coal companies, are together among the top three largest exporting thermal coal mines in the world. They have excellent coal export infrastructure and are strategically well placed to act as a source of supply for increasing regional demand, according to the release.

Together, KPC and Arutmin produced 53.5 million tonnes of coal in 2006 with over 95 per cent sold into the export market.

Prasad R. Menon, Managing Director, Tata Power said, "This move not only secures our fuel requirements in light of the aggressive growth plans charted out by the company but also opens up opportunities for Tata Power to own and operate a range of world class, competitive and profitable electricity and energy businesses in India and overseas. The acquisition specifically addresses fuel requirements for Mundra UMPP, Trombay and the coastal power project in Maharashtra, and is complementary and supports the assumptions made in the bid for Mundra UMPP".

Macquarie acted as exclusive adviser to Tata Power in relation to the purchase.

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