Tata Power Company, through its wholly-owned subsidiaries, has signed an agreement to sell its 30% stake in PT Arutmin Indonesia (Arutmin) and associated companies in coal trading and infrastructure, to a Bakrie Group entity. The aggregate consideration for Tata Power’s 30% stake is approximately $500 million, subject to certain closing adjustments. The sale is subject to certain conditions and restructuring actions, which the company targets to complete in the next three months.
Tata Power has decided to take the above step in order to get additional cash flow and to reduce its consolidated debt as it is facing under-recovery challenges in its Mundra UMPP operations and has got some cash flow concerns. Arutmin, is a mine spread over a number of pits in South Kalimantan, Indonesia and considering the present coal price scenario, it has started posing production and cost viability challenges in its operations.
The company, however, continues to hold its equity stake in PT Kaltim Prima Coal (KPC), which owns one of the largest thermal coal producing mines in the world. KPC will also continue to be a part of the supply chain for Tata Power Group’s coal off-take requirements.
