The Tata Power Company Ltd is exploring to buying vessels and stakes in shipping companies to transport coal from Indonesia.
On Wednesday Tata Power completed its acquisition of a 30 per cent stake in Indonesian thermal coal producers, PT Kaltim Prima Coal and PT Arutmin Indonesia, along with related trading companies owned by PT Bumi Resources.
The agreements to purchase the stakes were signed on March 30, 2007, for $1.1 billion prior to working capital and other adjustments. As part of the purchase, Tata Power has signed an offtake agreement with Kaltim Prima Coal, which entitles it to purchase about 10.1 million tonnes of coal per annum for an initial period upto 2021, which is extendable thereafter.
The Tata acquisition was made through two special purpose vehicles, one formed in Mauritius, Tata Power Mauritius Ltd, and the other in Cyprus, Tata Power Cyprus Ltd.
This purchase supports Tata Power's upcoming projects on the west coast of India comprising 7,000 MW to be developed over the next five years. These projects will require approximately 21 million tonnes of imported coal.
Agencies quoting Prasad R Menon, managing director, Tata Power, said the company would now explore opportunities for picking up stakes in shipping companies to transport the Indonesian coal to India.
A one-year $950 million bridge loan was provided to Tata Power for its Indonesian purchase by a group of banks led by Barclays Bank for Macquarie which acted as exclusive financial adviser to Tata Power in the deal.
Tata Power intends to refinance this bridge loan immediately after completion of the acquisition, and Barclays, which has expressed interest in doing so, will be given preference. This bridge loan has enabled Tata Power to become a shareholder of the coal companies quickly.