Tata Power Co. Ltd. (TPWR), suffering losses at its largest power plant in Mundra, western India, today said it may sell a 5 percent stake in Indonesia’s PT Kaltim Prima Coal for about $250 million to reduce group debt.
Tata Power, part of India’s largest business conglomerate, signed option agreements with a Bakrie Group entity for the stake, it said in a stock exchange filing today. The agreement also would include the sale of Tata Power’s entire 30 percent stake in Kaltim’s associated power infrastructure companies. If the options were exercised, Tata Power’s ownership in the coal mining company will be reduced to 25 percent.
A sale of a Kaltim Prima Coal stake would not affect coal supplies to Tata Power’s power plants, and there would be no dilution in its rights as a shareholder of the company, Tata Power said in the statement.
In January, Tata Power signed an agreement to sell its entire 30 percent stake in PT Arutmin Indonesia and associated companies to a Bakrie Group entity for $500 million. It aims to complete the Arutmin transaction by March 2015, according to today’s statement.
The company has reported losses in the past three fiscal years, largely driven by below-cost power sales at its 4,000-megawatt power plant in Mundra in the western Indian state of Gujarat. The contracted tariff for the plant, which runs on coal imported from Indonesia, became unviable after a change in law led to a jump in prices of the fuel in Indonesia, the world’s biggest exporter.
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