Tata Power divests stake in Arutmin, retains KPC mines

By Romel S. Gurky

India?s Tata Power said it has signed an agreement to sell its 30 percent stake in coal miner PT Arutmin Indonesia and associated companies in coal trading and infrastructure to a Bakrie Group entity for aggregate consideration of approximately US$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, facing under-recovery challenges in its Mundra UMPP operations and cash flow concerns, has decided to exit from coal miner PT Arutmin Indonesia to get additional cash flow and to reduce its consolidated debt,? Tata said in a statement on Friday.

Considering the present coal price scenario, Arutmin, which is a mine spread over a number of pits in South Kalimantan, Indonesia, had started posing production and cost viability challenges in its operations.

Tata Power, however, said that ti will continue to hold its equity stake in another coal miner 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.

Anil Sardana, Managing Director of Tata Power stated, "The current coal price scenario has presented a challenge to the entire coal mining sector. The proceeds from the sale of Arutmin will provide cash to meet the company's current challenges. We do not expect any impact on the coal supplies to our plants since we stay invested in KPC mines and our coal supply agreement continues as it is."

Editing by Reiner Simanjuntak