Tata Power to sell entire stake in PT Arutmin Indonesia for $500 mn

Tata Power Co Ltd, India's largest integrated power company, yesterday agreed to sell its 30 per cent stake in coal mining firm PT Arutmin Indonesia to Indonesia's Bakrie Group for $500 million (Rs3,150 crore) in order to generate additional cash flows and reduce debt.

Tata Power had in 2007 paid $1.3 billion for acquiring a 30-per cent stake each in major Indonesian thermal coal producers PT Arutmin Indonesia and PT Kaltim Prima Coal (See: Tata Power completes stake acquisition in Indonesia coalmines).

The Mumbai-based company had acquired the stakes in the twin mines, owned by P T Bumi to meet the power requirement of its then upcoming 7,000 MW power projects on the West coast, including the 4,000 MW Mundra Ultra Mega Power Project.

''Tata Power is facing under recovery challenges at its Mundra UMPP operations and cash flow concerns and therefore decided to exit PT Arutmin Indonesia to get additional cash flows and reduce its consolidated debt,'' it said in a statement.

''The current coal price scenario has presented a challenge to the entire coal mining sector,'' said Anil Sardana, managing director of Tata Power.

Tata Power,  will continue to hold its 26 per cent stake in PT Kaltim Prima Coal, which will continue to be a part of the supply chain for meeting the company's coal requirements.

At the time of the acquisition, Tata Power had signed a renewable "offtake" agreement with PT Kaltim Prima Coal, which entitles it to purchase about 10.1 million tonnes of coal every year till 2021.