India?s Reliance sign Sumatra mines acquisition deal

Indian firm Reliance Power, which is controlled by tycoon Anim Ambani, 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, The Economic Times of India reported Thursday.

The three mines located in the South Sumatra province were owned by PT Sriwijaya Bintangtiga Energi and PT Brayan Bintangtiga Energi, subsidiaries of the Sugico Group.

Reliance Power?s wholly-owned subsidiary, Reliance Coal Resources, will make an upfront payment of US$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, the report said.

Speaking to ET from Indonesia, K Leo, chairman of the Sugico Group said that the deal was a ?win-win? for both sides. ?The partnership with Reliance will improve the valuation of other assets in the region. I have met Anil Ambani and I am very confident of his commitment,? said Leo, when asked about his confidence in the staggered payment mechanism.

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 mines have production licenses 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. (*)