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Aditya Birla Group keen to bid for 10-15% stake in Indonesian coal miner PT Bumi

05 Jan 2012

The Aditya Birla Group will pitch for a strategic stake in Indonesian coal miner PT Bumi Resources to secure assured coal supplies for its expanding cement and aluminum smelter operations. Senior executives from the Birla group are evaluating the option to bid for about 10-15% of the equity of PT Bumi along with an offtake arrangement. The transaction could be valued at over Rs 1,000 crore. The Jakarta-based PT Bumi, the world's largest exporter of thermal grade coal, has been talking to interested companies to offload its equity and raise funds for prepaying debt. The group, owned by the Bakrie family, one of Indonesia's largest business houses, had recently agreed to sell 47% in Bumi Plc, one of its subsidiaries, for about $1 billion.

The group would look for a position on the board but not be directly involved in the day-to-day running of the company.A bid by the group would be interesting as it would run counter to the general unease among foreign companies over investing in Indonesian coal mines. A recent government decision to impose tax on coal exports has unsettled foreign companies. Power projects, dependant on Indonesian coal, have suddenly seen their costs shoot up, ruining profitability projections.

But demand for thermal coal from India and China continues to be strong, with Indonesia accounting for 65% of India's coal imports. PT Bumi Resources, which has reserves of about 9.22 billion tonnes of prime thermal coal, is targeting a 14% increase in production based on the demand pull from India. Indonesia has been considering a tax on mineral exports, especially on thermal coal. The move has drawn mixed reviews from local businessmen, while foreign companies, mainly Indian power producers, are concerned on the impact on power sale agreements.

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