Oct. 30 (Bloomberg) -- Tata Power Co., India’s biggest electricity generator outside state control, may buy coal from a mine in Mozambique being developed by Australia’s Riversdale Mining Ltd. to secure fuel supplies.

“Tata Power is one of the many interested Indian off- takers for our thermal product,” Riversdale Managing Director Steve Mallyon said in a statement e-mailed through the company’s external public-relations agency. “There is also growing interest from a number of Indian cement producers because of the product’s energy content.”

Tata Power, which said yesterday second-quarter net income fell 28 percent, is looking for new sources of fuel as Indian utilities plan to double generation capacity in the next seven years. The company paid $1.3 billion in March 2007 to buy stakes in two Indonesian coal mines owned by PT Bumi Resources.

“It makes sense for Tata Power to look for coal from different sources,” Abhineet Anand, an analyst at Antique Stock Broking, said by telephone from Mumbai. “They may need more coal than can be supplied by the Bumi venture for their future projects.”

Tata Power shares, which have risen 79 percent this year, declined 4.6 percent, the biggest fall since Aug. 7, to 1,338.85 rupees in Mumbai trading. The benchmark Bombay Stock Exchange Sensitive Index dropped 1 percent.

The Indonesian stake agreement entitled Tata Power to purchase 10 million metric tons of coal for its Indian power plants. Tata Power has an installed capacity of 2,785 megawatts, according to its Web site, and the utility is building a 4,000- megawatt power plant at Mundra in western India.

Adequate Arrangements

“We believe people should make adequate arrangements, whether it’s out of Indonesia or Mozambique or Australia, where coal is available, rather than depend purely on short-term markets,” S. Ramakrishnan, Tata Power’s executive director for finance, told reporters in Mumbai today.

Separately, Tata Power plans to invest 150 billion rupees to build hydroelectric projects in India and Nepal, Ramakrishnan said. Tata Power is forming a venture with SN Power of Norway that will generate 4,000 megawatts of hydroelectricity by 2020.

Riversdale and Tata Steel Ltd., India’s biggest producer of the metal, approved development of a $270 million coal mine in Mozambique with first production scheduled for next year.

Production in the first stage of the Benga project will be an estimated 1.7 million tons of coking coal and 300,000 tons of thermal coal for export, Sydney-based Riversdale said in a statement to the Australian stock exchange on Oct. 28.

The venture is considering a second-stage expansion by 2014 to boost output to 3.3 million tons of coking coal, used in steelmaking, and 2 million tons of thermal coal, used by power stations, Riversdale said in the statement. Tata Steel owns 15 percent of Riversdale.

To contact the reporter on this story: Gaurav Singh in New Delhi at gsingh31@bloomberg.net.

Last Updated: October 30, 2009 08:17 EDT