Tata Power completes acquisition of 30% stakes in Coal Companies owned by PT Bumi Resources

Tata Power Company Ltd on June 27, 2007 has announced the completion of its acquisition of 30% equity stakes (the "Purchase") in major Indonesian thermal coal producers, PT Kaltim Prima Coal ("KPC") and PT Arutmin Indonesia ("Arutmin") (together the "Coal Companies"), as well as related trading Companies owned by PT Bumi Resources Tbk ("Bumi").

In order to complete this acquisition, a bridge loan facility has been provided by a group of Banks led by Barclays Bank PLC for the amount of USD 950 million. This bridge loan has a tenor of 1 year and is competitively priced for loans of such nature. The Company intends to refinance this bridge loan facility immediately after completion of the Acquisition, and Barclays who has expressed interest in doing so, will be given preference. This bridge loan has enabled the Company to become a shareholder of the Coal Companies quickly, to help maximize shareholder value. The acquisition was made through two Special Purpose Vehicles (SPVs), one formed in Mauritius {Tata Power (Mauritius) Ltd} and the other in Cyprus [Tata Power (Cyprus) Ltd].

The definitive agreements to purchase 30% equity stakes were signed on March 30, 2007, for a consideration of USD 1.1 billion prior to working capital and other adjustments. As part of the Purchase, the Company has signed an Offtake Agreement with KPC which entitles it to purchase about 10.1 million tonnes of coal per annum for an initial period upto 2021 which is extendable thereafter. This Purchase supports the Company's upcoming power projects on the West Coast of India comprising 7,000 MW to be developed over the next 5 years. These projects will require approximately 21 million tonnes of imported coal.

Speaking on the occasion, Mr. Prasad R Menon, Managing Director of the Company said "We are happy to complete this acquisition. It's our endeavour to maximize shareholder value and securitize our fuel requirements in light of the aggressive growth plans chartered out by the Company".

The Coal Companies are together among the top three largest exports thermal coal mines in the world. They have excellent coal export infrastructure and are strategically well placed to act as a source of supply for increasing regional demand. Together, KPC and Arutmin produced approximately [53.5] MT of coal in 2006 with over [95] % sold into the export market. Fast growing regional demand for thermal coal coupled with supply constraints in certain exporting countries has led to sharply higher coal prices. The Coal Companies are "world class assets" and have enjoyed robust financial performance recently given rising production volumes and the increases in coal prices.

Macquarie acted as exclusive financial adviser to the Company in relation to the Purchase.

Source : Equity Bulls

Keywords