Tata Power eyes 26% stake in Adaro: Report

India electricity firm Tata Power Company (TPC) is planning to pick up a 26 percent stake South Kalimantan-based coal company PT Adaro Indonesia in order to reduce fuel costs, The Financial Express of India reported Wednesday through its website.

?We have been sourcing coal for our power generation activities from two coal companies in Indonesia, Adaro and SaMtan (Kideco). Recently, Adaro?s management approached us with a proposal for equity participation in the company. The proposal is under consideration,? a senior Tata Power official said.

Adaro is the largest coal producer in Indonesia and had sold around 23 million tons of coal in 2003.

Tata Power is looking at picking up the stake due to high volatility in international oil prices. Crude prices are ruling at around $50 levels now and economists are forecasting a recession if the price of crude touches $50 per barrel.

Tata Power is primarily interested in sourcing coal for the 1,350-megawatt power station at Trombay which supplies power to the company?s licensed area in Mumbai. The plant, though is a multi-fuel fired one with facilities for firing oil, gas and coal, is oil dominated, making it costlier compared to coal-fired plants. The use of oil as fuel at the plant has been brought down from 73 percent in 2002 to 54 percent in 2004, while that of coal has been increased from 13 percent to 32 percent during the same period, Tata Power sources said.

?The sulphur and ash content in the Indonesian coal is very low (0.1 percent sulphur and 2 percent ash) compared to that available from other parts of the world. Since TPC has plans to convert other generation units to multi-fuel mix units, it makes sense for the company to acquire some coal equity abroad,? a source close to the development said. (*)