Reliance Power has signed a share-sale agreement with Indonesia’s Sugico Group to acquire three coal mines in a transaction that will involve a series of production-linked milestone payments. Reliance Power’s wholly-owned subsidiary, Reliance Coal Resources, will make an upfront payment of Rs 500 crore ($106 million) for acquiring the mines. The balance payment will be paid in a staggered fashion depending on the mines meeting certain production targets. If all production-linked targets are met, the total value of the deal will be $1.6 billion.
R Power in 2008, had entered into a definitive agreement to acquire 100% economic interest in these three coal mines, and the share-sale agreement signed earlier this week marks the closure of the transaction. The three mines located in the South Sumatra province were owned by PT Sriwijaya Bintangtiga Energi and PT Brayan Bintangtiga Energi, subsidiaries of the Sudigo Group.
The coal from this region will not only ensure steady supplies for the proposed Krishnapatnam Power Project in Andhra Pradesh, that is to be based on imported coal, but will also be cost effective. Back of the envelope calculations show that the cost of this coal will work out to be almost 35% cheaper than other imported coal. But the quality of coal with a calorific value of 4,000 kcal (compared with 2,800 kcal in India) and an ash content of just 3-5% will come as a major advantage to Reliance. The mines have production licences and Reliance will now have to work towards the production of coal. It is estimated that the mine would be in a position to begin production in another three years. Reliance will develop the mine along with technical partner North American Coal Cooperation.
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| Company Name | CMP |
|---|---|
| NTPC | 391.95 |
| Tata Power | 456.50 |
| Power Grid Corp | 337.70 |
| Adani Power | 875.00 |
| Torrent Power | 1510.75 |
| View more.. | |
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