Tata scraps $300m deal to sell KPC and Arutmin's stake to Olympus
Tuesday, January 4 2011 - 09:02 AM WIB
The power company indicated that the deal was called off because of the private equity firm's inability to fulfil certain pre-conditions in the investment agreement.
Tata Power, through Cyprus-registered Bhivpuri Investments and Mauritius-registered Bhira Investments, holds 30 percent stake in both PT Kaltim Prima Coal and PT Arutmin Indonesia, two coal subsidiaries of mining giant PT Bumi Resources.
Six months ago, Tata Power entered into an agreement with Olympus where the power producer would sell 14-15 percent stake each in Bhivpuri and Bhira to Olympus.
"The investment was subject to completion of certain conditions precedent, as specified in the Investment Agreement. The conditions precedent as stated therein were not fulfilled by the Long Stop Date (last date as set out in the contract )," said Tata Power in a statement filed with the Bombay Stock Exchange, without getting into details of what the conditions were.
Consequently, Tata Power exercised its rights under the investment agreement and terminated it on Jan. 1.
In 2007, the India's largest private sector electricity generator acquired interest in KPC and Arutmin for $1.2 billion. The acquisition was funded through debt - a short-term loan of $950 million borrowed by Bhivpuri, which was guaranteed by Tata Power and a $273 million shareholder loan given by Tata Power to Bhira. The short-term loan was later refinanced and the current outstanding debt is $335 million as non-recourse and $340 million as recourse debt.
According to the agreement inked in July last year, Tata Power was to issue shares of Bhivpuri and Bhira with differential rights to Olympus Capital, which has investments in Orient Green Power and Quatrro BPO. These shares won't carry any dividend and voting rights but Olympus' $300 million investment would be protected at the end of five years from the date of closing the transaction. At the end of five years, Olympus had the option to convert them into ordinary shares, giving the fund a 14-15 percent stake each in Bhivpuri and Bhira.
Both KPC and Arutmin produces 55-60 million tons of coal annually. Of this, 12-14 million tons are used to feed Tata Power's 4,000 MW Mundra project. (*)