Tata Power has signed option agreements to sell 5% stake in PT Kaltim Prima Coal (KPC) to get additional cash flow as well as to reduce its consolidated debt. In addition, the entire 30% stake in KPC related power infrastructure companies is also covered for sale in the above agreement. The company has taken this step on facing under-recovery and cash flow challenges due to its Mundra UMPP operations.
The company, however, would continue to hold 25% equity stake in KPC if the option is exercised. KPC will also continue to be a part of the supply chain for the company’s Group’s coal off-take requirements. The aggregate consideration for Tata Power’s 5% stake is $250 million, subject to certain adjustments. Accordingly, Tata Power, through its wholly owned subsidiaries, has signed an option agreement which gives it the option to sell 5% equity stake in KPC and associated companies in coal trading, to a Bakrie Group entity.
Tata Power, through its wholly owned subsidiaries, has also signed an option agreement which gives it the option to sell its 30% equity stake in the Power Infrastructure Companies which are associated with KPC, to the same Bakrie Group entity. The above options will vest based on certain conditions being fulfilled. The aggregate consideration will be determined once the option is exercised and will be based on the valuation methodology agreed with the buyer.
